Home » Across Borders » A Borderless ASEAN before 2020

IN a previous article, we mentioned that ASEAN has formally agreed to establish an ASEAN Economic Community (AEC) by 2020.

The agreement was forged during the Ninth ASEAN Summit held last year in Bali, Indonesia. In general, the establishment of an AEC is envisioned to result in a single market and production base of 520 million people with annual GDP of US$700 billion and will allow the free flow of goods, services, investments, capital and skilled labor among the member countries.

The ASEAN Economic Community (AEC). The AEC is one of the three pillars under the ASEAN Community concept, which includes the ASEAN Security Community (ASC) and the ASEAN Socio-Cultural Community (ASCC).

With the prior establishment of the building blocks towards ASEAN economic integration [i.e., ASEAN Free Trade Area (AFTA), ASEAN Investment Area (AIA) and the ASEAN Framework Agreement on Services (AFAS)], the movement towards an AEC seem the most logical step in the economic ladder. With AEC therefore, ASEAN will have greater focus in expediting the movement towards an integrated free trade area.

Already, a high-level task force on economic integration has been created with clear deadlines to expedite the integration process towards an AEC. With many of the initiatives drawn towards benefiting the trading community, most of the deadlines established for the task force are supposed to happen before the end of 2005.

While the AEC is still in the planning stage, many foresee an AEC established towards the direction of an “FTA plus” arrangement. An FTA plus arrangement is basically a zero-tariff free trade agreement with additional benefits akin to a common market.

Thus, while the AEC is envisioned to be more than a free trade area, it will however not be identical to that of the European Union where there is a common external customs and tariff policy. Under the AEC, member-countries are expected to have harmonized tariffs while maintaining different tariffs when trading with non-ASEAN countries.

An FTA plus Arrangement. A recent study by the Institute of South East Asian Studies (ISEAS) envisions an AEC with the following characteristics:

  1. Zero-tariff free trade area; elimination of non-tariff barriers;
  2. Free movement of goods, services, investments and capital;
  3. Free movement of tourists and skilled labor;
  4. Harmonization of customs procedures and minimization of customs requirements (e.g. ASEAN Single Window for Imports);
  5. Harmonization of standards; and
  6. Institutional and legal infra-structure to facilitate economic integration.

Considering the varying level of economic develop among the member countries, experts are expecting a “two-speed” AEC, with Singapore and Thailand already pushing for early integration of priority sectors before the 2020 deadline. Under the “two-speed” scheme, member countries that are ready to integrate certain priority sectors can go ahead first, giving other countries the option to maintain its regular course.

Accordingly, the key to accelerating economic integration is to ensure that the less developed ASEAN members (i.e., Cambodia, Laos, Myanmar and Vietnam) are able to catch up fast enough within the AEC framework.

In a recent ASEAN roundtable discussion among academics and policy makers on the topic of AEC, some of the conclusions arrived at to promote an AEC were as follows:

  1. Promoting the utilization of AFTA-CEPT;
  2. Promoting “institutionalization” (meaning, creating more regional units to manage the economic integration);
  3. Creation of supranational bodies such as: (1) ASEAN Court of Justice; and (2) ASEAN Economic Secretariat; and
  4. Providing support for institutional building and human resource development for the less-developed ASEAN members.

The Need for an AEC. It is important to note that in an increasingly competitive environment, there are deep concerns that ASEAN is being overtaken by emerging market economic economies such as India and China.

An integrated economy through AEC should therefore promote the competitiveness and advantages of the region against the emerging markets.

In a related development, the association is now giving more focus in developing the area known as Brunei Darussalam, Indonesia, Malaysia and the Philippines-East ASEAN Growth Area (BIMP-EAGA). Against the backdrop of the planned greater economic cooperation, ASEAN recently entered into various cooperative measures with its dialogue partners in Asia, particularly, China, Japan, ROK and India.

In relation to China, Korea and Japan, ASEAN is now moving towards the implementation of the “ASEAN plus Three” processes, which involve short-term measures adopted by ASEAN leaders to deepen cooperation between ASEAN and the other three countries.

In reality, the move towards Asian economic cooperation hinges on how fast ASEAN gets integrated or specifically, how fast the less developed ASEAN members are able to integrate with the other members. Only when ASEAN becomes more economically integrated will we see acceleration in promoting cooperation with other Asian countries.

In other words, the key to Asian integration is ASEAN integration.

The author is an international trade and customs consultant, and a licensed customs broker. He is also a partner of The Law Firm of David Leabres Uvero Gaticales Mosquera Samson. For your comments, he may be contacted at aouvero@dlugms.com or at (632) 4002145 / 4050021.

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