Among the issues that will be discussed at the ASEAN Summit in Kuala Lumpur in December this year would be the development of an ASEAN Charter. A ten member Eminent Persons Group will be appointed to prepare a draft Charter for the consideration of ASEAN leaders in a year’s time. If all goes well, the region will have a Charter in time for the 2007 ASEAN Summit.

The Charter should provide ASEAN not only with a legal standing but also a strategic roadmap to meet the challenges of the new millennium. As far as regional economic integration is concerned, the proposed Charter could not come at a better time.

The proposed ASEAN Charter is expected to set out the longer-term direction for ASEAN. In terms of regional economic integration, that long-term direction and end-goal have already been articulated to some extent in the ASEAN Concord II which was released at the Ninth ASEAN Summit in Bali in October 2003. In the Concord, ASEAN leaders had agreed to integrate their economies and establish an ASEAN Economic Community (AEC) by 2020.

In line with the ASEAN Vision 2020, it is envisaged that the AEC will be a single market and production base with free flow of goods, services, investments, capital and skilled labour. This bold and ambitious project would require a higher degree of regional economic integration than what exists today in ASEAN.

When considering economic inputs into the Charter, there is no need to "reinvent the wheel" as key economic integration measures are already outlined in the Vientiane Action Programme 2004-2010 (VAP). This six-year strategic action plan was launched at last year’s ASEAN Summit in Laos. The VAP aims to intensify the economic integration process by developing and implementing measures that would put in place the essential elements for ASEAN to function as a single market and production base.

These measures will also continue to be relevant and applicable beyond the deadline of the VAP. They include accelerating trade and investment liberalization, reducing business transaction costs, promoting regional trade in services and strengthening the ASEAN dispute settlement mechanism.

To avoid a "two-tier" ASEAN, it would be absolutely critical that the Charter addresses the development gap among its member countries. This would ensure that the economic integration can be implemented smoothly and that every member country will benefit from the process. Therefore, appropriate resources should be allocated to bridge the economic divide and ensure the full participation of less developed ASEAN countries in the integration process. This would include financial and technical assistance, transfer of technology, education and training facilities.

Although most of the essential economic elements have been identified for the Charter, the main problem lies in its effective implementation and compliance by member countries. For example, we observe that some member countries have got away with fulfilling their commitments on time in specific sectors under the ASEAN Free Trade Agreement (AFTA). It is therefore crucial that the Charter should be designed to ensure that economic commitments are legally binding and that non-compliance will result in punitive measures such as trade sanctions. One hopes that the Charter can provide the existing ASEAN dispute settlement mechanism with some much needed "bite".

It is also important to note that deeper economic integration cannot be successfully achieved without the establishment of a stronger institutional structure. There is thus a need to streamline, strengthen and enhance coordination among the existing institutions, as well as design better enforcement mechanisms in order to facilitate and expedite economic integration. In this regard, the European experience is worth noting as institutional development started at an early stage of economic integration. In ASEAN’s case, building new institutions - some of which could be supranational in nature viz. an ASEAN Trade Commission - to expedite regional economic integration could be long overdue. In this regard, the Charter is an important step in creating a more rule-based institutional structure for ASEAN.

The end-goal of the AEC is not clearly defined conceptually – is it a common market? A single market connotes a European-style common market. A common market is understood to be an arrangement in which there are complete free flows of trade as well as free mobility of labor and capital. It is the ultimate form of economic integration.

Given the ambiguity of the final goal of regional economic integration, the AEC project is not surprisingly losing momentum. If ASEAN countries are unable to integrate deep and fast enough, then they will undoubtedly lose out to the dynamic emerging markets of China and India.

Hence, a change of mindset is required if ASEAN wishes to remain economically competitive and relevant. This may include rethinking the "ASEAN Way" of making decisions which is based on consensus. Clearly this form of decision-making process will slow down economic integration. An alternative approach would be the “2+X” principle which allows two member countries to integrate specific sectors first. This approach was suggested as a means to fast track integration at the Bali Summit two years ago.

Like the Treaty of Rome in 1957 which laid out the foundation for the creation of today’s European Union, the ASEAN Charter provides a golden opportunity to follow in the same footsteps. Given that ASEAN is made up of countries at very different levels of economic development, however, a common market is unlikely to be stablished by 2020. Nevertheless, it is a long-term goal that ASEAN should strive to achieve.

Even without a Charter, ASEAN is already moving towards realising a fully functioning free trade area. Hence, regional economic integration could be done in stages. By 2020, ASEAN will easily realise an “AFTA-Plus” arrangement where there is an FTA plus freer movements of good, services, investments, capital and labour. Within the next twenty to thirty years from that time, ASEAN should go someway towards establishing a common market. This might seem like an awful long time but it took richer and less diverse Europe thirty-five years to create its own common market.

The ASEAN Charter has to be bold if it’s going to make a real impact. However, given the fact that it will take at least two years to come out with an ASEAN Charter leaves plenty of time for the document to be watered down so as to avoid political ensitivities. If this happen, it would sadly be yet another missed opportunity for ASEAN.