Launching of AEC.
After much hedging and hawing, debates and discussions for over a decade the Association of Southeast Asian Nations (Asean) finally adopted the Asean Economic Community (AEC) roadmap (Blueprint) with its Strategic Schedule which provides the momentum for the establishment of the Community in the year 2015. Informatively the Asean has already implemented two phases of the Blueprint as of the end of last year.
This follows the trend set up as early as three decades ago by less developed economies, to wit: the Central American Common Market, West African Economic Community, Latin American Free Trade Area; and among more developed nations the European Economic Community and the North American Free Trade Area.
Some of the key achievements of the Blueprint include the elimination of tariffs in the Inclusion List for Asean-6 of Brunei Darussalam, Indonesia, Malaysia, the Philippines, Thailand and Singapore as well as achieving 0-5% for Cambodia, Lao PDR, Myanmar and Viet Nam tariffs under AFTA; the signing of the Asean Trade in Goods and Asean Comprehensive Investment Agreements; realization of the free trade areas with Australia and New Zealand, China, India, Japan, Republic of Korea as of 1 January 2010; several rounds of services liberalization; establishment of the Chiang Mai Initiative ; and signing of several transport agreements to facilitate trade.
Asean agreed to speed up the establishment of the AEC to 2015 and to transform itself into a region with free movement of goods, services, investment, skilled labour, and free flow of capital.
The Asean Economics (EAC) Blueprint adopted in 2007 serves as a coherent master plan guiding the establishment of the AEC.
It identities the characteristics and elements of the AEC with clear targets and timelines for implementation of various measures as well as pre-agreed flexibilities to accommodate the interest of all Asean member states.
Given the importance of the external trade to Asean and the need for the Asean community as a whole to remain outward looking, the Asean Economic Community (AEC) envisages the following key characteristic: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development and (d) a region fully integrated into the global economy.
One Market and Production Base
Once the Asean Economic Community will have been established the Community will become a single market and production base. This will make Asean more dynamic and competitive with new mechanisms and measures to strengthen the implementation of its existing economic initiatives, accelerating regional integration in priority sectors, facilitating movement of business persons, skilled labour and talents; and strengthening the institutional mechanisms of Asean.
An Asean single market and production base will comprise five core elements: (i) free flow of goods; (ii) free flow of services; (iii) free flow of investment; (iv) freer flow of capital; and (v) free flow of skilled labour. Industrial sectors included in the single market and production base comprise the twelve (12) priority integration sectors: agro-based products, air travel (air transport), automotive, e-Asean, electronics, fisheries, healthcare, rubber based products, textiles and apparel, tourism, wood-based products and logistics as well as the food, agriculture and forestry sectors.
As per the AEC Blueprint a single market for goods and services will facilitate the development of production networks in the region and enhance Asean’s capacity to serve as a global production centre and as a part of the global supply chain.
Tariffs will be eliminated and non-tariff barriers will be gradually phased out. Simple, harmonised and standardised trade and customs are expected to reduce transaction costs.
There will be a free movement of professionals. Asean investors will be free to invest in sectors and the services sectors will be opened up.
ASEAN Seeks Comparative Advantage
The goal of the AEC is the creation of a stable, prosperous, and highly competitive economic region. There are six core elements under the competitive economic region: (i) competition policy; (ii) consumer protection; (ii) intellectual property rights (IPR); (iv) infrastructure development; (v) taxation; (vi) e-commerce.
Growth with Equity
Under equitable economic development there are two elements: (i) Small and Medium Enterprise (SME) development and (ii) Initiatives for Asean Integration. These initiatives move towards bridging the development divide both at the SME level and enhance economic integration of Cambodia, Lao PDR, Myanmar and Viet Nam (CLMV) to enable all member states to move forward in a unified manner and to enhance Asean’s competitiveness as a region as well for all to benefit from the integration process.
Operating in an increasingly inter-connected and highly networked global environment, with interdependent markets and globalised industries, Asean businesses hope to be able to compete internationally to make Asean more dynamic and become a mainstream global supplier to ensure that the internal market remains attractive for foreign investment.
Two approaches taken by Asean in integrating with the global economy: (i) a coherent approach towards external economic relations through Free Trade Agreements (FTA) and Closer Economic Partnerships (CEP) and (ii) enhanced participation in global supply networks.
In part two of the series next week we will explain the above initiatives in more detail.