DAVOS, Switzerland – The 10-country Association of Southeast Asian Nations, or ASEAN, will be able to declare itself an economic community by the end of the year even though some thorny issues mostly about services are unlikely to be resolved, a top Malaysian minister said Thursday.
Trade and Industry Minister Mustapa Mohamed conceded that the countries, which include Cambodia, Singapore and Vietnam, won’t agree to every proposal to make the region more integrated economically. However, in an interview with The Associated Press on the sidelines of the World Economic Forum in the Swiss ski resort of Davos, he said he expects the current 85 per cent or so agreement to rise toward the 95 per cent level by the end of the year.
“At the end of the journey, it gets more complicated,” said Mohamed, who is leading the negotiations to put the final touches to an agreement that proponents say will foster trade, lift growth and alleviate poverty.
Malaysia took over the revolving chair of ASEAN at the start of the year.
Mohamed conceded that matters are complicated by the fact that the global economy is not performing as most hoped for a year ago in Davos, and some nations are getting more fearful about opening their economies up more.
“The job in 2015 is to tell fellow colleagues in ASEAN we have bigger objectives to achieve,” he said.
Mohamed sought to “demolish” the impression that the new economic community will resemble the European Union, a single market that allows the free flow of capital and labour across borders.
“Yes we are going to declare ourselves a community. But what we mean is that ASEAN countries will be more integrated, ASEAN has the objective of a freer flow of goods and services,” he said. “But it is certainly different from what is happening in Europe.”
Malaysia itself is facing tough economic times. The Malaysian government downgraded its growth forecasts earlier this week and increased its projections for the budget deficit, largely because of the hefty fall in oil prices to below $50 a barrel. Because Malaysia is a big exporter of oil, Fitch Ratings put the country on notice that it may have its credit rating downgraded and urged the government to diversify its dependence on oil revenues.
Mohamed said the government expects an average crude price of $55 a barrel. “Everything over would be a bonus.”
Although oil revenues account for around a third of government revenues, Mohamed said the bulk of the country’s exports are manufactured goods. He also laid out the hope that tourist numbers from China will also pick up this year following the “understandable” drop in 2014 following the disappearance of Malaysia Airlines Flight 370 in March. The airliner suffered a double tragedy when MH Flight 17 was downed over rebel-held eastern Ukraine in July.
“Those tragic events had an impact, psychologically, on people in China and Malaysia. Hopefully in 2015 will be a year when things will be back to normality and tourism will pick up again,” he said.
Mohamed was also confident that China, the world’s No. 2 economy and a big driver of Asian economic growth, won’t suffer a “hard landing.” Earlier this week, China reported its lowest annual growth rate in nearly 25 years.