The Facilitators - How LKY and Anand brought AFTA to life

“SENIOR Minister Lee urged me to pick up the ball and run with it,” says Anand Panyarachun, twice Prime Minister of Thailand, as he recalls a meeting with Lee Kuan Yew that ultimately led to formation of the ASEAN Free Trade Area. Leaders of the time also had a hidden political agenda – to forge a closer political entity within the region . . . 

THE ASEAN Economic Community is due to come to fruition in 2015, further deepening economic integration of a region already bound together by a Free Trade Agreement.
Formal economic union of the region might not have come but for the drive of one man — Anand Panyarachun — who was twice Prime Minister of Thailand in the early 1990s, during the tumultuous days of Thai politics when military coups were the order of the day.
Ever-gracious Panyarachun, now 80, credits one of Asia’s best known statesmen, Lee Kuan Yew, as having offered the advice that brought about economic integration of the Association of Southeast Asian Nations (ASEAN).
The Cambridge-trained lawyer-turned-businessman told ATI that, upon becoming Prime Minister for the first time in 1991, he paid a State visit to Singapore.
Anand recalls that Singapore’s Senior Minister Lee reminded him of his role in the private sector. “You are the first Prime Minister in ASEAN who has served both the Government and the private sector. Others are either fully-fledged politicians or Government officials,” Lee had said.
Anand explains: “It so happened that when I was in the private sector, I was very much involved with the work of the ASEAN Chamber of Commerce and Industry as President of the Thai Chapter of the Chamber.”
Lee spoke of the work that he (Anand) had done previously as Chair of an ASEAN Taskforce working on a plan to integrate member States. Anand’s report was submitted to ASEAN Foreign Ministers at the time, but he said: “Nobody had the will to pick it up and run with it. It was effectively shelved.”
“Senior Minister Lee urged me to pick up the ball and run with it,” Anand recalled during an interview with ATI in his office at Siam Commercial Bank’s headquarters, where he has been Chairman of the Board for the past six years. The Thai leader heeded Lee’s advice and established a team in Thailand to dust off the report. On his subsequent trips around ASEAN capitals, Anand requested other ASEAN States to appoint their own teams to work with Thailand on the FTA project.
When the ASEAN Heads of Statemet for their annual summit in Singapore in 1991, Anand unveiled the blueprint for an ASEAN Free Trade Area. It was accepted, and, in the following year, the then-leaders of ASEAN formally signed the AFTA Agreement.
In an interview with ATI in Singapore, published in March 1992, Anand said he would engage in consultation with interested parties in ASEAN with a view to further reducing tariffs to a maximum of 20 per cent by January 1, 1994. For those product groups which had been selected for accelerated tariff reductions, the aim was to reduce tariffs to the zero-to-five per cent range “as soon as possible”, he said then.
“Mind you, when I said we were moving towards an ASEAN Free Trade Area, we had a hidden political agenda (to forge a close political entity),” says Anand, as he reflects on the evolution of AFTA and now AEC.
“I think at the back of the mind of the AFTA founders, particularly our former Foreign Minister (Thanat Khoman), they knew that for ASEAN to be relevant for the future, there needed to be some sort of political agenda. (But) at the time, things were sensitive. It was not convenient to put down what we were thinking on paper, so we focussed on the soft side — economic and social issues.
“Even that vision did not include the creation of a supra-national body. We knew from the beginning, because of our different histories, cultures and upbringing, that we would not be able to go into full political integration, like the European Union.
“Our agenda was to strengthen integration in terms of investment and movement of labour, and to reduce restrictions on movement of capital. Yes, eventually we hoped that because of this economic infrastructure  we would be creating, that the result would be closer political harmonisation but not integration.”
Excusing himself to light up a cigar, Anand continues: “Of course, for any regional organisation to be a success, we need to be able to say that the countries of Southeast Asia live happily together, and, in order to live happily we have to co-operate with each other – have a political understanding of each other.”
Since he left politics, Anand has seen more talks on political issues in ASEAN in the past decade than in previous decades. That is inevitable, he says, because the closer the countries become in economic terms, the more the process will evolve.
Sooner or later, issues such as conflict of interest will arise, and such issues can only be resolved by political process, not on technical terms, “So, indirectly, you are enhancing this political harmonisation programme.”
ASEAN is made up of 10 nations — Malaysia, Indonesia, Singapore, the Philippines and Thailand (the original members), and Brunei, Vietnam, Laos, Cambodia and Burma, who have joined at later times.
It has often been said that ASEAN owes much to strong, autocratic leaders of the time — Singapore’s Lee Kuan Yew, Indonesia’s Suharto and Malaysia’s Mahathir Mohammad.
So does Anand think the current generation of ASEAN leaders has the political courage to make domestic sacrifices for mutual benefit?
“Definitely, while we talk about the promotion of investment and trade, it is inevitable that we have to work more within the process of a democratic framework,” he says. “You cannot be selective that you want this and you don’t want that. Economic progress and
democracy have to work in tandem. To me, that is partly a maturing process.”
Anand believes that the path towards achieving regional economic co-operation is not always going to be smooth. There have always been hiccups every now and then, particularly with the introduction of less-developed members into the ASEAN Club.
“You just have to deal with it and bridge the gap. Globalisation in itself will be the accelerator in our regional process,” he told ATI.
Anand also says that times have changed, and that those who were previously brainwashed to think of China as the evil empire no longer holds such views. “The political environment has drastically transformed. This is a new century. When you talk about the Pacific Century, you have to think of the rise of ASEAN.
“The priority is still how to generate growth in economic terms while maintaining political stability. For the first time in Asia, we speak the same language — not ideological language but common-sense language.”
Anand sees a rebalancing happening in Southeast Asia, where countries which were previous commodities exporters are industrialising. Thailand, now an automotive hub for the region, is an example. Anand threw the first dice, as it were, to make this happen.
“My Government lowered the tariff wall by cutting duty on imported cars from around 600 per cent to 300 per cent, making it feasible for the Thai car industry to get off the ground.
Instead of buying poorly-assembled Thai cars, our people were able to buy foreign cars built in Thailand,” he says.
Asked if the opening up of Indo-China, with new ports and highways connecting the various countries may see Thailand, for example, supplant Singapore’s entrepot role, Anand says: “If you refer to the transformation of transportation and technology, then perhaps Singapore’s role will be reduced. But in actual terms, it will not be reduced because of the expansion of growth. So I think it is not a winner takes all situation. It has to be a win-win situation.”
Successive Thai leaders have placed more credence on a closer ASEAN bloc than some of their ASEAN peers. Even today, Bangkok is a vocal proponent of the ASEAN Economic Community, because it can see a significant strategic role for itself, especially in continental ASEAN. Anand says: “We have many advantages. Our land area is sizeable enough to be a force to be reckoned with, the population size is sufficiently adequate to be recognised. We are blessed by our own geographical location. So it is natural that Thailand will be a regional centre of production, distribution, transport, and so on (within ASEAN).
“This has nothing to do with whether we have an efficient or inefficient Government. The private sector in Thailand has proved to be very strong. We have very good entrepreneurial skills within our own people. But the Thais are not good organisers and planners.
“We are good at improvisation and we roll with the punches. I call Thailand an “ad hoc-racy”. He jokes that this is why Thailand has bloodless coups.
Born into a well-established family, Anand’s future was more or less charted for him. He joined the diplomatic service, serving as his country’s Ambassador to the United States and the United Nations before turning to the private sector. “By the time I became Prime Minister, I had been in the private sector for over a decade and was not expecting to be returning to Government service again,” he quips.
As well as AFTA, as Prime Minister Anand Panyarachun made critical contributions to reform in Thailand, including drafting of a new Constitution for the Kingdom in 1997.  He led what many described as Thailand’s best civilian Government, which ushered Thailand into its first round of economic liberalisation.