Europe’s chance to show Asia it cares

Date: 23/07/1998

Relations between the Union and the ASEAN bloc are at a low ebb, in spite of recent EU promises of money to help the region recover from economic collapse. But early hopes that next week's ministerial meeting would improve matters are fading. By Mark Turner reports

WHEN Austrian Foreign Minister Wolfgang Schüssel leads an EU delegation to next week's annual South East Asian ministerial meeting in Manila, he will try not to make too many waves.

"Traditionally, Austria has never had priorities in Asia," explained an official in Vienna's ministry of foreign affairs. "We will just try to solve the problems as well as possible and hand over to the next presidency."

As if to prove the point, the official added that the Alpine state was unlikely to launch any new initiatives on the Asian financial crisis during its stint at Europe's helm.

Whether this reflects a humility befitting the small country or a dangerous degree of complacency remains to be seen.

After a full year of environmental, political and financial catastrophe, and possibly even harsher trials on the horizon, there is no denying that the nine-member Association of South East Asian Nations (ASEAN) is looking somewhat bedraggled.

By contrast, the EU appears to be a remarkable island of stability in a chaotic world, with the imminent single currency and strong domestic demand shielding its economy admirably from the Asian crisis.

It might appear forgivable, then, if Europeans believe they can sit back and feel rather pleased with themselves. Only a year ago, the Union was derided as a sluggish, bureaucratic monolith, ill-equipped to cope with the fast-paced cut-throat world of business in the 21st century. In mid-1998, it is the envy of the developing world.

The inhabitants of Tyre, the offshore capital of the Phoenician trading empire, must have felt much the same way as they watched Alexander the Great's armies pour out and ravage the Persian empire from the safety of their island fortress.

Unfortunately for them, the young Macedonian did not obey the normal rules of war. Spying Tyre's plump riches from across the water, he spent seven months building a causeway to the city, then simply marched over and claimed his prize. As their palaces burned, the Phoenicians cursed themselves for not spotting the obvious danger sooner.

Europeans may yet kick themselves for not doing more to stem the Asian rot.

Of course, the EU strongly denies any charge of standing back and feeling superior.

It points, for example, to the creation of a special trust fund, launched in conjunction with the World Bank at the second Asia Europe Meeting (ASEM II) in London this April.

After a number of fits and starts, donors this month pledged to give a total of around 45 million ecu, led by the EU's own contribution of 15 million ecu. Between 7 and 8 million ecu each was pledged by the UK, France and (in a last-minute show of generosity) Italy, while smaller countries donated between 1 and 2 million ecu.

Despite the notable absence of Germany, the bank claims these amounts mark a "very strong endorsement" from western governments, and predicts that the fund will be a great success.

Officials say the money will be used to counter the social consequences of the crisis and create mechanisms to make sure it does not happen again.

Vietnam, for example, will receive technical assistance for bank restructuring. An early warning system for financial shocks will be developed in Malaysia, and Koreans will be taught how to set up social welfare systems to deal with institutional unemployment.

Money will be sent almost immediately to Indonesia to support children who would otherwise have to leave school, and the fund will finance a snap survey of Philippine households to identify the country's worst-hit areas.

An advisory group consisting of stalwarts like ex-European Monetary Institute head Alexandre Lamfalussy, former European Bank for Reconstruction and Development chief Jacques de Larosière and ex-US Federal Reserve chairman Paul Volcker will help pick experts from throughout the EU to do the job.

"We will beg, borrow or steal these people wherever we can find them," says a World Bank official.

This, add European Commission officials, will be supplemented by a new social focus in the Union's bilateral development assistance to ASEAN countries.

While this is undoubtedly a worthy endeavour, even the World Bank admits that 45 million ecu is only a drop in the ocean compared to the region's total needs. It argues that the fund is a symbolic act, showing Asia that Europe cares and creating valuable links between experts.

Diplomatic ASEAN officials agree. "This is a symbol, and may mark the beginning of long-term financial cooperation," says one expert, who adds that the projects were jointly proposed by recipient countries, creating an important sense of ownership.

There is also a growing sense in South East Asia that ASEAN should begin to abandon its strict policy of non-interference and members should take more interest in each other's affairs, following a route mapped out by Europe.

"East Asia can learn from the capacity, the ability and the willingness of the members of the Union to engage in a free and candid exchange of views no matter how controversial the issue," says Tommy Koh, executive director of the Asia Europe Foundation.

Yet as cynical Asian journalists point out, Europeans are not necessarily best-placed to teach Asia how to deal with the social consequences of bad economic management.

The EU may look relatively strong now, but it still suffers from chronic unemployment, a dangerously underfunded state pension system and growing public discontent at the social costs of economic and monetary union.

There are also serious doubts about the personalities involved: male Europeans who are past their peak may not inspire confidence in Asian economies which feel under siege from western speculators. It is an unfortunate coincidence that many credit Volcker with sparking the 1980s Latin American debt crisis, following his untimely hike of US interest rates.

Experience of previous EU technical assistance programmes to eastern Europe and the former Soviet Union, renowned for overpaid consultants with scant local knowledge or retired or second-rate government experts, does not bode well either.

Overall, the Union still stands accused of remarkable indifference while the World Bank and the International Monetary Fund have proved woefully unable to halt full-scale social catastrophe.

Add to this the serious low to which EU-ASEAN relations have sunk of late, and you do not have a happy formula.

Persistent fights between the two blocs over Burma's participation in a joint cooperation council have, in effect, sunk official cooperation for two years, and hopes are fading that the meeting at the end of this month will improve matters.

Although ASEAN has shown some flexibility by encouraging Burma to keep quiet, it says it cannot force Yangon to sit in the background as the EU insists. However, Denmark refuses to budge an inch, still enraged by the 1996 death of its honorary consul James Leader Nichols in a Burmese prison.

"The EU is essentially mishandling the situation, which has caused a great deal of the rift between both sides," believes Dr Willem van der Geest of the European Institute for Asian Studies. "EU-ASEAN relations are at a low ebb."

He adds that the continuing stand-off between Portugal and Indonesia over East Timor remains a thorn in the side of inter-regional relations, making a third-generation cooperation agreement even more difficult to negotiate.

Given the freeze, fears have grown amongst ASEAN countries that the EU will simply switch all its programmes to the ASEM forum, which includes Japan, Korea and China.

That, according to ASEAN officials, would be a mistake. "The two processes are quite different," says one. "ASEM is a political gathering. I cannot see it replacing EU-ASEAN relations."

Austrian officials, faced with something of a public relations disaster, are keen to highlight the positive face of the Manila encounter.

For the first time, points out Vienna, officials from the EU's defence arm the Western European Union will attend meetings, demonstrating a new degree of cooperation in security issues.

Furthermore, both sides share a strong interest in the imminent elections in Cambodia: the EU as their chief bankroller and the ASEAN countries as potential future partners.

"The EU's intervention in Cambodia has been quite successful," insists an ASEAN official.

Major feature on relations between the EU and ASEAN.