ASEAN MEETINGS HIGHLIGHT CHALLENGES OF INTEGRATION

UNCLAS SECTION 01 OF 02 JAKARTA 002350 SIPDIS SIPDIS SENSITIVE DEPT PASS USTR FOR KATZ AND BROOKS DEPT FOR EAP/RSP and EAP/MTS DEPT FOR EB/IFD/OMA TREASURY FOR IA-SETH SEARLS COMMERCE FOR 4430/[GOLIKE] E.O. 12598: N/A TAGS: ECON ETRD PHUM PREL PGOV SENV KDEM ID SUBJECT: ASEAN MEETINGS HIGHLIGHT CHALLENGES OF INTEGRATION ¶1. (U) Summary. During a series of recent meetings and events at the ASEAN Secretariat, ASEAN officials expressed cautious optimism about economic integration and the draft ASEAN Charter despite continued challenges. Senior Government of Indonesia (GOI) officials and business leaders called for faster economic integration. Indonesian President Susilo Bambang Yudhoyono challenged ASEAN countries to embrace not only economic integration but also democratic values and fundamental human rights for all its citizens. ASEAN officials noted the USG's positive influence on the region and called for increased cooperation and strengthened U.S.-ASEAN relations. End Summary. ASEAN Rethinks ASEAN -------------- ¶2. (U) On August 7, the ASEAN Secretariat hosted the ASEAN Foundation forum "Rethinking ASEAN: Toward the ASEAN Community 2015." The event, which the ASEAN Foundation planned to commemorate the 40th Anniversary of ASEAN, focused on the need for ASEAN to respond to a changing political, economic and social landscape across the region and the world. These challenges include the emergence of economic competition from India and China, the need to narrow the development gap among ASEAN countries, and the need to strengthen ASEAN as an organization. ¶3. (U) Indonesian President Susilo Bambang Yudhoyono, who delivered the keynote address, challenged ASEAN to embrace not only economic integration but also democratic values and fundamental human rights for all ASEAN citizens. He noted that, without a provision for the establishment of a regional human rights body, the ASEAN Charter will not be an affirmation of a vision and set of values that are the hallmark of a caring community. He urged ASEAN leaders to draft a Charter than not only has legal efficacy, but also inspires their citizens. ¶4. (U) Secretary General Ong noted that the process of rethinking ASEAN, which began in 2003, has generated three important initiatives. First, ASEAN has placed increased importance on building an integrated ASEAN Community. Second, the leaders of the ten member countries have committed to giving ASEAN (and ASEAN agreements) stronger legal standing through an ASEAN Charter. Third, ASEAN has recognized the importance of strengthening people-to-people ties in order to achieve an integrated ASEAN Community. Economic Integration: Moving from Talk to Reality -------------- -------------- ¶5. (U) Indonesian Trade Minister Mari Pangestu also spoke at the forum. She admitted that the economic challenges to integration are complex but emphasized that ASEAN is significantly weaker as ten individual nations than as one integrated community. She urged ASEAN leaders to dispel the notion that ASEAN is "all talk" and take significant action to meet the goals of reducing trade barriers, creating a more competitive region through investment in infrastructure, and ensuring equitable development within ASEAN. ¶6. (U) The ASEAN Foundation invited Philip Kotler of the Kellogg School of Management at Northwestern University to headline the event. Dr. Kotler stressed the importance of developing business strategies that fully exploit the size of the dynamic pan-ASEAN market. Businesses should market products to ASEAN as a region rather than separately to each component national market. Several local and expatriate business leaders at the event urged ASEAN leaders to move faster on regional integration to ease the flow of goods and labor in the region. ASEAN Secretariat Staff Gear Up for Larger Mandate -------------- -------------- ¶7. (SBU) On August 10, Embassy met with Director of External Affairs Dhannan Sunoto and Director of Economic Integration Bureau S. Pushpanathan to discuss progress on drafting ASEAN's charter and economic integration blueprint. Both officials expressed optimism JAKARTA 00002350 002 OF 002 about achieving a single unified market by 2015 and about progress on the ASEAN Charter, but underscored the need for ASEAN to create enforceable agreements going forward. Sunoto noted, however, that ASEAN would not include a provision for making decisions by a vote of member states in the Charter. Nevertheless, he believed that given the importance of making and enforcing decisions as ASEAN moves toward integration, ASEAN will use pressure on member countries with dissenting views to reach decisions on important issues. ¶8. (SBU) Pushpanathan revealed how this might work in practice, saying that ASEAN's Economic Ministers have requested that the Charter include an "ASEAN minus X" formula that would allow a majority to pass and implement an agreement without the dissenting minority. In addition, ASEAN plans to formalize its dispute settlement mechanism in the ASEAN Charter in order to strengthen ASEAN's ability to deal with conflicting views. ASEAN also plans to set up a scorecard system similar to that used in the EU to gauge progress on the blueprint and focus technical assistance efforts. Sunoto noted that ASEAN is moving away from the uniform approach to technical assistance that the association has employed in the past. More FTAs, More Donor Coordination -------------- ¶9. (SBU) Pushpanathan expressed optimism that the economic blueprint for integration would provide a meaningful roadmap to integration over the next four years. Sunoto and Pushpanathan both indicated that ASEAN plans to have a briefing for major donors immediately following the announcement of the blueprint at the ASEAN Summit in Singapore in November. (Note: The European Commission and AusAid have recently expressed a desire to coordinate more closely on ASEAN assistance. End note.) ¶10. (SBU) Pushpanathan also discussed ASEAN's progress on negotiating free trade agreements (FTA). He remarked that ASEAN and the EU would engage in preliminary discussions over the next year to identify potential hurdles in the free trade agreement negotiations before commencing formal negotiations. He anticipated issues in the areas of intellectual property rights, government procurement, and agriculture. Pushpanathan noted that ASEAN is relatively close to concluding FTAs with Japan, Australia and New Zealand, and said that Turkey and the Gulf Cooperation Council both want to discuss possible FTAs with ASEAN. U.S. Engagement Welcome, Has Influence -------------- ¶11. (SBU) Post discussed cooperation between Embassy Jakarta and the ASEAN Secretariat. ASEAN officials expressed a desire to work closely with the USG on issues of mutual interest. Director Pushpanathan urged closer coordination on economic and trade issues. Director Sunoto reiterated their disappointment that Secretary Rice could not attend the ASEAN Post-Ministerial Conference and ASEAN Regional Forum in Manila and over the postponement of the U.S.-ASEAN Commemorative Summit planned for September. He emphasized the value ASEAN places on such events for relationship building and urged that a new date for the Summit be set as soon as possible. ¶12. (SBU) Sunoto contrasted the positive influence of the U.S. on ASEAN integration with the influence China exerts over its bordering ASEAN states. The ASEAN members bordering China, he claimed, do not feel as threatened by China's economic power as the remaining ASEAN members. As a result, the border and non-border members of ASEAN have had, at times, divergent views on the need for rapid economic integration. U.S. engagement, he suggested, keeps ASEAN as a whole closer to its non-aligned heritage and less intimate with China. As an example of U.S. influence, Sunoto remarked how the U.S. initiative to name an Ambassador for ASEAN directly prompted a provision in the draft ASEAN Charter for permanent representatives from each ASEAN member to the Secretariat. HUME