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ASEAN's awkward midlife crisis

Regional bloc needs closer integration to withstand challenges

| China
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Malaysians in traditional dress hold flags of ASEAN ​member countries. The Southeast Asia's club of nations, ASEAN, will turn 50 on Aug. 8 and already it appears to be grappling with midlife crisis.   © Reuters

Trouble is brewing in the ranks of the Association of Southeast Asian Nations as Asia's only real economic grouping turns 50. Its midlife crisis will be hidden from view come November, when leaders of the 10 nations gather in Manila. There, they will mug for the cameras in brightly colored barongs, sign vaguely worded communiques and pledge to forge boldly toward a shared future for the region's roughly 640 million people.

Below the surface, though, is a fast-growing number of cracks. Three, in particular, are worth exploring as ASEAN enters its sixth decade.

First, a bull market in domestic troubles. As an intergovernmental entity, ASEAN has always been a strange beast. Combining democrats, authoritarians, communists and a sultanate, it purports to speak with a common voice on economic, political and security matters. More often than not, it is the geopolitical equivalent of a dysfunctional family whose reunions leave everything painful unsaid and forced smiles on attendees' faces. But ASEAN is only as strong as its weakest links and, wow, do they abound.

Thailand, long an economic and democratic exemplar, is three-plus years into military rule and elections to restore civilian governance are nowhere in sight. Complete policy drift in Bangkok ensures a lost economic decade. In Malaysia, corruption scandals surrounding Najib Razak are at such a fever pitch that anti-capitalism firebrand ex-leader Mahathir Mohamad, 92, came out of retirement to challenge the prime minister.

Cambodia's Hun Sen, Asia's longest-serving leader, is curbing political opponents in what Human Rights Watch calls his "final triumph of dictatorship." Brunei has embraced Sharia law. Myanmar's democratic turn is marred by powerful military interests clinging to power and a brutal crackdown on the Rohingya Muslim minority.

Indonesia's Joko Widodo is grappling with the return of economic nationalism that could derail reform efforts and creeping Islamization. Singapore's squeaky-clean image took hits as Lee Kuan Yew's children (including current leader Lee Hsien Loong) brawl over the late statesman's estate. Philippine President Rodrigo Duterte's bloody war, neglect of economic retooling and erratic behavior is as big a wild card as ASEAN has ever experienced.

The bottomline is most Southeast Asian leaders are more inwardly focused today than when ASEAN turned 40 -- and less inclined to spend political capital regionally.

Second, China as spoiler. Its 6.5% growth and 1.4 billion people looking to get rich, consume and travel would seem a winning lottery ticket for neighboring economies -- a vital "floating-all-boats" dynamic as U.S. President Donald Trump's America builds walls. But China does not do multilateral groups, preferring instead to deal with ASEAN members one-on-one. This bilateralization of issues from trade to territorial disputes to military cooperation is part of a "divide-and-conquer" strategy that augurs poorly for ASEAN brotherhood.

Kowtowing to China

One reason Duterte's arrival in June 2016 shook the neighborhood is his unlikely bromance with Chinese President Xi Jinping. Twelve days after Duterte took office, an international tribunal in The Hague ruled in favor of the Philippines in a maritime dispute with Beijing. Duterte could have parlayed it into pressuring Xi to curb his South China Sea ambitions. Instead, Duterte pivoted from long-time ally Washington to Beijing, which is sure to run circles around Manila on trade and underwater energy exploration. Malaysia, Cambodia and others also are cozying up to China.

The Asian Infrastructure Investment Bank and Belt and Road project bode poorly for ASEAN multilateralism as Beijing buys fealty from each member. These are mere extensions of the China Development Bank, or Superbank, model: We will build your dams, bridges, airports and power grids and buy your energy and manufactured goods in exchange for bilateral loyalty. ASEAN's pageantry and photo ops are no match for Beijing's deep pockets and prowess at playing one nation against another.

Third, a chronic lack of ambition. If ASEAN did not exist, Southeast Asia would be creating something like it. It is the closest thing Asia has to a European Union with a full-time secretariat (in Jakarta). Credit where it is due: In 2015, it launched the ASEAN Economic Community to facilitate the free flow of goods and services, the biggest step toward integration. Yet ASEAN members still compete more than they cooperate.

As Beatrice Tanjangco of Oxford Economics puts it: "A proliferation of non-tariff protectionist measures, a lack of enforcement mechanisms and the pressure to prioritize domestic over regional interests still weigh on progress." The drive to become the next Detroit, for example, should have ASEAN pulling together to pool comparative advantages. Instead, Tanjangco says, governments are imposing "measures to protect their auto industries and implementing inconsistent policies that undermine the region's goal to become a unified production base."

There are several steps ASEAN could take in Manila to get its act together. First, map out plans to genuinely open markets and ban hidden barriers. ASEAN should curb limits on migration, while linking bond, stock and currency markets and pooling some foreign-exchange reserves. It should harmonize tax, customs and regulatory systems and, where possible, share security intelligence.

Finally, ASEAN must scrap its non-interference clause. Friends tell each other the truth, and peer pressure works. ASEAN's preference for avoiding criticism -- of Duterte's body bags, Indonesia's annual haze, tolerance of money-laundering, Chinese encroachment -- means it is more bark than bite. It is a vital precondition to crafting a peer-group framework to share data, research and, yes, critiques to reduce inequality, increase productivity and property and weather the next global crash.

Today, it is a midlife funk that can be overcome by a change in direction and refocused priorities. Let it fester, and the crisis Southeast Asia will face is a future as a mere subsidiary of China Inc.

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