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Border fighting threat to ASEAN economic plans

SPEAKING at the inaugural ASEAN-EU Summit on Thursday in Jakarta, Indonesian President Susilo Bambang Yudhoyono noted the region still faces “challenges” in achieving integration by 2015.

The past few weeks has shown Cambodia’s border dispute with Thailand remains a major threat to ASEAN’s bid for an integrated economic zone, a point conceded by Thai Prime Minister Abhisit Vejjajiva on Saturday at the ASEAN Summit in the Indonesian capital.

Thailand’s decision to close borders to trade following recent clashes, which prompted Prime Minister Hun Sen’s counter threat to ban Thai imports represents the exact opposite of what the ASEAN Economic Community (AEC) is trying to achieve.

Among the most prominent goals of the region’s economic blueprint is the free flow of goods within the region. And the threat to trade is not only restricted to Cambodia and Thailand. The dispute also remains a risk factor for trade throughout the region given Poipet is a major channel for the Southeast Asian arm of the Asian Highway Network. Closure of the busiest crossing between the two countries remains unlikely but could happen if the situation deteriorates further.

The greatest threat posed by the border dispute is the deteriorating climate for negotiation when a host of bilateral agreements would be needed in the next few years under the AEC blueprint, which calls for non-discriminatory treatment of other ASEAN states and improved cooperation.

Fighting in and around Preah Vihear lessens the possibility the other main bilateral border dispute in the Gulf of Thailand can be resolved. The AEC blueprint calls for cooperation in extractive industries but currently no such possibility exists in the 27,000 square-kilometre overlapping claims area considered to hold high promise for oil and gas reserves.

Furthermore, the blueprint calls for a complete network of bilateral agreements on double taxation, an issue bemoaned by many Thai investors and importers working in Cambodia. Given its own domestic tax enforcement problems, the Kingdom has struggled to eliminate double-taxation with any other country thus far.

Thailand would make the obvious first choice given it is the Kingdom’s biggest trade partner, but with bilateral relations at their lowest point for years an agreement looks a remote possibility, especially by 2015 given such arrangements usually take a few years to implement.

The main problem ASEAN faces is that, far from trying to protect their bilateral economic relationship as political ties have become strained, Thailand and Cambodia have actively sought to use trade as a weapon.

This hardly bodes well for Cambodia’s chances of meeting key AEC requirements ahead of 2015 when it remains deficient in areas such as taxation, tariffs, infrastructure and customs clearance.

For ASEAN then, clearing up this ongoing bilateral spat not only promises security and political benefits, there are major economic rewards too.

Achieving these by 2015, however, looks less likely with each clash on the border.

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