Unchartered Territory

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Brunei's top officials were in Singapore on November 20 to sign the much-vaunted Association of Southeast Asian Nations (ASEAN) Charter. The agreement includes a raft of liberalising initiatives, aimed at reducing protectionism and Customs procedures. With measures to increase the mobility of capital and labour, the charter coincides with several development areas already targeted by Brunei.

The charter's primary goal is to form a cohesive political-economic bloc, offering "a more coordinated ASEAN model which can then actually be offered to business investors." Once signed, it will incorporate the member countries into a legally bound entity, the ASEAN Economic Community (AEC), further extending the 1992 ASEAN Free Trade Agreement (AFTA).

Brunei is set to reap considerable rewards from the charter. Efforts to nurture a more entrepreneurial culture will be given impetus by the charter's emphasis on welcoming foreign competition. Simpler procedures for exporting to other ASEAN countries are expected to help Brunei overcome problems associated with its small domestic market. A dispute-settlement mechanism could have direct implications for the impasse between Brunei and Malaysia concerning oil rights in the contested territory of 'Block J', which has stalled exploitation efforts for some years.

Further plans to reduce the transaction costs of ASEAN trade and Customs are a boon to Brunei's $1.5bn Muara port project. Given its central location within the region, and estimates that a capture of just 5% of the shipping market would make it profitable, a trade surge brought about by relaxed regulations would allow the venture to blossom.

Freer capital movement will aid ambitions in the rapidly growing Islamic finance market, already buoyed by the 2006 merger of Islamic Bank of Brunei and Islamic Development Bank. Muhammad Syaippudin, managing director of the new Bank Islam Brunei Darussalam, has been speaking openly of capitalising on Brunei's excess liquidity, expressing the bank's desire to "make our presence felt overseas".

The charter also includes provisions aimed at stimulating economic growth, overlapping plans already underway in the sultanate. Of the AEC's 11 priority industries, wood-based products, textiles, fisheries, air travel and tourism all figure as sectors currently targeted by the Brunei Economic Development Board.

Tourism already shines as a key sector in Brunei, with 5% annual growth attracted in large part by 220,000 sq km of pristine rainforest marketed under the 'Heart of Borneo' scheme. Similar potential is visible in a $150m airport expansion slated to begin in 2008 and the modernising efforts of national carrier Royal Brunei Airlines.

Brunei has been a member of ASEAN since its independence in 1984 and boasts the region's second-highest per capita GDP, after Singapore. As an oil-dependent market of just 370,000 people, belonging to a strong ASEAN is preferable to the uncertainties of bilateral trade deals. The increased negotiating power brought about by the charter would prove an important bargaining chip, especially as nearby Indonesia and Malaysia dwarf Brunei's purchasing power and industrial standing.

ASEAN's successes have thus far been enviable. The possibility of conflict between the bloc's 560m citizens has all but disappeared, GDP has grown from 4% to 30% of the world's total, a financial crisis has been survived and under its umbrella member nations have come of age.

Nonetheless, the relevance of the organisation is facing mounting scrutiny from political and economic observers. Detractors cite differences among ASEAN governments and have raised questions about participating countries' differing perspectives on business fundamentals such as property rights and ownership. While ASEAN members cherish their varying national characters, when faced by changing markets this very diversity may risk becoming an economic impediment. Given the strength of Indian and Chinese competition, ASEAN can ill-afford obstacles to unity.

The signing of the charter is an important moment for Brunei and the other ASEAN countries. Statistics from the 1990s show that the implementation of AFTA received more impetus from the Asian financial crisis than from the signing of the document itself, leading observers to wonder when the charter's promises will actually come into effect. With analysts asking whether the new charter will bring increased maturity and purpose to the organisation, or if it will simply be more words, ASEAN cannot risk waiting for calamity before pulling together.

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