As 2015 approaches, I think it would be interesting to discuss about the ASEAN Economic Community (AEC) which is set to be introduced next year. The ASEAN Economic Community is a regional economic integration in Southeast Asia that has objectives to create a single market and production base facilitating the free flow of goods, services, labor and capital.
In 2007, ASEAN’s leaders had declared strong commitments towards accelerating the establishment of AEC and since then the ASEAN countries gradually lower their import duties among them and targeted to become zero for most of the import duties in 2015. If we talk about achievement to date, more than 70% of intra-ASEAN trades are now trade-free and less than 5% subject to tariffs above 10%.
However there are still remaining challenges such as removing barriers to trade in sensitive areas like agriculture and steel, removing border barriers as well as removing behind-the-border constraints related to logistics, transport, infrastructure problems, weak institutions and adopting harmonized standards on competition policy and intellectual property rights.
In addition that, the other challenge is regarding the development divide between less-developed economies such as Cambodia, Lao PDR, Myanmar and the other economies in the region. The development divide should be narrowed so those countries remain engaged, no countries to lag behind and all countries in ASEAN are on a par with each other. It is important because by having this integration; there will be both winners and losers, at least in the short run.
If we look through those challenges mentioned before, many believe that the 2015 deadline will not be achieved. I think we should not view the year of 2015 as a hard deadline but rather a milestone within a longer journey. We could use the year to serve more as a benchmark of progress because depending on the speed of progress, more measures for integration can be undertaken at 2015 and beyond.
“It cannot be completely done by a certain date, but the reason why they set the date is also to get everybody across the region committed to a certain timeline. Even when it comes to the date and the task cannot be fully accomplished but it is ongoing.” Ong Keng Yong, former Secretary General of ASEAN
Although the AEC is a government-led agenda, the AEC cannot succeed without fully engaging the business community and the public at large. Thus, we need to look at the impact of AEC towards business sector. In fact, the private sector is kind of skeptical about the AEC realization and the firms in the region are not convinced that it will actually help to boost their business.
Based on the ISEAS-ADB survey that conducted in March 2012 with total of 381 firms in nine ASEAN countries, 55% of the respondents said they were not aware of AEC 2015 and 77% said they never fully engaged and benefited from the low tariff privileges. Some factors that prevent the business sector to take advantage of this integration are mostly because of lack of information on how to make use of the new tariffs that have been put in place and administrative costs in the form of excessive bureaucracy, different regulatory standards, etc.
ASEAN needs to encourage private sector to be more engaged and contribute to increase the effectiveness of the implementation of the AEC. Some policy suggestions that can be considered are the following: (1) Establish National AEC unit one stop shop for timely AEC related information (2) Explain the advantages of AEC to private sector and also get rid of the fear of perception from some businesses who has lack of culture of competition (3) Cross-country simplification, harmonization and standardizing of business rules and regulation.
ASEAN has in fact made some progress towards achieving an economic community, but there are several challenges to meet that deadline of 2015. Let me conclude this article with some optimism. We could see the AEC 2015 as means rather than ends because the process of regional economic integration requires individual country’s structural reform. At the end of the day, even it does not happen, we as countries still benefit from the effort to be better and more competitive. The process towards the integration may not be completely and perfectly accomplished but at least we are moving to the right direction.
Ceteris Paribus 
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