SOUTH East Asian leaders have created a unified economic community in the region 13 years after mooting the idea. The ASEAN Economic Community (AEC) was formalised by the 10 Association of South East Asian Nations (ASEAN) leaders during a summit in November with the hope that it can compete with China and India.
The AEC forms part of a larger ASEAN Community that aims for political, security, cultural and social integration.
Malaysian Prime Minister Najib Razak hailed the AEC as a landmark achievement and urged members to accelerate integration. “The region is primed to expand exponentially.”
Many AECs fundamentals have been applied in the region, including the removal of tariff barriers and visa restrictions, while the ASEAN organisation is already benefiting from greater political and cultural cooperation.
Johns Hopkins University professor of international economics at the Europe Centre, Michael Plummer, who is based in Bologna, Italy, told Associated Press that the AEC would bolster income and employment, and provide the region with stronger economic muscle in facing the other giants.
“ASEAN integration will help balance the economic power of China and India,” he said. “Individually, ASEAN countries are, perhaps, too small to be important players in the economic and security game but as an integrated group of more than half a billion people, they would be in the major league.”
There is a long way to go before the AEC becomes fully functional after becoming a legal entity on December 31. The region’s diversity can be a hindrance. ASEAN has 630 million people, speaking different languages, following various faiths and governed by various systems, including rambunctious democracies, a military dictatorship, quasi-civilian, authoritarian, monarchy and communism.
Professor Plummer said, “The AEC is arguably the most ambitious economic integration program in the developing world and implementation is increasingly uphill. Much remains to be done and the region faces many challenges in finishing.”
He said it fell short in more sensitive areas such as opening up agriculture, steel, auto production and other protected sectors while progress had been slow in services liberalization. Cross-border flow of investment was restricted by large exclusion lists and caps on foreign ownership while government procurement and curbing monopolies by state-owned enterprises were highly sensitive and untouched.
Although the four poorer economies - Cambodia, Laos, Myanmar and Vietnam - have until 2018 to bring down tariffs, economic integration could further reinforce income equalities. There were also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping while a wide economic gulf divides the region’s rich and middle income economies of Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines, and the four less developed members.