Southeast Asian countries, under pressure from volatile financial markets and the economic might of China and India, are considering sanctions for those who do not comply with crucial free-trade deals on time, according to confidential reports.
The Association of Southeast Asian Nations (ASEAN) also plans to establish a strict monitoring system to ensure timely compliance with a new blueprint, which envisions transforming the region into a booming EU-style economic community by 2015, according to the reports yesterday.
ASEAN's 10 member countries, once bastions of protectionism, have forged a number of deals among themselves to demolish trade barriers.
They are negotiating similar pacts with Asian economic powerhouses like China and India, along with affluent Japan and South Korea -- trying to benefit from the giants' overwhelming investment clout, rather than be trounced by it.
On Friday, ASEAN economic ministers meeting in Manila approved a comprehensive blueprint to create an ASEAN Economic Community by 2015, five years ahead of the original schedule. ASEAN heads of state are expected to give final approval at a November summit in Singapore.
But the ASEAN economic bloc's chairman, Philippine Trade Secretary Peter Favila, warned that the blueprint was not a magic wand that can instantly transform their region "from ashes to ballroom elegance, as in the case of the Cinderella story."
ASEAN Secretary-General Ong Keng Yong, in a confidential report to the ministers, said the regional bloc should learn to comply with free-trade obligations on time -- and remove perceptions that it "is prone to `agree fast, act slow.'"
"This has fostered continuing skepticism outside the official circles," Ong said. "ASEAN needs to focus on getting results."
In a bid to ensure compliance with free-trade arrangements, Ong recommended that the ASEAN economic ministers "institute compensatory measures or denial of benefits for delay in implementation."
While ASEAN's economy grew at an impressive rate of 6 percent last year, and was forecast by the Asian Development Bank to register 5.6 percent growth this year, Ong said the bloc faces a slew of challenges.
"These include high oil prices, the competition from China and India, higher-than-expected inflation, increased volatility in the financial market, faster-than-expected US economic slowdown," said Ong, adding to the list unspecified "non-economic threats."
With its efforts to more rapidly liberalize trade, ASEAN "is poised for a big leap forward provided the challenges are overcome," he said.
The ASEAN Economic Community or AEC blueprint allows flexibility in the enforcement of free-trade obligations -- provided it's "pre-agreed and [would] not delay the overall progress and implementation of the AEC."
Under the deal, for example, import duties for all agreed products should be slashed by ASEAN's six more affluent members -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- by 2010.
The rest of the membership, comprising Cambodia, Laos, Myanmar and Vietnam, should do so by 2015, with flexibility for the deadline to be extended up to 2018 for some of the four developing countries' sensitive products.