Lunch Address by Dr Narongchai Akrasanee Chairman, MFC Asset Management Plc. Former Minister of Energy, and Former Minister of Commerce, Thailand, at Singapore Forum 2016

1. Good afternoon to all of you. First, thank you for the invitation again. Last year, I was the Minister and I was invited. This year I am not a Minister, I am still invited. So, Singapore is a real friend.

2. You see, being in Thai politics is really very unstable. We often have a military government so you cannot have a career being a minister, unlike in Singapore where you can be a minister forever.

3. I am going to talk about the ASEAN Economic Community (AEC). The intention is to inform you about this AEC, about the work that we have done over the last 40-50 years. A lot of work has been done to create the Association of Southeast Asian Nations (ASEAN) of today, the ASEAN that we have. I sincerely believe that without ASEAN, we would be faced with so many problems as mentioned by Singapore’s Deputy Prime Minister Tharman Shanmugaratnam last night; the fragility, the power factors, the technology and productivity and the sectorial problems and so on. As I belong to an asset management company, I always think of net asset value. For us, ASEAN is net asset value positive, meaning being more asset than liability. We should be very pleased with that, and that is actually the conclusion of my speech. And if you have already heard the conclusion, you do not need to listen to anything else.

4. But if you like to listen, let me continue. I like to tell this AEC in a story manner, like a story telling, because you had such a serious session this morning.

5. I was sitting there, looking at the faces of you and feeling very worried about what was going on. So I changed my presentation from reading a speech to telling a story, and that story I would like to dedicate to Mr S Rajaratnam, after whom the Endowment is named, and Dr Karnail Sandhu. Why I do that will be clear when I make the presentation.

6. I will tell my story in six episodes, one episode less than Star Wars. You might recall that the title of the latest Star Wars, Episode VII, is ‘The Force Awakens’. Listening to the session this morning, I was wondering what that force was. Who was that Darth Vader? Looking at Chinese history and armour design, I was told that George Lucas copied the design of the dress, the costume of Darth Vader, from China. So, maybe, that force is China? Is it? You may wonder. But I leave that to your imagination.

7. Now beginning with episode number one – six episodes, average maximum five minutes each. I guarantee that I will keep my time.

8. First is the beginning of my interest in South East Asia as a region. Why did I become interested in South East Asia as a region? That went way back to my student days in Australia in 1963-66. That was the first time that I met South East Asian friends, and the one that I would like to mention by name – I am very proud of him – is Dr Boediono, who was my classmate. He was vice president in the last government of Indonesia. I also have many other friends: Malaysia’s Tadjindin; Singapore’s Mr Tan who became chief of the public housing authority, and many others, both men and women, boys and girls. And I like them very much. We got along very well.

9. One thing that I remember during my student days was the time Singapore’s then Prime Minister Lee Kuan Yew went to Western Australia in 1966. I still remember. I do not know why I remember that. He gave a speech at the dining hall. It was packed with an audience, and he spoke so well. I was so amazed how a person could speak so well. Since then, I never forgot him, and he would not let me forget him forever.

10. He talked about the situation in South East Asia. You remember, 1965 was a very crucial year for South East Asia. Singapore became independent from Malaysia. Indonesia changed over from Sukarno – the period 1959-65 – to Suharto. And there was the Tonkin incident in Vietnam. That was the beginning of the end of superpower control of Indochina. You might recall the Tonkin incident about the US Navy shooting the Vietnamese Navy and vice versa. When President Lyndon Johnson was asked what happened, he said the US Navy was shooting at whales, not at the Vietnamese Navy.

11. In 1967, I came back to Thailand, teaching at Thammasat University and that was when ASEAN was set up in Bangkok. You recall the names – Dr Thanat Khoman, Mr S Rajaratnam, of course, Mr Adam Malik, Tun Abdul Razak, Mr Narciso Ramos – these were the people who set up ASEAN, basically, to counter the threat of Communism. That was the first time that we – all of us – in ASEAN learned about ASEAN, about its evolution from Southeast Asia Treaty Organisation, from Association of Southeast Asia and the concept of Maphilindo (for Malaya, the Philippines, and Indonesia).

12. Next, episode number two – the beginning of my work on AEC. I returned from my PhD study at the Johns Hopkins University to work at Thammasat University in 1973.

13. I was fortunate to have met and have worked with Professor Seiji Naya who had a strong interest in research on ASEAN economic cooperation, following upon the Kansu Report. That was when I started to do research on AEC.

14. Then in April 1975, the Vietnam War ended, signalling a possibility of a domino effect of communist expansion to other South East Asian countries. In response to this threat, ASEAN decided to have a Summit in Bali, the first Summit, in 1976. I helped prepare some schemes for ASEAN economic cooperation, along the line of the recommendation from the Kansu Report. These were the Preferential Tariff Arrangement, ASEAN Industrial Project, etc. The first Summit was soon followed up by the second Summit in 1977 in Kuala Lumpur.

15. The two summits are considered to be the beginning of AEC, but not much materialised after that.

16. From 1980, episode number three – the developing of support for AEC. I was organising a number of training programmes for ASEAN officials with support from the United Nations Development Programme. Suddenly, the Ford Foundation wanted to set up an ASEAN Economic Research Unit (AERU). That was in 1982. So, I was asked to help identify what agency should be the best to set up that centre. We decided on Institute of South East Asian Studies (ISEAS) in Singapore. We set up AERU with the leadership of Dr Karnail Sandhu and what happened after that is unbelievable. ISEAS or AERU produced a community of researchers and publications on ASEAN economic cooperation and ASEAN Community. That was the birth of the so-called ‘ASEAN economic mafia’: Dr Chia Siew Yue, Dr Hadi Soesastro, Dr Mohammed Ariff, Dr Florian Alburo, etc. I should also mention Ambassador Chan Heng Chee, but she does not look like a mafia member, so I may have to excuse her from that list.

17. In 1983-84, I worked for the ASEAN task force that was set up in 1982 and led by Khun Anand Panyarachun. Many of you will remember the name. I will come back to his name again later. The task force was set up to develop AEC after the oil crisis of 1979-80. We produced a report in 1984 which became a blueprint for AEC.

18. Episode number four – the birth of AEC. As I mentioned before, we finished that report, but after 1985 – after the Plaza Accord – the ASEAN economy was doing very well, so we did not pay that much attention to ASEAN until 1991. This episode number four is the most crucial part. In 1991, something happened in Thailand. We had a coup d’etat. You may not be surprised at all because Thailand always has coups d’etat. But this one is important. This one is number seven, if we only count the successful ones. If you also count the unsuccessful ones, I think that is about number 17. So, we are pretty good at coups d’etat, and if the US army would like to have help from the Thai army, if Donald Trump were to become president, we can definitely help.

19. My point is this: sometimes in life, in history, there is a lot of coincidence. The generals of the coup d’etat asked Khun Anand, the head of the task force, to be Prime Minister. He was so surprised that they asked him to be Prime Minister but he accepted. Usually, when you are invited to be Prime Minister, you do not say no, especially by the generals. He became Prime Minister in February 1991. In July, then Prime Minister of Singapore Goh Chok Tong went to see Khun Anand and decided to work on setting up the ASEAN Free Trade Area (AFTA). They had a conversation and they decided that they should push for AFTA. This is what Singapore always does. In ASEAN, Singapore is the one that does the plotting, the scheming, and then grabs the opportunity when it is open. Very good. Somebody asked earlier what Singapore should do. They should continue to do that.

20. From September 1991 to February 1992, we worked to achieve AFTA, by the political economy approach. We study political economy, we learn what would be easy, and where would be difficult. Singapore, of course, was easy. We talked to Lee Hsien Loong. He said no need to discuss. We went to see Datuk Rafidah: ‘Naronghchai, okay, no need to discuss.’ We spent three days in Indonesia because we knew they were difficult. I was the chief negotiator. When I made my presentation, at that time, my counterpart was Pak Hartoto, from the Coordinating Ministry for Economic Affairs, and he listened. He was a very quiet man. After I finished, he said, ‘Indonesia no free trade.’ That was how he talked. Somebody who knew him well would remember that. No free trade.

21. So, we continued to work on Indonesia. Khun Anand sent somebody to convince President Suharto. By October in Kuala Lumpur, we had an Economic Ministers Meeting. I made my presentation. Everyone was quiet. Datuk Rafidah, Chairperson at that time asked Pak Hartoto. ‘Pak Hartoto, what is Indonesia’s stand?’ This was how Datuk Rafidah talked. She talked very fast. Everyone was quiet. Then Pak Hartoto said, ‘Indonesia agrees.’

22. Lesson number one: you need Singapore to do the scheming, plotting. Lesson number two: you need Indonesia to agree. No ASEAN agreement without Indonesia agreement. So that is lesson number two. That was the time we decided on AFTA. AFTA was signed here in this hotel, I think, in this room. Mr Wong Kan Seng who was Singapore’s then Minister of Foreign Affairs gave me terrific support as I still remember. We signed the AFTA agreement here. Within six months we signed. It was the shortest negotiation ever in international affairs. Whenever somebody argued, I said AFTA stands for ‘agree first and talk after’. The one that argued the most is the Philippines, because the Philippines have a lot of lawyers and women lawyers. Lawyers always argue, particularly women lawyers. That was the beginning of this ASEAN economic cooperation turning into AEC.

23. Later on, we had other countries joining ASEAN: 1995, Vietnam; 1997, Myanmar and Laos; and 1999, Cambodia. In 1997, I like to mention here also – very important – that the Greater Mekong Subregion began to be an important part of ASEAN development. We have at that time the emergence of mainland and maritime ASEAN because of the inclusion of Cambodia, Laos, Myanmar and Vietnam, and because that allowed the connectivity with the southern part of China.

24. Episode number five – AEC and ASEAN development. I believe AFTA allowed ASEAN economy to be more open and more market friendly. So, from 2001, we experienced a proliferation of Free Trade Agreements (FTAs). So many FTAs after 2001, particularly after the ASEAN-China FTA. ASEAN-Japan FTA –when you agree with China, you must agree with Japan. Japan would come running very quickly after China. ASEAN-Korea, ASEAN-Australia-New Zealand, etc.

25. In addition, each ASEAN country has FTAs and you know which country has the most FTAs? Singapore. Singapore has FTAs more than anybody else, so much so that Prof Tommy Koh, another friend of mine, said, ‘Singapore is the most promiscuous.’ I could not believe Singapore could be ‘promiscuous’. I believe government would never allow Singapore to be ‘promiscuous’. Anyway, that is what happened. Then afterwards, we have agreements on trade and services, agreement on investment, agreement on working of professionals, and so on. However, all along, what we maintain is an ASEAN open regionalism. By 2008, we have an ASEAN charter. By 2015, we have ASEAN Community, including economic, social, culture and security.

26. Episode six – the ASEAN economy into the future. I think this is of importance to us at this forum. AEC from 2016, what would happen? Just two weeks ago, the ASEAN governments had a meeting to make an assessment about the 2015 blueprint. The conclusion from the meeting on 22 March in Chiang Mai, Thailand, was that only about 70-75% of the blueprint were accomplished. Now they set up the 2025 blueprint. My belief is we should not expect much from the blueprint. We should let the AEC and ASEAN Community evolve by themselves.

27. Why do I say that? I have both economic and political reasons, and these are the things that we can discuss. Number one: population. With ASEAN Community, we now have 625 million people compared with 520 million in 2000. In 15 years, we will have an increased population by over 100 million, thanks mainly to the Filipinos.

28. Gross Domestic Product (GDP): you hear this morning about India having a GDP of US$2.2 trillion. ASEAN’s GDP is US$2.5 trillion. It went up from US$0.6 trillion from 2000. This is a big economy – over 600 million people, more than US$ 2.5 trillion in GDP. Intra-ASEAN trade is 25% for merchandise, and 18% for services.

29. And we have urbanisation. Over the last 15 years, I have been travelling all over the place. What I have been seeing is urbanisation. Thailand is now passing 50%, with the Philippines following closely behind, and other countries also following, coming along. The ASEAN economy has become much more advanced in the last decade and a half. We benefit so much from the opening of China and India. Of course, we arrange these market friendly policies through AFTA. Then China and India opened up. China, of course, opened up earlier than India. India opened up from 1991. I remember because I was in Delhi on the day that they finished the budget. They were selling the budget document in the streets. In Thailand, you give it away for free, nobody buys, but in India they were selling the budget document. I asked Minister Chidambaram why. He said because the reform was in the budget. So it is real from 1991.

30. What happened is the entry of China and India – and I say this all over the place when I explain the global economy. It is like suddenly you have two huge labour forces entering the global economy together, workforces of more than a billion, and they are of different characters. The Chinese are very hard working people so they become the factory of the world. The Indians are very hard talking people. They become the call centre of the world. The labour cost in the factory, and the labour cost in the so-called transaction – internet transaction – is reduced drastically. In Thailand, we would never compete with the Chinese, we would never argue with the Indian, because we know we would never win. So, we go along, collaborate with them and we prosper. That is how we should do.

31. At the moment, according to my own assessment and study, the economy of ASEAN is much more regional and ‘extra regional’ than before, because of its open regionalism. In fact, many of the Thai corporations are making more money from investing in other ASEAN countries than in Thailand. You have Thai corporations, Singapore corporations, Malaysian corporations, Indonesia corporations, all over the place.

32. The second reason why I do not want to push too hard on the ASEAN scheme is because of politics, because of domestic politics. We do not have enough strong leadership for such a scheme for regional cooperation. We could not come up with a scheme and then get the political leadership to push for it because domestic politics is taking up a lot of time now, more than before. If you look at Thailand and Myanmar, it is the politics of the lady and generals. It has been ongoing for how many years. Formerly, you look at Myanmar and you monitor and you say the politics is about how the generals treat the lady. Today, you see how the lady treats the generals.

33. In Thailand a few years ago, you watched and you saw how the lady treated the generals. Today, you see how the generals treat the lady. Now, they still cannot agree on the constitution. We have written maybe 19 – this is number 19 – and every constitution is so specific about certain intentions. Like in Myanmar, they try not to allow the lady to be president. They could not put in the name Suu Kyi. So, they say that anybody with foreign children is not allowed to be president. In Thailand they argue about how to pre-empt political conflicts.

34. When we had AFTA, Malaysia was under Mahathir. Now Malaysia is entangled with UMNO politics. Indonesia and the Philippines are adjusting to government by popular representation. About domestic politics, I can go on and on.

35. Therefore, in conclusion, I would say the following and close. The ASEAN economy has its own momentum now, with growing public recognition about ASEAN. The corporate sector is increasingly more regional and ‘extra regional’. All that we need is only more liberalisation in investment, in professional services. That would allow corporations to optimise their operations. And any investment in infrastructure connectivity is good for both domestic politics and regional economics.

36. Thank you very much, ladies and gentlemen, for your attention.

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