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Economic Integration and
Regional Development

With a combined population larger than that of the EU or NAFTA, economic

integration of the ASEAN states will have a massive impact on both the Asian
and global economies. This book examines the ASEAN Economic Community
(AEC) and its opportunities and challenges. It looks at the impacts of economic
integration, trade structure and economic interlinkage among these countries
through case studies. The book also utilizes theories to further examine areas
such as trade, cross-border infrastructure, border management, and the regional
development in terms of trade liberalization and foreign labor.
This book also provides insight and analysis to developing policies for “ASEAN
Connectivity”. Given the challenges faced and huge potential impacts of the
AEC’s cross-border project, this book will be of interest to policy makers, busi-
ness leaders and researchers in the ASEAN region and throughout the world.

Kiyoshi Kobayashi is Professor, Graduate School of Management and Profes-

sor, Department of Urban Management, Graduate School of Engineering, Kyoto
University, Japan.

Khairuddin Abdul Rashid is Head, Procurement and Project Delivery Sys-

tems Research Unit and Professor, Kulliyyah of Architecture and Environmental
Design, International Islamic University Malaysia.

Masahiko Furuichi is Professor, Graduate School of Management, Kyoto Uni-

versity, Japan.

William P. Anderson (Bill) is Director and Professor, The Cross-Border Insti-

tute, University of Windsor, Canada.
Routledge Studies in the Modern World Economy
For a full list of titles in this series, please visit www.routledge.com/series/SE0432

162 Information Efficiency and Anomalies in Asian Equity Markets

Theories and evidence
Edited by Qaiser Munir and Sook Ching Kok

163 Agricultural Growth, Productivity and Regional Change in India

Challenges of globalisation, liberalisation and food insecurity
Surendra Singh and Prem Chhetri

164 The Political Economy of Special Economic Zones

Concentrating Economic Development
Lotta Moberg

165 Varieties of Capitalism in History, Transition and Emergence

New perspectives on institutional development
Martha Prevezer

166 Human Evolution, Economic Progress and Evolutionary Failure

Bhanoji Rao

167 Achieving Food Security in China

The Challenges Ahead
Zhang-Yue Zhou

168 Inequality in Capitalist Societies

Surender S. Jodhka, Boike Rehbein and Jessé Souza

169 Financial Reform in China

The Way from Extraction to Inclusion
Changwen Zhao and Hongming Zhu

170 Economic Integration and Regional Development

The ASEAN Economic Community
Edited by Kiyoshi Kobayashi, Khairuddin Abdul Rashid, Masahiko Furuichi
and William P. Anderson
Economic Integration and
Regional Development
The ASEAN Economic Community

Edited by Kiyoshi Kobayashi,

Khairuddin Abdul Rashid,
Masahiko Furuichi and
William P. Anderson
First published 2018
by Routledge
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Kobayashi, Kiyoshi, editor. | Rashid, Khairuddin Abdul,
editor. | Furuichi, Masahiko, editor.
Title: Economic integration and regional development : the ASEAN
economic community / edited Kiyoshi Kobayashi, Khairuddin
Abdul Rashid, Masahiko Furuichi and William P. Anderson.
Description: First Edition. | New York : Routledge, 2017. |
Series: Routledge studies in the modern world economy ; 170 |
Includes bibliographical references and index.
Identifiers: LCCN 2017009510 | ISBN 9781138688056 (hardback) |
ISBN 9781315534053 (ebook)
Subjects: LCSH: Southeast Asia—Economic integration. |
Southeast Asia—Social conditions. | Regionalism—Southeast
Asia—21st century. | Southeast Asia—Politics and
government—1945–
Classification: LCC HC441 .E266 2017 | DDC 337.1/59—dc23
LC record available at https://lccn.loc.gov/2017009510
ISBN: 978-1-138-68805-6 (hbk)
ISBN: 978-1-315-53405-3 (ebk)
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This book is dedicated to the late Professor Cayetano
Paderanga Jr. in memory of his vast contribution
to the field of economic development and planning,
research and education. May his soul rest in peace.
Contents

List of figuresx
List of tablesxii
List of contributorsxiv
Acknowledgementsxvii

1 Introduction 1
KIYOSHI KOBAYASHI, KHAIRUDDIN ABDUL RASHID,
WILLIAM P. ANDERSON AND MASAHIKO FURUICHI

PART I
Regional development of ASEAN from a broad
perspective9

2 ASEAN integration: opportunities and challenges 11

KOJI SAKANE AND JICA STUDY TEAM ON ASEAN 2025 REPORT

3 The role of ADB in ASEAN integration: harnessing

connectivity for regional cooperation and integration 34
JAMES LYNCH, ALFREDO PERDIGUERO AND JASON RUSH

4 ASEAN–India economic partnership for growth and

inclusive development in the region 45
GAUTAM RAY

PART II
Institutional framework to enhance the connectivity59

5 NAFTA and ASEAN: the promise and perils of

cross-border supply chains 61
WILLIAM P. ANDERSON
viii Contents
6 Towards a common PPP framework for ASEAN 75
KHAIRUDDIN ABDUL RASHID

7 How supply chain networks play a role in SMEs’ financing:

implications for ASEAN 88
HUA SONG

PART III
Infrastructure development for business location101

8 Thailand-plus-one: a new regional manufacturing

pattern of Japanese companies preparing for ASEAN
economic community 103
JUN NAKABAYASHI

9 Methodology to assess border special economic zone

development for industrial investments in AEC era 115
JITTICHAI RUDJANAKANOKNAD AND
CHANIKAN VONGSMAENTHEP

10 Global infrastructure and production division by

heterogeneous firms 129
DAMING XU, KIYOSHI KOBAYASHI, KAKUYA MATSUSHIMA,
SHARINA FARIHAH HASAN AND SHUNSUKE SEGI

PART IV
Developing maritime transport networks145

11 ASEAN-wide connectivity by realizing RO/RO shipping

network: challenges and opportunities 147
MASAHIKO FURUICHI, KEN KUMAZAWA AND
TATSUYUKI SHISHIDO

12 Intermodal route choice of international containers in

Southern Mekong region and policy simulation using the
large-scale intermodal network assignment model 162
RYUICHI SHIBASAKI, TAKASHI SHIMADA AND MASARU SUZUKI

13 Model of hub port competition applied to ASEAN: the

case of Singapore and Malaysia 177
SE-IL MUN AND YU MORIMOTO
 Contents ix
PART V
Economic analysis of development policies189

14 Challenges for urban and rural areas within AEC from

cross-border integration: analysis and modelling 191
LARS WESTIN

15 Predicting the economic impacts of ASEAN integration

at the subnational level 204
SATORU KUMAGAI, IKUMO ISONO, KAZUNOBU HAYAKAWA,
SOUKNILANH KEOLA AND KENMEI TSUBOTA

16 Empirical analysis of international economic dependencies

based on the three-nation (China–Thailand–Lao PDR)
international input–output table 218
HIDEFUMI KANEKO, KWANGMOON KIM,
FRANCISCO T. SECRETARIO AND PHETSAMONE SONE

17 Impact of trade liberalization on pollution and poverty:

evidence from Lao PDR 232
PHOUPHET KYOPHILAVONG, SHINYA TAKAMATSU
AND JEONG-SOO OH

Index245
Figures

1.1 PPP adjusted GDP per capita (in current international $)

of the member states as of 2015 2
2.1 Development of infrastructure in Mekong region 15
2.2 Demographic bonus period 16
2.3 Share of aged population 17
2.4 Total factor productivity 19
2.5 Urban population growth rate and urbanization rate 20
2.6 Middle income trap 21
2.7 Growth and capital formation 23
3.1 ADB financial support for regional and subregional
projects 2006–2015 35
3.2 GMS connectivity in the transport and energy sectors – past,
present, and future 37
3.3 Greater Mekong Subregion economic corridors 39
3.4 Countries’ economic competitiveness and logistics
performance42
4.1 Movement of ASEAN’s percentage share in India’s total
import 2003–2014 46
4.2 Movement of ASEAN’s percentage share in India’s total
export 2003–2014 47
4.3 India’s export share in total ASEAN import 2003–2014 48
4.4 Mechanics of inclusive growth and development in open
social systems 52
7.1 Supply chain finance for SMEs of S Company 93
7.2 Supply chain financing for SMEs of C Bank 93
7.3 Supply chain finance for SMEs of N Company 94
8.1 Annual FDI flows to ASEAN countries from Japan
and the world 105
8.2 Hypothesis of the future industrial base in Mekong Area 106
8.3 Population profile: Thailand, Cambodia, Lao PDR,
and Myanmar 108
8.4 Salary for factory worker for Japanese companies 108
8.5 Logistics flow of Ajinomoto 110
 Figures xi
  8.6 Total population of ASEAN countries 111
  8.7 The gross capital of formation of ASEAN countries as
percentage of GDP 112
  8.8 Examples of solutions for inefficiencies in the export–import
procedure113
  8.9 R&D expenditures and high-tech exports of Asian countries 113
  9.1 Eight towns proposed by the Thai government 120
  9.2 Town connection and important infrastructure 123
10.1 The assumptions for the model 132
10.2 Pattern of trades 136
10.3 Decreasing in transport cost 139
10.4 Harrod-Neutral technical progress in S country 141
10.5 Market size increasing in S country 142
11.1 Qualitative feasibility matrix of RO/RO ship types by route
location and distance 152
11.2 Eight RO/RO shipping candidate services 152
12.1 Major shipping routes of international cargo from/to
Phnom Penh 163
12.2 Major conditions for each international shipping route from/
to Phnom Penh 164
12.3 Amount of Cambodian international laden containers
transported by route 167
12.4 Intermodal super-network of the model 168
12.5 Network structure of the maritime shipping submodel 169
12.6 Estimated share of shipping route (gateway port) for
Cambodian international laden containers in 2010 173
12.7 Estimated share of shipping route for Cambodian
laden container 175
13.1 Scale economy and the positive circulation of traffic
agglomeration178
13.2 Locations of the two hub ports and the third region 180
13.3 The scale economy and marginal revenue 184
13.4 Port capacities in equilibrium and optimum 185
14.1 Rank-size distribution of the largest cities within
ASEAN in 2015 199
15.1 GRP per capita in East Asia, 2010 207
15.2 Land route network data in IDE-GSM 210
15.3 Economic impacts of MPAC 213
16.1 Layout of the TNIIO table linking China, Thailand,
and Lao PDR 220
Tables

  2.1 Rankings related to business environment 18

  3.1 Selected ADB-financed transport connectivity projects in the
GMS that have contributed to the completion of routes along
the ASEAN Highway Network 40
  4.1 ASEAN–India trade statistics 2013–2014 47
  6.1 Estimated infrastructure investment needs in ASEAN,
2010–202076
  6.2 ASEAN infrastructure capacity and demand gap in 2020 76
  6.3 Snapshot on PPP implementation in ASEAN 78
  6.4 Stages of development of PPP in ASEAN member countries 79
  7.1 Financing type and financing information 91
  8.1 Locations for expanding functions by Japanese companies
in future 104
  8.2 Japanese FDI to Cambodia and Lao PDR 106
  9.1 General definitions of infrastructure and cross-border trade
facilitation index 116
  9.2 Transport infrastructure criteria 116
  9.3 Criteria to evaluate local utilities 117
  9.4 Criteria to evaluate tourist attractions 118
  9.5 Criteria to evaluate border trade facilitation index 119
  9.6 Weights (%) of components in infrastructure and cross-border
trade facilitation indices 122
  9.7 Scores of components in infrastructure and cross-border trade
facilitation indices 125
  9.8 Analysis of border town industrial and business activities 126
11.1 Comparison of RO/RO and ROPAX shipping services
by distance 149
11.2 Comparison of cross-border RO/RO shipping services
by distance 150
11.3 Profile of eight RO/RO shipping candidate services 153
11.4 Priority evaluation result of ASEAN RO/RO
candidate services 154
13.1 Data on the quantities of containers and port charges 182
 Tables xiii
13.2 Normalized values of data 182
13.3 Port capacities, traffic demands, and social welfare 183
13.4 The relationship between port capacities and value of beta 187
15.1 Economic impacts of MPAC by country 214
15.2 Changes in the Gini coefficient by country in 2030 215
16.1 Overview of supply and demand 223
16.2 International Backward and Forward Linkage effects
and their grouping 226
16.3 International spillover and feedback effect among China,
Thailand, and Lao PDR 228
16.4 Total impact of imports required in production to sustain
final demands 229
17.1 Impact on macroeconomic variables 236
17.2 Impact on CO2 emissions 237
17.3 Impact on welfare 238
Contributors

As of February 2017
William P. Anderson (Bill) is Director and Professor, The Cross-Border Insti-
tute, University of Windsor, Canada.
Masahiko Furuichi is Professor, Graduate School of Management, Kyoto Uni-
versity, Japan.
Sharina Farihah Hasan is Assistant Professor, Kulliyyah of Architecture and
Environmental Design, International Islamic University Malaysia.
Kazunobu Hayakawa is Overseas Research Fellow (Singapore), IDE-JETRO,
Japan.
Ikumo Isono is Deputy Director, Economic Geography Studies Group, Inter-
disciplinary Studies Center, IDE-JETRO, Japan.
Hidefumi Kaneko is Principal Fellow, Association of Regional Econometrics
and Environmental Studies (AREES), Japan, and Former Subsection Director
of Statistical Analysis, Statistics Division, Tokyo Metropolitan Government,
Japan.
Souknilanh Keola is Research Fellow, Bangkok Research Center, IDE-JETRO,
Thailand.
Kwangmoon Kim is Associate Professor, Kyoto University and Principal Fellow,
Association of Regional Econometrics and Environmental Studies (AREES),
Japan.
Kiyoshi Kobayashi is Professor, Graduate School of Management and Professor,
Department of Urban Management, Graduate School of Engineering, Kyoto
University, Japan.
Satoru Kumagai is Director, Economic Geography Studies Group, Inter-­
disciplinary Studies Center, IDE-JETRO, Japan.
Ken Kumazawa is Director, ALMEC Corporation, Japan.
Phouphet Kyophilavong is Associate Professor and Vice Dean, Faculty of
­Economics and Business Management, National University of Laos.
 Contributors xv
James Lynch is Deputy Director General, Pacific Department, Asian Develop-
ment Bank.
Kakuya Matsushima is Associate Professor, Department of Urban Management,
Graduate School of Engineering, Kyoto University, Japan.
Yu Morimoto is Researcher in Faculty of Economics, Konan University, Japan.
Se-il Mun is Professor, Graduate School of Economics, Kyoto University, Japan.
Jun Nakabayashi is a consultant of Nomura Research Institute, Ltd., Japan.
Jeong-Soo Oh is Adjunct Professor, National University of Laos.
Alfredo Perdiguero is Director, Regional Cooperation and Operations Coordi-
nation, Southeast Asia Department, Asian Development Bank.
Khairuddin Abdul Rashid is Head, Procurement and Project Delivery Systems
Research Unit and Professor, Kulliyyah of Architecture and Environmental
Design, International Islamic University Malaysia.
Gautam Ray is Professor, Graduate School of Management, Kyoto University.
Jittichai Rudjanakanoknad is Associate Professor, Faculty of Engineering and
Deputy Director, Transportation Institute, Chulalongkorn University, Thailand.
Jason Rush is Principal Operations Communication Specialist, Southeast Asia
Department, Asian Development Bank.
Koji Sakane is Deputy Chief Secretary, Office of the President, Japan Interna-
tional Cooperation Agency (JICA).
Francisco T. Secretario is Statistical Consultant and Former SNA IO Expert of
National Statistics Coordination Board (NSCB), the Philippines.
Shunsuke Segi is Assistant Professor, Department of Urban Management, Grad-
uate School of Engineering, Kyoto University, Japan.
Ryuichi Shibasaki is Head, International Cooperation Division, National Insti-
tute for Land and Infrastructure Management (NILIM), MLIT, Japan.
Takashi Shimada is Senior Director for Research in The Overseas Coastal Area
Development Institute of Japan (OCDI), Japan.
Tatsuyuki Shishido is Senior Director for Research, The Overseas Coastal Area
Development Institute of Japan (OCDI), Japan.
Phetsamone Sone is Deputy Director General, Lao Statistics Bureau, Ministry
of Planning, Lao PDR.
Hua Song is Professor, School of Business, Renmin University of China, Beijing.
Masaru Suzuki is an advisor in Japan Dredging and Reclamation Engineering
Association (JDREA), Japan.
Shinya Takamatsu is an employee of The World Bank.
xvi Contributors
Kenmei Tsubota is Researcher, Economic Geography Studies Group, Inter-­
disciplinary Studies Center, IDE-JETRO, Japan.
Chanikan Vongsmaenthep is a student in an M.S. course in Financial Risk Man-
agement at University of Reading, UK, who got a B.Eng. in Civil Engineer-
ing, Chulalongkorn University, Thailand.
Lars Westin is Professor in Regional Economics, Umeå University, Sweden.
Daming Xu is Associate Professor, Harbin Institute of Technology, China.
Acknowledgements

We would like to express our thanks to The Ports and Harbours Association of
Japan (PHAJ) and Waterfront Vitalization and Environmental Research Founda-
tion (WAVE). The PHAJ is a non-profit organization whose objectives are to con-
tribute to the port development/management, trade growth and economic base
of Japan by conducting research related to port policy. WAVE is also a non-profit
organization in Japan that conducts a wide range of research on ports, harbors
and airports with the united efforts of industry, academia and government. The
two organizations have funded our conferences held in Kuala Lumpur, Malaysia,
in March 2015, and Vientiane, Lao PDR., in February 2016, acknowledging the
importance of ASEAN on the Asian economy and supply chain networks. This
book is a compilation of selected papers presented at the conferences. We also
would like to express our appreciation to the hard work of Dr. Shunsuke Segi for
helping us to edit the book.
1 Introduction
Kiyoshi Kobayashi, Khairuddin Abdul Rashid,1
William P. Anderson and Masahiko Furuichi

1 ASEAN and AEC

The Association of Southeast Asian Nations (ASEAN) has grown into an impor-
tant player in the world economy. The combined population of the 10 member
states in 2014 is 622 million, which is the third largest in the world following
China (1,367 million) and India (1,259 million). The combined GDP in 2014 is
US$2.5 trillion, which has almost doubled from US$1.33 trillion in 2007. With
this high growth rate, the population with an income of more than US$5,000
is estimated to grow from 300 million in 2015 to 400 million in 2020. The
member states combine, therefore, to form the world’s most important emerging
consumer market. In addition, ASEAN has two advantages as a production base.
First, ASEAN is well placed between two huge consumption markets: China and
India. Second, ASEAN has a large and diverse labor force comprising both skilled
workers and diligent low wage labor.
The ASEAN Economic Community (AEC), formally established on 31 Decem-
ber 2015, is a framework of regional economic cooperation to facilitate regional
growth through free trade and market integration. The establishment of this eco-
nomic community is a key milestone for the ASEAN region as an emerging econ-
omy. The concept of AEC was first stated in 2003 at the 9th ASEAN Summit. The
AEC Blueprint 2015 was initiated in 2007 with the following four strategic goals.

1 Single market and production base: free flow of goods, free flow of services,
free flow of investment, free flow of capital, free flow of skilled labor.
2 Competitive economic region: competition policy, consumer protection, intel-
lectual property rights, infrastructure development, taxation, e-commerce.
3 Equitable economic development: small and medium enterprise (SME)
development, support to less developed member states.
4 Integration into global economy: comprehensive free trade and economic
partnership agreements (FTAs/EPAs), enhanced participation in global sup-
ply networks.

This book primarily addresses the free flow of goods within ASEAN and with
the rest of the world. It is a core element of the AEC to achieve the first goal,
2 Kiyoshi Kobayashi et al.
a single market and production base. ASEAN has been implementing strategic
measures for the free flow of goods: elimination of tariff and non-tariff barriers,
and trade facilitation. The development of transportation infrastructure (in the
second goal) and integration into global economy (the fourth goal) also facili-
tate the flow of goods by reducing the cost of private firms in supply chain and
logistics.
Although this book mainly focuses on development policies to facilitate the
free flow of goods, the book also pays attention to equitable economic develop-
ment, the third strategic goal of the AEC. Achieving this goal is necessary not
only to meet fairness requirements but also to encourage cooperation among the
member states. The variation in development levels among the members is large,
as shown in Figure 1.1. The GDP per capita of Singapore is more than 24 times
higher than that of Cambodia. Even if the top three countries are ignored, the
GDP per capita of Thailand is 4.6 times higher than that of Cambodia. This
large gap can discourage low-income members from harmonizing the institu-
tional framework toward greater economic integration. This book also tries to
give direction on how to narrow this gap.

2 Progress of the AEC – focusing on flow of goods

and equitable development
According to an evaluation by the ASEAN Secretariat, 469 out of 506 high-
priority measures (92.7 percent) in the strategic goals in the Blueprint 2015 have
already been implemented. However, details of the implemented measures are
not open to the public. The actual progress still has a long way to go toward

Figure 1.1 PPP adjusted GDP per capita (in current international $) of the member
states as of 2015
Source: IMF World Economic Outlook Database, October 2016
 Introduction 3
completion. Economic integration will continue to progress gradually in the next
10 years under the AEC Blueprint 2025, which was initiated in 2015.

2.1 Free flow of goods

Significant progress has been made in intra-regional tariff elimination. The
ASEAN-6 (Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore,
and Thailand) have virtually eliminated all intra-regional tariffs, with 99.2 per-
cent of tariffs at 0 percent. The rest of the countries, known collectively as CLMV
(Cambodia, Laos, Myanmar, and Vietnam), had eliminated 91 percent of intra-
regional tariffs by the end of 2015, having been allowed to postpone eliminating
tariffs on influential products such as automobiles and motorcycles until 2018.
Of comparable importance is the fact that ASEAN has also concluded five com-
prehensive FTAs with China, India, Japan, Korea, and Australia/New Zealand.
However, the elimination of non-tariff barriers has made less progress.
Although some technical standards and requirements have been harmonized,
other kinds of non-tariff barriers, such as quotas and import permits, remain
prominent. A number of problems also exist in the area of cross-border manage-
ment, such as the complicated customs procedures that are in some cases unique
to individual member states. Accordingly, the AEC regards trade facilitation as
critical to reducing the administrative (paperwork) cost and waiting times at bor-
der crossings.
Transportation infrastructure (road, rail, port, and airport) has been devel-
oped to enhance physical connectivity, especially in the Greater Mekong Sub-
region (GMS, namely Cambodia, Laos, Myanmar, Thailand, Vietnam, and a
part of China). Three international highways have been constructed to connect
major cities in the sub-region: the North-South Economic Corridor (Hanoi–­
Kunming–Bangkok), the East-West Economic Corridor (Da Nang–Savannakhet–­
Mawlamyaing), and the Southern Economic Corridor (Ho Chi Minh City–Phnom
Penh–Bangkok).
There is still, however, a significant gap between transportation demand and
infrastructure capacity. Further infrastructure development is necessary in order
to accommodate the growth of demand as well as to narrow the development
gaps. Intra-regional physical connectivity is especially weak in the port-dependent
members: Brunei, Indonesia, Malaysia, and the Philippines, all of whom trade less
with the other member states than with markets outside of ASEAN. Develop-
ment of land transportation between Thailand and Malaysia as well as maritime
transportation among the island countries will play a vital role in realizing an
integrated transportation network within the region.

2.2 Equitable development

SME development and support to less developed member states are the two core
elements of equitable development. SMEs comprise over 90 percent of the enter-
prises in ASEAN, generating over half of the employment in the region. As such,
4 Kiyoshi Kobayashi et al.
it is indispensable to equitable development that SMEs be encouraged to partici-
pate in regional and global value chains. The AEC aims to enhance the competi-
tiveness of SMEs through improved access to finance, markets, human resources,
information and advisory services, technology, and innovation. ASEAN has
developed information and advisory services for SMEs, but the implementation
of financial support to them lags behind.
In order to narrow the development gap among member states, ASEAN has
implemented the Initiative for ASEAN Integration (IAI), which invests in devel-
opment projects of the CLMV. However, the impact of IAI has been limited
because of the small budget. The total budget of Work Plan I (2002–2008) was
US$211 million, and that of Work Plan II (2009–2015) was US$20 million until
2014. This small budget reflects the limited financial capacity of the ASEAN Sec-
retariat and the local governments. Foreign aid from international organizations
and external countries will play an important role in filling the development gap.

3 Concepts of this book

The AEC Blueprint 2015 was not fully realized by the end of 2015. Although
significant progress has been made in intra-regional tariff elimination and com-
prehensive FTAs, inadequate capacity of transportation infrastructure and inef-
ficient cross-border management in some member states still inhibit integration
both internally and with the global market. Looking to the future, the AEC
Blueprint 2025 recognizes the importance of these two issues. It underlines trade
facilitation as strategic measures for greater free flow of goods. Developing an
integrated transportation network is emphasized in support of a new strategic
goal, “enhanced connectivity and sectoral cooperation.” The need to enhance
“ASEAN connectivity,” which was already stated in the 2010 Master Plan on
ASEAN Connectivity (MPAC). Recalling a theme from 2010 Master Plan
on ASEAN Connectivity (MPAC), Blueprint 2025 calls for “the seamless move-
ment of goods, services, investment, capital, and skilled labour within ASEAN in
order to enhance ASEAN’s trade and production networks, as well as to establish
a more unified market for its firms and consumers.” Physical, institutional, and
people-to-people linkages between member states and the rest of the world are
keys to the AEC’s continued economic expansion, productivity growth, resilience
to external shocks, and reduced development gap.
At this crucial moment, the planners in ASEAN should seek effective policy for
infrastructure development and trade facilitation to enhance ASEAN connectiv-
ity. This work is challenging for three reasons. First, development policy is con-
strained by the limited financial capacity of the member governments. In order
to effectively use the limited financial resources, it is necessary to evaluate and
prioritize infrastructure projects and trade facilitation measures. Second, accurate
evaluation of the projects and policies requires knowledge about supply chains,
logistics, and economics, which are complicated systems governing the flow of
goods and business location. Third, development policy should also be equitable
 Introduction 5
and inclusive in order to narrow the development gaps of the member states and
eradicate poverty.
This book is a compilation of selected papers presented at conferences held
by Kyoto University and International Islamic University of Malaysia. With the
aim of providing insights for the development of policy to enhance ASEAN
connectivity and realize region-wide equitable growth, the Graduate School of
Management, Kyoto University, Japan, and the Kulliyyah of Architecture and
Environmental Design, International Islamic University of Malaysia, have held
three academic conferences. The first conference took place in Manila, the Phil-
ippines, in March 2014; the second in Kuala Lumpur, Malaysia, in March 2015;
and the third in Vientiane, Lao PDR, in February 2016. This book includes
papers presented, reviewed, and discussed at those conferences. Chapters that
follow include extensive discussions and analyses on the development of infra-
structure, institutional frameworks, and supply-chain/logistics networks. Several
contributors utilize economic models in order to provide quantitative assess-
ments of policies and projects. By providing useful economic models as well as
insights from the discussions and analyses, this book seeks to advance the process
of creating a more connected, cohesive, resilient, and equitable AEC.

4 Organization of this book

This book is divided into five parts.
Part I discusses general issues regarding regional development from a broader
perspective. This part comprises this introductory chapter and Chapters 2–4.
Chapter 2 (by Sakane, K. and JICA Study Team) reviews the opportunities
and challenges of ASEAN both comprehensively and neutrally, based on a study
conducted by the Japan International Cooperation Agency (JICA). Following
the review, it points out the necessity of further equitable integration for regional
competitiveness as well as policies to address emerging issues, such as the aging
society, domestic disparities, the expansion of food and energy demand, and
increased disaster risks.
Chapter 3 (by Lynch, J., Perdiguero, A. and Rush, J.) summarizes the past and
future roles of the Asian Development Bank (ADB) in the regional development
of ASEAN. ADB has been contributing to the AEC through financial support and
technical assistance. Such international aid is indispensable for ASEAN because
of the limited financial and human resources of the member governments. The
chapter also outlines the central issues of the AEC from the viewpoint of an aid
agency, including infrastructure development and trade facilitation.
Chapter 4 (by Ray, G.) develops theoretical arguments for cross-border eco-
nomic partnership and inclusive growth in the context of ASEAN–India Com-
prehensive Partnership. With its large, growing market and proximity, India is
an important partner for ASEAN. This chapter first summarizes past economic
growth and relations between ASEAN and India. Then, the paper develops
theoretical arguments to lay out an illustrative roadmap for an ASEAN–India
6 Kiyoshi Kobayashi et al.
partnership. The developed theory gives general insights into how the partner-
ship promotes inclusive development.
Part II presents some ideas for improving institutional frameworks to enhance
connectivity and encourage integration. This part comprises Chapters 5–7.
Chapter 5 (by Anderson, W. P.) reviews the history of economic integration
in NAFTA, with emphasis on the development of cross-border supply chains.
Both the AEC and the NAFTA have large shares of intermediate goods in their
internal trade. This means that trade facilitation can have critical impacts on the
competitiveness of the economies since a variety of industries use cross-border
supply chains. Various topics are addressed regarding cross-border management.
After similarities and differences between the two trade blocs are defined, lessons
for the AEC are drawn from the NAFTA area.
Chapter 6 (by Khairuddin, A. R.) assesses the prospect of having a common
Public Private Partnership (PPP) framework for ASEAN. The development of
infrastructures in ASEAN is often constrained by the limited financial and human
resources of the member governments. Public Private Partnership (PPP) is con-
sidered to be the most viable alternative and is also encouraged in the ASEAN
Blueprint 2025. This chapter first examines PPP implementation in ASEAN
member states to find inconsistency in implementation frameworks, which can
present problems. Then, it presents the prospect of a common PPP framework
and highlights key areas to be harmonized.
Chapter 7 (by Song, H.) presents supply chain finance as a solution for the
working capital problems of SMEs in ASEAN. Supply chain finance is a type of
financing where a focal firm (lender) in the supply chain network supplies liquid-
ity to the SMEs in the network based on the operational information collected
through the network. Based on case studies in China, this chapter argues that
supply chain finance can also improve SMEs’ financing quality in ASEAN. It
provides another rationale to facilitate the formation of supply chain networks for
equitable development.
Part III focuses on the relation between infrastructure development and busi-
ness location. This part includes Chapters 8–10.
Chapter 8 (Nakabayashi, J.) discusses the implication of a production strategy
called “Thailand-plus-one,” which is adopted by Japanese multinational firms.
This strategy transfers the labor-intensive production process from Thailand to
neighboring countries (Cambodia, Laos, and Myanmar). This is a typical example
of cross-border supply chains where the more labor-intensive process is located
in the country with the lower wage. Based on case studies of multinational firms,
this chapter argues that both development of infrastructure and trade facilitation
are necessary to encourage the strategy, which will contribute to regional eco-
nomic integration in the GMS.
Chapter 9 (by Rudjanakanoknad, J. and Vongsmaenthep, C.) develops indices
to evaluate the attractiveness of border special economic zones (SEZ) in Thailand
for multiple industries. The indices provide a guideline for the Thai government
to develop SEZ in several border towns with the aim of facilitating cross-border
supply chains. The developed indices evaluate both infrastructure development
 Introduction 7
and trade facilitation in terms of sufficiency, quality, etc. The chapter also finds
the importance of infrastructure development and trade facilitation at border
crossings.
Chapter 10 (by Xu, D., Kobayashi, K., Matsushima, K., Sharina, F. H. and
Segi, S.) develops a pure theoretical economic model to discuss the economy-
wide welfare implications of the shifts in production locations of multinational
firms. The chapter formulates a model based on the Ricardian trade theory of
comparative advantage, where firms decide the production location according
to labor productivity, wage, and their production technology. The constructed
model illustrates how reduced cross-border cost facilitates the global division of
labor as well as improves the welfare of every country under foreign direct invest-
ment. It theoretically shows the value of facilitating cross-border supply chains in
terms of regional development.
Part IV analyzes maritime transportation.
Chapter 11 (by Furuichi, M., Kumazawa, K. and Shishido, T.) presents a pre-
liminary feasibility study on ASEAN Roll-on/Roll-off (RO/RO) priority ship-
ping routes. RO/RO shipping is a unique form of maritime transportation that
provides seamless services of passengers, vehicles, general cargoes on trucks, and
containers on chassis. This characteristic is especially beneficial for the island
countries and Malaysia, which are less physically connected with the ASEAN
member states than the GMS. Accordingly, the ASEAN RO/RO shipping net-
work development project is listed as one of the priority projects in the MPAC.
This paper not only provides a preliminary feasibility study conducted by JICA,
but also recommends legal and institutional framework on sea and land cross-
border transportation to ensure RO/RO shipping services among the member
states.
Chapter 12 (by Shibasaki, R., Shimada, T. and Suzuki, M.) develops a con-
tainer traffic assignment model on a large-scale intermodal network including
both global maritime liner shipping network and regional inland shipping net-
work in the GMS. It applies the model to assess the impacts of policies to improve
several shipping routes used in Cambodian international trade. This chapter illus-
trates how a detailed network model reasonably reproduces the actual cargo flows
as well as quantifies the impacts of transportation development, such as river
shipping and road network in a region.
Chapter 13 (by Mun, S. and Morimoto, Y.) develops a pure theoretical eco-
nomic model to analyze the welfare implication of the competition between the
Port of Singapore and Tanjung Pelepas. The Port of Singapore has been the
center of the maritime transportation network of ASEAN. Meanwhile, the Port
of Tanjung Pelepas in Malaysia is emerging as a competing hub port. Both ports
are investing in facilities aggressively to expand their container handling capac-
ity, thereby attracting more transshipment demand. Analysis with the formulated
model finds that competition between the two ports would lead to an ineffi-
ciently low level of investment. In other words, the capacity investment of both
ports should be encouraged in order to improve regional welfare.
Finally, Part V assesses development policies quantitatively, based on economics.
8 Kiyoshi Kobayashi et al.
Chapter 14 (by Westin, L.) discusses ASEAN integration with reference to eco-
nomic theories, focusing on the flows of goods and people within the region. The
discussions are based on basic economic theories that give valuable knowledge
about economic integration and regional development. This chapter explains
how quantitative economic models are useful in evaluating the economic benefits
of infrastructure development and trade facilitation. These models estimate not
only the total benefit but also the distribution of the benefits among the states,
cities, and actors. This characteristic is valuable for understanding the impacts and
pitfalls of development projects as well as giving guidance for establishing priori-
ties among multiple projects. This chapter also argues the necessity to develop
a system to share the benefits of integration and human capital over the entire
ASEAN region in order to realize equitable economic integration smoothly.
Developing region-wide economic statistics will be crucial for such a system.
Chapter 15 (by Kumagai, S., Isono, I., Hayakawa, K., Keola, S., and Tsubota,
K.) presents a computational simulation model based on spatial economics devel-
oped by Japan External Trade Organization (JETRO). This model covers more
than 1800 sub-national regions in East Asia, connected by more than 10,000
routes based on actual transport networks. The model has the capability to pre-
dict the economic impacts of various infrastructure development and trade facili-
tation on the economy of each sub-national region. With the model, this chapter
illustrates an economic impact analysis of the projects under the Master Plan for
ASEAN Connectivity.
Chapter 16 (by Kaneko, H., Kim, K. and Sone, P.) applies an input–output
(IO) model to measure the economic interdependencies among China, Thai-
land, and Laos. An IO model is a quantitative economic framework to look into
the inter-industry relationships within an economy, showing how each industry
inputs the products of other industries to output their products. The IO analysis
gives a more thorough understanding of the economy. The chapter explains how
to construct a three-country international input-output table.
Chapter 17 (by Kyophilavong, P., Takamatsu, S. and Oh, J.-S.) analyzes the
impacts of trade liberalization in Laos on poverty and the environment, with
the combined application of a computable general equilibrium (CGE) model
and a micro-scale welfare measurement analysis. A CGE model is a quantita-
tive economic model equipped with an IO table, which can measure the macro-
economic impacts of trade liberalization. The output of the CGE model is used
as inputs in the micro-scale welfare measurement analysis to identify the impacts
on poverty.

Note
1 Khairuddin Abdul Rashid can be reached at khairuddin@iium.edu.my
Part I

Regional development
of ASEAN from a
broad perspective
Another random document with
no related content on Scribd:
opportunity to come before the Commission and suggest
objections or amendments to the bills. The Commission has
likewise adopted as part of its regular procedure the
submission of all proposed bills to the Military Governor for
his consideration and comment before enactment. We think that
the holding of public sessions furnishes instructive lessons
to the people, as it certainly secures to the Commission a
means of avoiding mistakes. … The Commission has now passed
forty-seven laws of more or less importance. … A municipal
code has been prepared and forwarded to you for the
consideration of one or two critical matters, and has not yet
been adopted, pending your consideration of it. A tariff bill
… has been prepared. … A judicial and civil procedure bill is
nearly completed. The same thing is true of a bill for
provincial government organization. A new internal tax law
must then be considered. The wealth of this country has
largely been in agricultural lands, and they have been
entirely exempt. This enabled the large landowners to escape
any other taxation than the urbana, a tax which was imposed
upon the rental value of city buildings only, and the cedula
tax, which did not in any case exceed $37.50 (Mexican) a
person. We think that a land tax is to be preferred, but of
this there will be found more detailed discussion below. …

"The only legislation thus far undertaken by the Commission

which bears directly on the conduct of municipal affairs in
the city of Manila is a law regulating the sale of spirituous,
malt, vinous or fermented liquors. It is provided that none of
the so-called native 'wines' [said to be concocted by mixing
alcohol with oils and flavoring extracts] shall be sold except
by holders of native wine licenses, and that such holders
shall not be allowed to sell intoxicants of any other sort
whatever. … The selling of native wines to soldiers of the
United States under any circumstances is strictly prohibited,
because the soldiers are inclined to indulge in those
injurious beverages to excess, with disastrous results. … The
Filipino ordinarily uses them moderately, if at all.
 Fortunately, he does not, to any considerable extent, frequent
the American saloon. With a view to preventing his being
attracted there, the playing of musical instruments or the
operation of any gambling device, phonograph, slot machine,
billiard or pool table or other form of amusement in saloons,
bars or drinking places is prohibited."

The report of the Commission urged strongly the establishing

of a purely civil government in the Islands, for reasons thus
stated: "The restricted powers of a military government are
painfully apparent in respect to mining claims and the
organization of railroad, banking and other corporations and
the granting of franchises generally. It is necessary that
there be some body or officer vested with legislative
authority to pass laws which shall afford opportunity to
capital to make investment here. This is the true and most
lasting method of pacification. Now the only corporations here
are of Spanish or English origin with but limited concessions,
and American capital finds itself completely obstructed.
{395}
Such difficulties would all be removed by the passage of the
Spooner bill now pending in both houses.

See below: A. D. 1901 (FEBRUARY-MARCH).

The far reaching effect upon the feeling of the people of

changing the military government to one purely civil, with the
Army as merely auxiliary to the administration of civil law,
cannot be too strongly emphasized. Military methods in
administering quasi-civil government, however successful in
securing efficiency and substantial justice, are necessarily
abrupt and in appearance arbitrary, even when they are those
of the Army of the Republic; and until a civil government is
established here it will be impossible for the people of the
Philippine Islands to realize the full measure of the
difference between a government under American sovereignty and
one under that of Spain."
Another subject of great importance dealt with in the November
report of the Commission was that concerning the employment of
native troops and police, on which it was said: "The question
as to whether native troops and a native constabulary are at
present practicable has received much thought and a careful
investigation by the Commission. … We have sought and obtained
the opinions of a large number of Regular and volunteer officers
of all rank, having their fields of operation in all parts of
the islands, and there appears to be a general consensus of
opinion among them that the time is ripe for these
organizations, and this is also our conclusion. Assuming that
Congress at its next session will provide for an increase of
the Regular Army, it by no means follows that a large part
thereof will, or should, be stationed here permanently.
Considerations of public policy and economy alike forbid such
a programme, nor in our judgment is it necessary.

"While the American soldier is unsurpassed in war, as it is

understood among civilized people, he does not make the best
policeman, especially among a people whose language and
customs are new and strange to him, and in our opinion should
not be put to that use when, as we believe, a better
substitute is at hand. We therefore earnestly urge the
organization of ten regiments of native troops of infantry and
cavalry, the proportion between the two arms of the service to
be fixed by competent military judges. These troops should in
the main be officered by Americans. Certainly this should be
the case as to their field officers and company commanders.
Lieutenants might be Filipinos, judicially selected, and
provision might be made for their promotion in the event of
faithful or distinguished service.

"We further recommend that a comprehensive scheme of police

organization be put in force as rapidly as possible; that it
be separate and distinct from the army, having for its head an
officer of rank and pay commensurate with the importance of
the position, with a sufficient number of assistants and
subordinates to exercise thorough direction and control. This
organization should embrace every township in the islands, and
should be so constituted that the police of several contiguous
townships could be quickly mobilized. The chief officers of
this organization should be Americans, but some of the
subordinate officers should be natives, with proper provision
for their advancement as a reward for loyal and efficient
services. The main duty of the police would, of course, be to
preserve the peace and maintain order in their respective
townships, but occasion would, no doubt, frequently arise when
it would be necessary to utilize the forces of several
townships against large bands of ladrones."

With regard to the organization of municipal government in the

townships (pueblos) of the Islands the report of the
Commission says, in part: "The 'pueblos' of these islands
sometimes include a hundred or more square miles. They are
divided into so-called 'barrios' or wards, which are often
very numerous and widely separated. In order that the
interests of the inhabitants of each ward may be represented
in the Council, on the one hand, and that the body may not
become so numerous as to be unwieldy, on the other, it is
provided that the Councillors shall be few in number (eighteen
to eight, according to the number of inhabitants), and shall
be elected at large; that where the wards are more numerous
than are the Councillors the wards shall be grouped into
districts, and that one Councillor shall be in charge of each
ward or district, with power to appoint a representative from
among the inhabitants of every ward thus assigned to him, so
that he may the more readily keep in touch with conditions in
that portion of the township which it is his duty to supervise
and represent. …

"In order to meet the situation presented by the fact that a

number of the pueblos have not as yet been organized since the
American occupation, while some two hundred and fifty others
are organized under a comparatively simple form of government
and fifty-five under a much more complicated form on which the
new law is based, the course of procedure which must be
followed in order to bring these various towns under the
provisions of the new law has been prescribed in detail, and
every effort has been made to provide against unnecessary
friction in carrying out the change.

"In view of the disturbed conditions which still prevail in

some parts of the archipelago it has been provided that the
military government should be given control of the appointment
and arming of the municipal police and that in all provinces
where civil provincial government has not been established by
the Commission the duties of the Provincial Governor,
Provincial Treasurer and Provincial 'Fiscal' (prosecuting
attorney) shall be performed by military officers assigned by
the Military Governor for these purposes. It has been further
provided that in these provinces the Military Governor shall
have power through such subordinates as he may designate for
the purpose to inspect and investigate at any time all the
official books and records of the several municipalities, and
to summarily suspend any municipal officer for inefficiency,
misconduct or disloyalty to the United States. If upon
investigation it shall prove that the suspended officer is
guilty, the Military Governor has power to remove him and to
appoint his successor, should he deem such a course necessary
in the interest of public safety. It is thought that where the
necessity still exists for active intervention on the part of
the Military Governor it will ordinarily be desirable to allow
the towns to retain their existing organization until such
time as conditions shall improve; but, should it prove
necessary or desirable in individual instances to put the new
law into operation in such provinces, it is felt that the
above provisions will give to the Military Governor ample
power to deal with any situation which can arise, and he has
expressed his satisfaction with them.
{396}

"There are at the present time a considerable number of

provinces which, in the judgment of the Commission, are ready
for a provincial civil government. It is believed that in the
majority of cases it will be possible to organize all the
municipalities of a province, creating at the same time a
civil provincial government. So soon as civil government is
established in any province, power to remove officials for
inefficiency, misconduct or disloyalty, and, should public
safety demand it, to fill the offices thus made vacant, is
vested in the civil authorities. The law does not apply to the
city of Manila or to the settlements of non-Christian tribes,
because it is believed that in both cases special conditions
require special legislation. The question as to the best
methods of dealing with the non-Christian tribes is one of no
little complexity. The number of these tribes is greatly in
excess of the number of civilized tribes, although the total
number of Mahometans and pagans is much less than the number
of Christianized natives. Still, the non-Christian tribes are
very far from forming an insignificant element of the
population. They differ from each other widely, both in their
present social, moral and intellectual state and in the
readiness with which they adapt themselves to the demands of
modern civilization."

PHILIPPINE ISLANDS: A. D. 1900 (October).

United States military forces in the Islands.

"At the date of my last annual report there were in the

Philippine Islands 971 officers and 31,344 enlisted men; and
there were en route for service in those islands 546 officers
and 16,553 enlisted men—the latter force being principally in
California. Since that time an additional force ordered to
China was diverted to the Philippine Islands, making a total
of 98,668 men sent to the archipelago. Of this number 15,000
volunteers, first sent to that country in 1898, together with
 the sick and disabled, have been returned to the United
States, leaving at the present time in the islands, according
to last report, 2,367 officers and 69,161 enlisted men.
Fifteen hundred men have been left in China to act as a guard
for the American legation in that country and for other
purposes."

United States, Annual Report of Lieutenant-General

Commanding the Army, October 29, 1900.

PHILIPPINE ISLANDS: A. D. 1900 (November).

The problem of the Spanish Friars.
Two contradictory representations of their work and influence.
Views and recommendations of the United States Commission.

Of the character, work and influence of the Spanish religious

orders in the Philippine Islands there are two diametrically
opposite accounts given by different writers. Both are
represented in two of the quotations below, and those are
followed by extracts from a report made by the United States
Commission, November 30, 1900, on the subject of the problem
they present to the new government of the Islands. The first
writer is condemnatory. He says:

"The better classes [of the Filipinos] have absorbed much of

Spanish civilization in their three-century-old
apprenticeship. They show extraordinary talent for music. The
church of the mother land of Spain is much in evidence among
them. It brought to them its blessings, but also incidentally
a terrible curse. The mendicant orders—the Franciscans, the
Dominicans, the Augustinians, no longer poor preachers,
thinking only of serving, blessing, loving men, but grown
rich, domineering, and, in many cases, sadly corrupt in
morals—ate up the land. They added field to field, house to
house, till there was but little space left for the people.
They charged enormous rents to those who to put bread in their
mouths must till their fields. Just such cause for revolt existed
as that which in France aroused the storm of the great
revolution; the people taxed without mercy, the clergy
untaxed, reaping the benefit. Had the Christ-like St. Francis
of Assisi been endowed with the gift of prophetic vision to
see this gross degeneracy of his followers, more than ever
would he have felt the soundness of his intuition which made
him set his face like flint against the acquisition of any
property by his order. His beloved fair Lady of Poverty would
have seemed to him more beautiful than ever. He would have
been horrified with the knowledge of the cruel rapacity of
monks bearing his name, who, nevertheless, grossly oppressed
the Philippine peasantry in rents and taxes,—the very poor
whom St. Francis founded his order to serve.

"Perhaps the most deep-seated cause of Filipino insurrection

against Spanish authority was this unchecked growth of
ignorant, cruel, and oppressive ecclesiasticism. It was this
which weighed most heavily upon the people. It made the mere
question of gaining a livelihood difficult, but especially did
it strangle intellectual and moral growth. It not only
oppressed the Filipinos, but it overawed and dominated the
Spanish authorities. It was the power of the mendicant orders
which drove out the just Condé de Caspe, and later the
well-disposed and clement Blanco, which stimulated and
supported the frightful atrocities of the cruel Polavieja
during the revolution of 1896. Archbishop Nozaleda, a Spanish
monk of the Dominican order, was a leader in urging wholesale
and often wholly unjustifiable arrests, which were succeeded
by the torture and execution of hundreds of persons. It is
difficult for a mind reared in the freedom and culture of
modern Europe, or still freer America, to realize the horrible
excesses and actual mediæval cruelties which were committed in
the prisons of Manila and elsewhere in the islands upon Filipino
insurgents, or those accused of being in league with them,
during the revolution of 1896. The actual story of these
things as it is unfolded, not only from Filipino sources, but
from the Spanish archives of Manila, is like a scene evoked
 from the long-buried and forgotten past in the middle ages.
Indeed, the only intelligible interpretation of events which
cast shame on the name of Spanish authority and Spanish
Christianity is found by reflecting that affairs in the
Philippines, just previous to the battle of Manila, were
controlled by ideas and forces which existed generally in
Europe previous to the Reformation,—ideas which slowly
retreated before the dawn of the new learning and the
liberation of the individual conscience."

H. Welsh,
The Other Man's Country,
chapter 1 (Philadelphia: J. B. Lippincott Company).

{397}

In the other view there is an appeal to results which cannot

easily be divested of force. They are set forth in the
following:

"The ideals of civilization for the Spanish missionary priests

in the Philippines were substantially the same as those of
Bacon and Raleigh, of the founders of New England and the
founders of New York. In the mind of all, a civilized people
was one which lived under settled laws by steady labor, which
was more or less acquainted with the material progress made
amongst the races of Europe, and, as all would say, which was
Christian. The Spanish friars undertook the task of giving
such a civilization to the Malays of the Philippines, and no
other body of men of any race or any faith have accomplished
what they have done. A task of somewhat similar kind has been
attempted by others in our own day in the name of Christian
civilization but not the Catholic Church. Hawaii has been
under control of missionaries from New England for
seventy-five years more completely than the Philippines were
ever under that of the Spanish friars. The native kings
adopted the new creed and enforced its adoption on their
subjects by vigorous corporal punishments. The missionaries
were abundantly supplied with such resources of civilization
as money could buy, and they have grown wealthy on their
mission; but what has been the fate of the natives? They have
dwindled in numbers to a fourth of what they were when Messrs.
Bingham and Thurston entered their islands, their lands have
been taken by strangers, their government overthrown by brute
force, and the scanty remnant has dropped the religion imposed
on them. In the Philippines in a hundred and forty years a
million of Catholic natives has grown seven fold. In Hawaii
under missioners of the world's manufacture a hundred and
forty thousand of the same race has shrunk to thirty-eight
thousand. Have the promises of the Spanish friars or those of
the American ministers been the most truthfully kept? The
actual condition of the Catholic population formed by the work
of the religious orders should not be judged by the excesses
which have marked the present revolution. Many old Christian
nations have gone through similar experiences. It would be as
unreasonable to judge the Christianity of France by the Reign
of Terror as to condemn the Filipino population for the
atrocities sanctioned by Aguinaldo. The mass of the country
population has taken no part in these deeds of blood which are
the work of a small number of political adventurers and
aspirants for office by any means. Until lately revolutionary
disturbance was unknown in the Philippines. During three
centuries there was only one serious Indian rebellion, that of
Silan, in the province of Illocos, at the time of the English
invasion. The Spanish military force was always too small to
hold the islands had there been any real disaffection to the
Government. The whole force at Manila in the present war, as
given by General Otis, was only fifty-six hundred, and about
as many more represented the entire Spanish force among a
population of seven millions.

"The disposition of the Catholic Filipinos is essentially law

abiding. One of the friars lately driven from the islands by
the revolution assured the writer that in Panay, an island
with a population of half a million, a murder did not occur
more often than once or twice in a year. In our own country
last year the proportion was more than fifty times as great.
There is no forced labor as in the Dutch Indian colonies to
compel the native Filipinos to work, yet they support
themselves in content without any of the famines so common in
India under the boasted rule of civilized England. A sure
evidence of material prosperity is the growth of the
population, and of its religion a fair test is the proportion
of Catholic marriages, baptisms and religious interments to
the whole number. The proportion of marriages in 1806 to the
population among the natives administered by the friars was
one to every hundred and twenty, which is higher than England,
Germany, or any European country. The number of baptisms
exceeded the deaths by more than two and a half per cent, a
greater proportion than in our own land. Compare this with
Hawaii and one feels what a farce is the promise of increased
prosperity held out by the American Press as the result of the
expulsion of the Spanish friars. It is not easy to compare
accurately the intellectual development of the Catholic
Filipinos with American or European standards. The ideals of
civilization of the Catholic missioners were different from
those popular with English statesmen and their American
admirers. The friars did not believe that the accumulation of
wealth was the end of civilization, but the support of a large
population in fair comfort. There are no trusts and few
millionaires in the islands, but their population is six times
greater than that of California after fifty years of American
government. The test so often applied of reading and writing
among the population finds the Filipinos fairly up to the
standard of Europe at least. Of highly educated men the
proportion is not so large as in Europe, but it is not
inconsiderable, and neither in science nor in literature are
the descendants of the Malay pirates unrepresented in their
remote islands. The native languages have developed no
important literature of their own, but they have a fair supply
of translations from Spanish works in history, poetry, and
 philosophy. In that they are superior to the Hindoo of British
India, though spoken by nearly a hundred millions. These are
facts that throw a strange light on the real meaning of
civilization as planted by the Spanish friars among a
barbarian race. Compare them with the fate of the Indian races
on our own territory and say what benefit the Filipinos may
expect from the advent of 'Anglo-Saxon' civilization."

Bryan J. Clinch
(American Catholic Quarterly Review,
volume 24, page 15).

These opposing views are suggestive of the seriousness of the

problem which the subject offers to the new authority in the
Philippines. The American Commission now studying such
problems in those islands has presented its first views
concerning the Spanish friars in a lengthy report, written by
Judge Taft, and transmitted to Washington as part of the
general report of the Commission, bearing date November 30,
1900. The passages quoted below contain what is most essential
in the interesting document:

"Ordinarily, the Government of the United States and its

servants have little or no concern with religious societies or
corporations and their members. With us, the Church is so
completely separated from the State that it is difficult to
imagine cases in which the policy of a Church in the selection
of its ministers and the assignment of them to duty can be
regarded as of political moment, or as a proper subject of
comment in the report of a public officer.
{398}
In the pacification of the Philippines by our Government,
however, it is impossible to ignore the very great part which
such a question plays. Excepting the Moros, who are Moslems,
and the wild tribes, who are pagans, the Philippine people
belong to the Roman Catholic Church. The total number of
Catholic souls shown by the Church registry in 1898 was
6,559,998. To care for these in that year there were in the
archipelago 746 regular parishes, 105 mission parishes and 116
missions, or 967 in all. Of the regular parishes all save 150
were administered by Spanish monks of the Dominican,
Augustinian, or Franciscan orders. Natives were not admitted
to these orders. There were two kinds of Augustinians in these
islands, the shod and the unshod. The latter are called
Recolletos, and are merely an offshoot from the original order
of St. Augustine.

"By the revolutions of 1896 and 1898 against Spain, all the
Dominicans, Augustinians, Recolletos, and Franciscans acting
as parish priests were driven from their parishes to take
refuge in Manila. Forty were killed and 403 were imprisoned,
and were not all released until by the advance of the American
troops it became impossible for the insurgents to retain them.
Of the 1,124 who were in the islands in 1896, only 472 remain.
The remainder were either killed or died, returned to Spain,
or went to China or South America. There were also in the
islands engaged in missions and missionary parishes, 42
Jesuits, 16 Capuchins, and six Benedictines, and while many of
these left their missions because of disturbed conditions they
do not seem to have been assaulted or imprisoned for any
length of time. In addition to the members of the monastic
orders, there were 150 native secular clergymen in charge of
small parishes who were not disturbed. There were also many
native priests in the larger parishes who assisted the friar
curates and they have remained, and they have been and are
acting as parish priests. The burning political question,
discussion of which strongly agitates the people of the
Philippines, is whether the members of the four great orders
of St. Dominic, St. Augustine, St. Francis, and the Recolletos
shall return to the parishes from which they were driven by
the revolution. Colloquially the term 'friars' includes the
members of these four orders. The Jesuits, Capuchins,
Benedictines, and the Paulists, of whom there are a few
teachers here, have done only mission work or teaching, and
have not aroused the hostility existing against the four large
orders to which we are now about to refer. …

"The truth is that the whole government of Spain in these

islands rested on the friars. To use the expression of the
Provincial of the Augustinians, the friars were 'the pedestal,
or foundation, of the sovereignty of Spain in these islands,'
which being removed, 'the whole structure would topple over.'
… Once settled in a parish, a priest usually continued there
until superannuation. He was, therefore, a constant political
factor for a generation. The same was true of the Archbishop
and the bishops. The civil and military officers of Spain in
the island were here for not longer than four years, and more
often for a less period. The friars, priests, and bishops,
therefore, constituted a solid, powerful, permanent, well
organized political force in the islands which dominated
policies. The stay of those officers who attempted to pursue a
course at variance with that deemed wise by the orders was
invariably shortened by monastic influence. Of the four great
orders, one, the Franciscans, is not permitted to own
property, except convents and schools. This is not true of the
other three. They own some valuable business property in
Manila, and have large amounts of money to lend. But the chief
property of these orders is in agricultural land. The total
amount owned by the three orders in the Philippines is
approximately 403,000 acres. Of this 121,000 acres is in the
Province of Cavité alone. The whole is distributed as follows:
Cavité, Province of Luzon, 121,747 acres; Laguna, Province of
Luzon, 62,172 acres; Manila, Province of Luzon, 50,145;
Bulacan, Province of Luzon, 39,341; Morong, Province of Luzon,
4,940; Bataan, Province of Luzon, 1,000; Cagayan, Province of
Luzon, 49,400; Island of Cebu, 16,413; Island of Mindoro,
58,455. Total, 403,713. …

"It cannot admit of contradiction that the autocratic power

which each friar curate exercised over the people and civil
officials of his parish gave them a most plausible ground for
belief that nothing of injustice, of cruelty, of oppression,
of narrowing restraint of liberty, was imposed on them for
which the friar was not entirely responsible. His sacerdotal
functions were not in their eyes the important ones, except as
they enabled him to clinch and make more complete his civil
and political control. The revolutions against Spain's
sovereignty began as movements against the friars. … Having in
view these circumstances, the statement of the bishops and friars
that the mass of the people in these islands, except only a
few of the leading men of each town and the native clergy, are
friendly to them cannot be accepted as accurate. All the evidence
derived from every source but the friars themselves shows
clearly that the feeling of hatred for the friars is well nigh
universal and permeates all classes. In the provinces of
Cavité, Laguna, and Bulacan, as well as in the country
districts of Manila, the political feeling against the friars
has in it also an element of agrarianism. For generations the
friars have been lords of these immense manors, upon which,
since 1880, they have paid no taxes, while every 'hombre'
living on them paid his cedula, worked out a road tax, and, if
he were in business of any kind, paid his industrial impost. …

"In the light of these considerations it is not wonderful that

the people should regard the return of the friars to their
parishes as a return to the conditions existing before the
revolution. The common people are utterly unable to appreciate
that under the sovereignty of the United States the position
of the friar as curate would be different from that under
Spain. This is not a religious question, though it concerns
the selection of religious ministers for religious
communities. The Philippine people love the Catholic Church. …
The depth of their feeling against the friars may be measured
by the fact that it exists against those who until two years
ago administered the sacraments of the Church upon which they
feel so great dependence and for which they have so profound a
respect. The feeling against the friars is solely political.
The people would gladly receive as ministers of the Roman
 Catholic religion any save those who are to them the
embodiment of all in the Spanish rule that was hateful.
{399}
If the friars return to their parishes, though only under the
same police protection which the American Government is bound
to extend to any other Spanish subjects in these islands, the
people will regard it as the act of that Government. They have
so long been used to have every phase of their conduct regulated
by governmental order that the coming again of the friars will
be accepted as an executive order to them to receive the
friars as curates with their old, all-absorbing functions. It
is likely to have the same effect on them that the return of
General Weyler under an American Commission as Governor of
Cuba would have had on the people of that island.

"Those who are charged with the duty of pacifying these

islands may therefore properly have the liveliest concern in a
matter which, though on its surface only ecclesiastical, is,
in the most important phase of it, political, and fraught with
the most critical consequences to the peace and good order of
the country, in which it is their duty to set up civil
government. … It is suggested that the friars, if they
returned, would uphold American sovereignty and be efficient
instruments in securing peace and good order, whereas the
native priests who now fill the parishes are, many of them,
active insurgent agents or in strong sympathy with the cause.
It is probably true that a considerable number of the Filipino
priests are hostile to American sovereignty, largely because
they fear that the Catholic Church will deem it necessary, on
the restoration of complete peace, to bring back the friars or
to elevate the moral tone of the priesthood by introducing
priests from America or elsewhere. But it is certain that the
enmity among the people against the American Government caused
by the return of the friars would far outweigh the advantage
of efforts to secure and preserve the allegiance of the people
to American Sovereignty which might be made by priests who are
still subjects of a monarchy with which the American
Government has been lately at war, and who have not the
slightest sympathy with the political principles of civil
liberty which the American Government represents.

"We have set forth the facts upon this important issue because
we do not think they ought to be or can be ignored. We
earnestly hope that those who control the policy of the
Catholic Church in these islands with the same sagacity and
prevision which characterize all its important policies, will
see that it would be most unfortunate for the Philippine
Islands, for the Catholic Church and for the American
Government to attempt to send back the friars, and that some
other solution of the difficulties should be found. … The
friars have large property interests in these islands which
the United States Government is bound by treaty obligations
and by the law of its being to protect. It is natural and
proper that the friars should feel a desire to remain where so
much of their treasure is. … It would avoid some very
troublesome agrarian disturbances between the friars and their
quondam tenants if the Insular Government could buy these
large haciendas of the friars, and sell them out in small
holdings to the present tenants, who, forgiven for the rent
due during the two years of war, would recognize the title of
the Government without demur, and gladly accept an
opportunity, by payment of the price in small instalments, to
become absolute owners of that which they and their ancestors
have so long cultivated. With the many other calls upon the
insular treasury a large financial operation like this could
probably not be conducted to a successful issue without the
aid of the United States Government, either by a direct loan
or by a guaranty of bonds to be issued for the purpose. The
bonds or loans could be met gradually from the revenues of the
islands, while the proceeds of the land, which would sell
readily, could be used to constitute a school fund. This
object, if declared, would make the plan most popular, because
the desire for education by the Filipinos of all tribes is
very strong, and gives encouraging promise of the future
 mental development of a now uneducated and ignorant people.
The provincials of the orders were understood in their
evidence to intimate a willingness on the part of the orders
to sell their agricultural holdings if a satisfactory price
should be paid. What such a price would be we are unable
without further investigation to state. If an agreement could
not be reached it is probable, though upon this we express no
definite opinion, that there would be ground in the
circumstances for a resort to condemnation proceedings."

PHILIPPINE ISLANDS: A. D. 1901.

Act of the United States Congress increasing army and
authorizing the enlistment of native troops.
Rejection of the proviso of Senator Hoar.

See (in this volume)

UNITED STATES OF AMERICA:
A. D. 1901 (FEBRUARY).

PHILIPPINE ISLANDS: A. D. 1901 (February-March).

Congressional grant of military, civil and judicial
powers for the government of the Islands to persons whom the
President may appoint.
The so-called "Spooner Amendment."

During the first session of the 56th Congress the following

bill was introduced in the U. S. Senate by Mr. Spooner, of
Wisconsin, but received no action:

"Be it enacted, etc., That when all insurrection against the

sovereignty and authority of the United States in the
Philippine Islands, acquired from Spain by the treaty
concluded at Paris on the 10th day of December, 1898, shall
have been completely suppressed by the military and naval
forces of the United States, all military, civil, and judicial
powers necessary to govern the said islands shall, until
otherwise provided by Congress, be vested in such person and
 persons, and shall be exercised in such manner as the
President of the United States shall direct for maintaining
and protecting the inhabitants of said islands in the free
enjoyment of their liberty, property, and religion."

Half the following session of Congress passed before any

disposition to take the action proposed by Senator Spooner was
shown. Then the matter was brought to notice and pressed by
the following communication to the Secretary of War, from the
Commission in the Philippines:

"If you approve, ask transmission to proper Senators and

Representatives of following: Passage of Spooner bill at
present session greatly needed to secure best result from
improving conditions. Until its passage no purely central
civil government can be established, no public franchises of
any kind granted, and no substantial investment of private
capital in internal improvements possible." This was repeated
soon afterwards more urgently by cable in the message
following:

{400}

"Sale of public lands and allowance of mining claims

impossible until Spooner bill. Hundreds of American miners on
ground awaiting law to perfect claims. More coming. Good
element in pacification. Urgently recommend amendment Spooner
bill so that its operation be not postponed until complete
suppression of all insurrection, but only until in President's
judgment civil government may be safely established."

The request of the Philippine Commission, endorsed by the

Secretary of War, was communicated to Congress by the
President, who said in doing so: "I earnestly recommend
legislation under which the government of the islands may have
authority to assist in their peaceful industrial development."
Thereupon the subject was taken up in Congress, not as
formulated in Senator Spooner's bill of the previous session,
but in the form of an amendment to the Army Appropriation
Bill, then pending in the Senate. The amendment, as submitted
to discussion in the Senate on the 25th of February, 1901, was
in the following terms:

"All military, civil, and judicial powers necessary to govern

the Philippine Islands, acquired from Spain by the treaties
concluded at Paris on the 10th day of December, 1898, and at
Washington on the 7th day of November, 1900, shall, until
otherwise provided by Congress, be vested in such person and
persons and shall be exercised in such manner as the President
of the United States shall direct, for the establishment of
civil government and for maintaining and protecting the
inhabitants of said islands in the free enjoyment of their
liberty, property, and religion: Provided, That all franchises
granted under the authority hereof shall contain a reservation
of the right to alter, amend, or repeal the same. Until a
permanent government shall have been established in said
archipelago full reports shall be made to Congress, on or
before the first day of each regular session, of all
legislative acts and proceedings of the temporary government
instituted under the provisions hereof, and full reports of
the acts and doings of said government and as to the condition
of the archipelago and its people shall be made to the
President, including all information which may be useful to
the Congress in providing for a more permanent government."

Strenuous opposition was made, firstly to the hasty grafting

of so profoundly important a measure of legislation on an
appropriation bill, and secondly to the measure itself, as
being a delegation of powers to the President which did
violence to the Constitution and to all the precedents and
principles of the American government, and also as having
objects which would not only do flagrant wrong to the people
of the Philippine Islands, but bring dishonor on those of the
United States. The military authority already exercised by the