In 2003, ASEAN leaders agreed to establish an ASEAN Economic Community (AEC) by 2020; a goal later advanced to 2015. The purpose of the AEC is to achieve a Single Market and a production base that facilitates the free flow of goods, services, investment, capital and skilled labour. Much attention so far has been paid to the problems of deeper ASEAN economic integration such as the ineffectiveness of ASEAN institutions, a lack of political will, the persistence of non-binding, ASEAN norms, and a widening gap in the level of economic development that prevents the formation of the AEC. An extensive and critical review of the literature reveals that there was limited research that focused on the negative consequences of domestic politics and political economic structures on regional economic integration. Thus there is a case for exploring the evolving dynamic of government-business relationships (patron-client networks) and the manner in which they affect the interaction between national and regional economies. Taking domestic political economic structures into account will fill the gap left in the ASEAN literature on economic integration. Therefore, this thesis seeks to fill this important gap by demonstrating that government and business relations not only result in cronyism and economic rents, but also have a major impact on regional economic integration. Hence, the study argues that these relations should be seen as having an economic ‘domino effect’, distorting specific industries and affecting both domestic and regional economies.
To shed light on the reality of ASEAN economic integration, this research utilizes the ‘inside out’ methodology to understand regional economic integration rather than an ‘outside in’ approach that disregards the underlying politico-economic structures within ASEAN states. An economic realist perspective on IPE is utilized as a lens to explain ASEAN member state’s preferences towards regional trade commitments. As a result, the embedded domestic political economies of ASEAN states will be brought into the analysis as domestic politics is a central insight of the IPE approach and considers ASEAN economic integration a political project. This research aims to explain the slow progress on the elimination of restrictions on ASEAN services under AFAS. The aim of this study is to clarify the impact of close ties between government and business in terms of sustaining restrictions in the services sector. The study seeks to capture an insider’s understanding of how and in what ways domestic political economic structures are entrenched by the continuing close relations between government and business. It also seeks to explore how non-economic barriers are employed to prevent market access and national treatment.
To explore the impact of government and business links on the AEC, this thesis focuses on the liberalization of ASEAN services under Mode 3 of AFAS, with particular attention on the telecommunications industry. The telecommunications industry is chosen because it is a new industry more likely to facilitate economic integration across the region because the interplay of economies of scale would be relatively new. Thailand and Malaysia were chosen as case studies. A comparative analysis of the cases will establish the similarities of the outcome that the relationship between government and business under different political regimes and institutional structures has on market competition and regional economic integration. By examining ASEAN economic integration from such an ‘inside out’ approach, this study helps to illuminate why the removal of impediments to an open market in services is difficult to implement in South-East Asia and why domestic interests deviate from official regional economic commitments.