ASEAN Economic Community And Small-Medium Enterprises: An English School Perspective

ASEAN leaders have repeatedly conveyed their political will and commitment to building ASEAN Economic Community (AEC) by 2015. They establish ASEAN Vision 2020, signed the ASEAN Charter, and decided to accelerate ASEAN Community into 2015. ASEAN Charter puts in place the institutions and mechanisms to build up an ASEAN Community. ASEAN Vision 2020 consisted of three pillars: ASEAN Economic Community, ASEAN Socio-cultural Community and ASEAN political security community.

ASEAN Economic Community consists of four main elements: single market base, competitive economic region, equitable economic development, and integration into global economy (ASEAN Secre-tariat, 2009). ASEAN Economic Community Blue-print has been signed and adopted at the 13th ASEAN Summit on 20 November 2007 in Singapore.

In the competitive economic region, there are five pillars: free flow of goods; free flow of services; free flow of investment; free flow of capital; and  free flow of skilled labor.

In the case of “equitable economic development”, ASEAN developed the Initiative for ASEAN Integra-tion (IAI), which identified the needs of CLMV countries (Cambodia, Lao, Myanmar and Vietnam) and the promotion of small and medium enterprises.

Accounting for 30-60% of GDP of ASEAN mem-ber states and the largest source of employment for all economic actors, small medium enterprises is a very important economic actor in Southeast Asia (ASEAN Secretariat, 2013). Indonesia, for example, is home to 55,2 million SMMEs which contributes to 57% Indonesian GDP (Chandra & Hattari, 12). SMEs are important in cyclical downturns and recessions. They cushion the impact on economies that more often than not comes from large enterprises (Nixon, 2009).

Single market and production means greater opportunities for SMEs to export their products to ASEAN market. A strong, dynamic and efficient SME sector will ensure the sustainable, inclusive and broad-based economic and social development. A vibrant SME sector is critical in supporting closer regional

integration through the establishment of the ASEAN Community, particularly the ASEAN Economic Community (AEC). Thus, the encouragement and promotion of competitive and innovative SMEs is necessary in contributing to greater economic growth and social development towards more inclusive and broad-based integration of the ASEAN region.

The SME sector in ASEAN, however, is confronted with a wide-range of structural, financial and other challenges, among which are limited access to finance, technologies and markets. There is also the question of entrepreneurial spirit and management skills among ASEAN SMEs. These problems are compounded by the lack of information, inadequate capacity for compliance with standards and certification, and the absence of a more conducive business and policy environment.

In addition, there are the new trends of conducting business utilizing information and communications technology (ICT) with on-line linkages across the value chain as well as the outsourcing and networking strategies adopted by large enterprises and multina-tional companies (MNCs) which lack participation by SMEs. All these require SMEs and government to undertake proactive capacity building and other measures to ensure and sustain SME participation in supply networks and to sharpen SME competitiveness, flexibility and hence business sustainability.

The formation of SME-based clusters, and inter-firm networks and linkages within ASEAN will help leverage collaboration and collective efficiency, includ-ing scale economies across the value chain, thus creating further opportunities for business develop-ment and supply linkages for SMEs and their entrepre-neurs in the region.

There is additionally a need to create and promote a more conducive business and policy environment for SME development where Government, ASEAN institution and the private sector assume synergistic and complementary roles. The Government and ASEAN institutions act as a facilitator, while SMEs themselves are the engine of growth. Indeed, collabora-tive SME development programmes within a public-private partnership framework will ensure the contin-ued economic growth and social development in the region. These programs can be achieved through structured and organized action plans and develop-ment initiatives, including though the introduction of wide-ranging capacity building and fiscal and financial incentive programmes, with SMEs and their entrepre-neurs as the main target beneficiaries.

As one of international organization, ASEAN has many important roles in developing SMEs. Together with states, ASEAN institutions can guide, direct, and fund many development programmes related to SMEs. In the context of AEC, ASEAN has big responsibility to nurture SMEs. Moreover, AEC, a new set of regional liberalization package, will have important consequences to SMEs’ growth in the ASEAN mem-ber states. It can be two-edge swords for SMEs. AEC can be opportunities to internationalize SMEs but in other hand it can threaten the SMEs by fiercer compe-tition from big corporation.

Therefore, this paper will ask a question of: How AEC will affect SMEs in ASEAN member states using English School Theory in International Political Economy.



English School Theory (EST) is one of IR grand theory widely acknowledged by its comprehensive contribution in security and International Political Economy (IPE) studies. In IPE studies, EST at-tempted to examine the relationship between sover-eignty, international trade, international organization and non-conventional issues such as environment and human rights.

English School Theory, pioneered by Martin Wight, Hedley Bull and Barry Buzan, answered this debate by splitting up IR into three divisions. Wight (1992), for example, provides three conceptions on IR, which are realism, rationalism, and revolutionism. Realism offers pessimistic worldviews and revolutions represented radical movement toward idealist norma-tive goals. Rationalism is the middle ground between realism and revolutionism emphasizing the role of law and wisdom in IR.

Bull (1966) provided three basic conceptions of IR, which are international system, international society and world society. International system refers to power politics amongst states, and puts the structure and process of international anarchy at the center of its analysis. International society is about the institu-tionalization of shared interest and identity amongst states, and puts the creation and maintenance of shared norms, rules and institutions at the center of IR theory. Worlds society takes individuals, non-state organizations and ultimately the global population as a whole as the focus of global societal identities and arrangements, and puts transcendence of the states-system at the centre of IR theory.

Furthermore, Buzan (2004) argues that there are six spectrum of international society; asocial, power political, coexistence, cooperative, convergence, confederative. Each of this spectrum has its own assumptions on environment and non-state actors. Asocial, power political and coexistence considered that sovereignty and international order as the ulti-mate goal of international society meanwhile cooperative, convergence and confederative are very active in promoting new issues and actors in IR such as Interna-tional Political Economy.

There are some ES’ key concepts that can be used to analyze IPE. This research will focus to concept of market and sovereignty. Market, like war and diplo-macy, is a very old practice in human affairs, arguably perhaps the oldest candidate for the status of a pri-mary institution defining the relations between the highest level of organized human grouping at any given time (Buzan & Little, 2000). Market was the primary economic institution for much of human history until fairly recent times, often carrying with it secondary institutions such as the particular rights accorded to enclaves of foreign traders in most of the city-states and empires of the ancient and classical world until today.

For ES theorists, market means more than just trade and finance. Market becomes an institution when there is shared practice and norms for granting particular rights to particular individual and collective organization. It is a principle of organization and legitimation that affects both how states define and constitute themselves, what kind of other actors they give standing to, and how they interpret sovereignty and territoriality.

Another key concept was sovereignty. The emphasis on sovereignty will result to two perspectives; mercan-tilism and liberalism. Mercantilism is in harmony with balance of power, nationalism, and war. Liberalism has complex effects. It requires sovereignty/non-interven-tion to be reinterpreted to allow more porous borders.

Under mercantilism, states saw themselves in a zero-sum competition with others and sought to maximize their wealth, power, and autonomy, not least by seeking favourable trade balances and the accumulation of specie. Crudely put, mercantilism meant that self-reliance was preferred to trade because the national interest was defined in terms of an ability to wage war. On the other side was liberalism, which held that trade was a good in and of itself, lowering prices, increasing technological innovation, prosperity, and social dynamism, and reducing the incentives for war. Mercantilism enhanced the power of the state, while liberalism elevated the power of the market and a variety of non-state actors.

Two different perspectives and two different concepts will yield different result in terms key words, objects of investigation and recommended proposal. This battle not only affected the whole character of the IPE, but also radically altered the balance and meaning of the primary institutions of international society. For more than a century this struggle was a, and arguably the, central issue of international rela-tions.

In addition to having major impacts on the other institutions of international society, the market also changes the composition of the actors who are in one way or another members of or at least participants in international society. Under liberal rules, both indi-viduals and non-state actors have legal rights against the state even if those rights are granted by the state. In principle, liberalism as a doctrine and the market as a practice favour a minimal state and the maximum liberty for individuals consistent with maintaining social order. In practice this means the empowerment of civil society and the right of people to establish organizations for a wide range of purposes.

To convince the battle between market and sover-eignty, the author will use the concepts to analyze globalization. Some allege that the most important result of globalization is the triumph of the market over the nation-state and the consequent end of national sovereignty. Economic forces are said to be eroding national boundaries so that governments lose control over their economies, and national economic systems converge toward a common model.

Market-oriented proponents of globalization consider this development as signaling a grand mo-ment in human history; the supremacy of the market over the state and of economics over politics over the end of a human institution and of the political struggles responsible for war, domination and other problems. For critics of globalization, on the other hand, victory of the market means the end of the state as the protector of the economically weak against the economically strong, and the supremacy of ruthless market forces and those who control such forces.

Author : Verdinand Robertua