The Association of Southeast Asian Nations (Asean) has made slow but steady progress in reaching the Asean Economic Community (AEC) goals, a new report from Asian Development Bank (ADB) said.
According to the semi-annual report, Asian Economic Integration Monitor (AEIM), the AEC Scorecard showed that since 2008, the region has made slow but steady progress, or 68 percent by 2011, in reaching AEC targets.
The report said that the region needs to work harder on tackling barriers to trade in economically sensitive sectors such as agriculture, steel, and motor vehicles as well as reducing the non-tariff barriers that are increasingly replacing tariffs as constraints to international trade.
“Even if reform proceeds apace, the real test for the AEC will lie in the years beyond—in trade facilitation, liberalization of services, investment, labor mobility, competition policy, regional trade agreements, and compliance, among others,” it stated.
The AEIM added that liberalizing trade in services and enacting competition policy and intellectual property rights protection—all difficult areas of reform—require national rather than regional actions.
As such, 2015 will be a milestone rather than an end-point in fully achieving the AEC goals laid out by the region.
The ADB report also noted that work needs to continue beyond 2015, particularly to increase labor mobility so that unskilled as well as skilled workers can move across borders more easily, as greater labor mobility will allow the region to reap the full benefits of all its other reforms.
Furthermore, the publication mentioned the need to address other impediments to trade including fees, excessive paperwork at customs, and trade finance.
“Tackling these issues are where the main trade benefits lie. Every 1 percent saving in trade-related transaction costs is estimated to yield a worldwide benefit of $43 billion,” the ADB said.
The report also said that regional cooperation can address economic uncertainties and other cross-border challenges such as climate change, health issues, and territorial disputes.
This can be achieved notably through greater policy dialogue, stronger regional institutions, better transport links, deeper regional capital markets, and financial safety nets, it added.
On the other hand, AEIM said governments in Asia must undertake national as well as regional actions to reap the full benefits of integration initiatives like the AEC and be in a strong position to face global economic volatility going forward.
“Strengthening regional integration will help developing Asia become more productive and efficient at a time when the global economy still in flux,” said Iwan J. Azis, head of the Office of Regional Economic Integration which produced the report.
“To do that and to avoid falling prey to domestic protectionist pressures, governments must act now to ratify, implement, and enforce regional agreements,” he added.
The report noted that Asia has seen mixed progress in regional cooperation and integration recently against the backdrop of a shifting economic and financial landscape.
Cross-border trade and equity flows have slowed modestly despite improvements in cross-border foreign direct investment, bond purchases, bank credit, and tourism flows, it added.
MAYVELIN U. CARABALLO