Asean must partner China and India effectively to become an effective grouping and take decisive action to integrate.

Singapore's Prime Minister Lee Hsien Loong sees these as the new challenges for the 10-member grouping, which marks its 40th anniversary tomorrow.

Delivering the Asean Day lecture this afternoon, PM Lee said Asean is still a long way from becoming a fully integrated community because of its political, economic and cultural diversity which makes natural coherence more difficult than established groupings such as the European Union.

He gave two reasons why Asean must work hard to achieve closer integration.

"The first is simply that we do not have a choice ? Asean must integrate to survive. This may be a stark and blunt way to put it, but it is the cold reality. The rise of China and India has transformed the strategic landscape and created new dynamics within Asia," he told the gathering of Asean officials and dignitaries.

"Companies and investors around the world are paying attention to what is happening in Asia, but they are focussing their energies on these two emerging giants. Elsewhere in the world, regions like the Gulf States and Eastern Europe are also reforming their economies and becoming attractive investment destinations.

"To stay in the game, Asean must take decisive action. We must become a strong and effective grouping, able to partner China and India effectively. "

PM Lee said many investors today see Asean as 10 "isolated, scattered national economies, too small to be worth paying attention to, warning: "If Asean?s integration stagnates while the rest of Asia forges ahead, we will be left behind and become irrelevant. "

While virtually all Asean countries recognise that integration is important and that time is not on their side, there are differing priorities and perspectives, he said.

"Countries are at different stages of development. For some, the priority is to narrow this development gap. They worry that faster integration will mean more direct competition at their doorsteps. Other governments are preoccupied with pressing domestic issues," he explained.

"They have to deal with myriad interest groups and constant political pressures at all levels. Not surprisingly, closer integration is not uppermost on their agendas, as its rewards are spread out and long-term. These are realities we must confront to move Asean forward.

To keep our efforts on track, PM Lee said the pace of Asean integration should not be set by its slowest members.

Suggesting that the more developed Asean members can and should take the lead in setting the pace of integration for the rest to follow, he said: "We should look for creative and flexible approaches to accelerate integration, despite the diversity of the region.

"One way is for Asean countries which are ready to move ahead first, either bilaterally or as a smaller sub-group. Others can join in later when they are ready. This will give regional integration a much needed boost.

"At the same time, governments must take a long-term view of their national interests. This calls for leadership and political will, to explain to the people what is at stake, and why Asean is important. They must understand concretely what integration means to them: more choices, more opportunities and, ultimately, better lives.

"Only thus can governments create more space for themselves to take rational actions, and muster the political consensus needed to accelerate regional integration. "

The second reason for integration is an aspirational one ? creating a united and coherent sean organisation so that we are favourably positioned as the basis of the new regional architecture, said the PM.

Asia, he noted, has become a new focus for the great game of international relations. It is prosperous and brimming with opportunities, and more countries are entering the fray. Both regional and extra-regional players are keen to engage, yet at the same time, are wary of one another. Moreover, the presence of multiple players in the region, and their complex power relations make the shape of the new Asia both critically important and difficult to settle.

All East Asian countries place growth as their basic priority. But regional stability must underpin growth. Thus the ongoing search for a robust framework of cooperation within which countries can cooperate and compete peacefully, and manage disagreements and disputes.

Here is where Asean has an opportunity to play a constructive role, given the good relations it enjoys with all the major powers and the success of its various forums.

"If we can strengthen these Asean-based processes, they have the potential to form the core of the evolving architecture for regional cooperation. This is what we mean when we say that Asean must strive to be in the driver's seat. The rules of the game in our region should be determined from within, not without," urged Mr Lee.

"However, we cannot take it for granted that this favourable state of affairs will persist. If Asean is disunited or ineffective, we will lose the privileged position of being courted by various players. Credibility begins from within. Asean needs to show that it is able to look beyond narrow short-term interests in the pursuit of broader strategic goals. "

"By presenting ourselves coherently, we will show ourselves to be capable of pursuing our interests and engaging the world. We will convince others that Asean can be relied upon to play an active, fair and constructive role in providing the platform for their interaction within Asia. Only then will other powers take us seriously. Only then can Asean establish its standing and take its rightful place in the region. This is the broader reason for our Chairmanship theme ? "One Asean at the Heart of Dynamic Asia".

Singapore takes over the chairmanship of Asean in November this year.

Mr Lee listed some of the key areas Singapore would be pushing for during the year it is in the chair.

This include putting in place processes that will guide the grouping on the right track , and setting clear directions to lay the parth for further growth.

A key focus will be on strengthening Asean internally and making the grouping more competitive and attractive as an investment region.

Other milestones will be signing the Asean Charter and the economic blueprint for setting up the Asean Economic community by 2015 at the Asean Summit in Singapore in November.

At the same time there would be a deepening of community building efforts and engagement of external powers, both in the region and beyond.

Singapore will also push for the early completion of free trade agreement (FTA) negotiations, and in particular work on speeding up negotiations on the newly-launched Asean-European Union FTA, Mr Lee said.

For the full lecture, click here