The ASEAN Economic Community – Status Quo and Challenges

    Posted on: 2016-03-12 (台灣) 出版

The ASEAN Economic Community – Status Quo and Challenges

The ASEAN is still far away from a single market when it comes to other measures of market liberalization. Should it prove impossible to satisfy the CLMV countries’ aspirations for distributive justice, these countries and their domestic civil society organizations might become forces that hinder the development of the AEC or could even trigger a new protectionist movement. These problems could pose real challenges to the future development of the AEC.

By Ian Tsung-Yen Chen, assistant professor at Institute of Political Science of National Sun Yat-sen University

Published with permission from Taiwan Brain Trust.

The members of the Association of Southeast Asian Nations (ASEAN) hoped to launch the  ASEAN Economic Community (AEC) before the end of 2015 as a milestone toward the envisaged ASEAN Community. This means achieving the goals set out in the AEC Blueprint, adopted in late 2007, which aims to transform ASEAN into a single market. On Nov. 22, 2015, the leaders of the ten ASEAN states signed a declaration to establish the AEC at the group’s 27th annual summit in the Malaysian capital of Kuala Lumpur. The AEC was formally launched Dec. 31. The summit also adopted the AEC Blueprint 2025, which proposes concrete goals for the next phase of community building.

Based on official ASEAN statements, the AEC hopes to achieve the four following goals in regional economic integration before 2015: First, establishing a single market and production base, which entails a free flow of goods, services, investment, capital, and labor as well as priority integration sectors, and making the food, agriculture and forestry sectors more competitive. Second comes raising the region’s economic competitiveness by fostering a culture of fair competition and the rule of law, and drafting legislation on consumer protection, intellectual property rights, infrastructure development, avoidance of double taxation and the promotion of e-commerce. The third pillar is about equitable economic development which endeavors to foster the development of small and medium sized enterprises to eliminate the development gap within the ten-member ASEAN and realize the Initiative for ASEAN Integration (IAI). The fourth pillar of the AEC is integration into the global economy by boosting ASEAN’s external trade relations and increasing its involvement in the global supply chain. The AEC is expected to lead to a free flow of goods, services, investment, skilled labor and capital within the ASEAN market. The four strategies described above are means to achieve the AEC goals. The overriding goals of the AEC are using these economic integration measures to raise the international competitiveness of the ASEAN market in the global economy and to narrow the gap in national development across the region. These two big goals are clearly stated in the AEC Blueprint.

According to official ASEAN figures, the ASEAN member states had eliminated 89 percent of all mutual import tariffs on goods as of end of  October 2014 and were aiming to reach zero tariffs before the end of 2015 with the exception of  the younger and less developed members Cambodia, Laos, Myanmar and Vietnam, also known as CLMV), which have been given time until 2018
to complete their tariff elimination schedules.  Aside from trade in goods, where outcomes have  been quite obvious, liberalization has been rather limited with regard to other areas such as trade in services, investment, labor and capital flows. The consensuses that the countries have reached on legislation and policy are mostly principled ones so that the individual countries still need to draw up national legislation and policies to further implement the AEC agenda.

Progress has been even slower regarding the AEC goal of narrowing the regional development gap. Latest research shows that since the launch of the AEC the ASEAN countries have not made any notable progress toward reducing regional differences in economic development. Income distribution within ASEAN shows that wealth is still concentrated in several affluent countries such as Singapore, Brunei and Malaysia. Furthermore, foreign investors keep focusing their investments on a handful of countries. As a result, civic groups within the AEC are voicing concern that ambitious foreign powers will use AEC opening to secure resources in the region in an unfair manner. They also worry that the ASEAN model for regional integration promotes “unequal trade and investment agreements negotiated and agreed to by member states (that) fail to guarantee redistributive, economic, gender, social and environmental justice, or accountability.” Since the wealth and development gaps are one of the problems that stand in the way of ASEAN integration, the ASEAN members might question the legitimacy of the AEC should it fail to deliver distributive justice. ASEAN economic integration will face even greater challenges should obstruction of the AEC plan become a useful political tool for certain organizations.

Although the AEC has achieved results in terms of integrating trade in goods, which has led to greater international competitiveness of ASEAN imports and exports as a whole, the ten-member group is still far away from a single market when it comes to other measures of market liberalization. Should it prove impossible to satisfy the CLMV countries’ aspirations for distributive justice, these countries and their domestic civil society organizations might become forces that hinder the development of the AEC or could even trigger a new protectionist movement. These
problems could pose real challenges to the future development of the AEC.