ASEAN’s AEC Integration: 2015, a Milestone or a target?

20110905-headASEAN is integrating and most observers of ASEAN integration have said for years the following:

  • The formation of the AEAN Economic Community (AEC) in 2015 is an important “milestone” in the process of ASEAN integration. The challenge for members is to grow with the gains of integration while staying prepared for changes. It is important to reap benefits by creating a mutually reinforcing “virtuous circle” of integration. That virtuous circle means, more willingness in liberalization would, through increased competition and technology transfer, support the development of the economy. The development of the economy, in turn, will support further liberalization. The extent of liberalization under the AEC Blueprint and the current state of implementation, does not aim towards full liberalization in all areas, with implementation currently lagging behind in some areas. There is room to accelerate liberalization process under the Blueprint, particularly in the area of financial liberalization. Key to this is the adoption of an “integration mindset” by incorporating regional integration issues into domestic laws, regulations and master plans, which will ultimately give thrust to the aforementioned “virtuous circle”.

But even with the above information, widely available for years, fierce critics of ASEAN integration remain. As ASEAN leaders recently met in Brunei, Reuters reported the following article:

  • Southeast Asia’s 2015 unity dream collides with reality

Reuters – Thu, Apr 25, 2013 5:34 PM EDT

By Stuart Grudgings

Southeast Asian nations have quietly begun to row back on a deadline of forming an “economic community” by 2015, confirming what many economists and diplomats have suspected for years as the diverse group hits tough obstacles to closer union.

Rather than referring to the end of 2015 as a firm goal, officials at this year’s first summit of leaders of the Association of Southeast Asian Nations (ASEAN), whose 10 members range from glitzy Singapore to impoverished Myanmar, prefer to call it a “milestone” to be built on in years ahead.

In so doing, they are bowing to the reality of slow progress and even some regression on politically sensitive goals, such as eliminating non-tariff barriers and lowering obstacles to the free flow of labour in the diverse region of 600 million people.

While failure to meet the ambitious goal, which was brought forward from 2020 originally, is no surprise, it risks undermining ASEAN’s credibility at a time when it faces unprecedented divisions over maritime disputes with China.

“Essentially ASEAN’s community-building is an ongoing process that will continue even after our 2015 milestones,” Brunei Prime Minister and Sultan Hassanal Bolkiah told a summit-concluding news conference on Thursday.

He acknowledged “challenges due to the varying levels of development amongst us”.

The summit’s final communique contained no specific commitment to the 2015 goal, saying that leaders had agreed to “leverage upon ongoing work to establish the AEC”, or ASEAN Economic Community.

The problems raise doubts over whether the group, whose renowned “consensus” approach is designed to protect national interests but also slows decision-making, can bridge yawning economic gaps between richer nations like Malaysia and newer, poorer members such as Myanmar and Laos.

“They are a long way off,” says Jayant Menon, a senior economist at the Asian Development Bank in Manila, referring to the “Mekong” nations of Laos, Cambodia, Myanmar and Vietnam.

“This kind of exercise – highly ambitious, short time-lines – simply works to fracture the organisation further.”

Founded in 1967 in the midst of Cold War conflicts, insurgencies and coups in Southeast Asia, ASEAN has become the region’s most successful grouping, credited with preventing strife and promoting a surge in trade and investment.

But critics say it appears to be reaching the limits of its integration unless its decision-making and institutional powers are strengthened. The ASEAN Secretariat in the Indonesian capital, Jakarta, has fewer than 1 percent of the staff numbers at the European Commission, a reflection of governments’ reluctance to cede sovereignty.

“I think nobody will say that,” Philippine President Benigno Aquino told reporters earlier in the oil kingdom of Brunei, where the summit was held this week, when asked if the 2015 goal was now impossible, adding there was much work to be done.

His trade minister, Gregory Domingo, said non-tariff barriers remained the thorniest problem, suggesting that the pace of reform was being dictated by the slowest-moving members.

“We are liberalising on our own, but our liberalisation has to be in sync with others. Otherwise, if we liberalise too fast ahead of others, it will be to our disadvantage.”

Complex and unpredictable import standards in some countries – such as the number of bananas required in a bunch – were holding up the liberalisation of agriculture trade, he said.

Signs that the AEC was not going according to plan emerged last September at a meeting in Cambodia when a top official said its completion may be delayed to the end of 2015 rather than the beginning.

TOUGH STEPS

Investors and multinational executives are eager for ASEAN to accelerate its integration to give them better access to a big, youthful population and rapidly growing middle class at a time when Southeast Asia is a rare bright spot in the global economy.

But many voice disappointment that progress in harmonising regulations has not kept pace with the rhetoric and with businesses’ own efforts to treat Southeast Asia as one market.

“Frankly, today you’re either local or foreign in most countries; there’s no in between when it comes to regulations,” Nazir Razak, the chief executive of Malaysia’s CIMB (CIMB.KL) bank told Reuters in an interview in February. “It’s time we give substance to what ASEAN means, what it means to be ASEAN.”

ASEAN has made strong progress in some areas, reducing nearly all import tariffs among the wealthier six members to zero, for example, as it moves towards its goal of becoming a free-trade zone.

Overall, it says it has implemented 77.5 percent of AEC measures, up from 74.5 percent last October. But economists say the remaining 20 percent or so of steps are the tough ones, and that many agreed by ASEAN still face the hurdle of domestic ratification.

While formal tariffs have come down, other barriers to trade remain formidable, such as government protection for sensitive industries and sectors.

Malaysia, for example, has been reluctant to liberalise auto trade barriers for fear of competition from regional car-manufacturing powerhouse Thailand. The Philippines has kept in place heavy restrictions on foreign investors that critics say are aimed at shielding domestic businesses from competition.

Indonesia, Southeast Asia’s biggest economy, has taken a protectionist turn over the past year by capping foreign ownership of mines and introducing a 20 percent export tax on metal ores in an effort to boost its industry.

Domestic political pressures have limited steps to liberalise worker migration within ASEAN to a handful of professions.

As ASEAN plods along, it risks being overtaken by more nimble moves as Asian countries strike more favourable free-trade deals with countries globally, adding complexity to a so-called noodle soup of regional agreements.

Several ASEAN countries are aiming to join the proposed Trans-Pacific Partnership, which includes the United States.

“This is pulling in different directions,” said the ADB’s Menon. “I don’t know how this is all going to work out.”

(Additional reporting by Manuel Mogato; Editing by Jason Szep and Robert Birsel)

  • Reuters?

Reuters journalists appear totally lost of the general consensus on ASEAN’s AEC. In fact, what this latest Reuters article above writes about, have been written about before. There is nothing new, about doubt at ASEAN integration. In fact, ASEAN leaders have responded to critics before, many times.

  • For example:

VietNamNet Bridge reports:

  •  Vietnam  Prime Minister Nguyen Tan Dung has said, ASEAN needs to continue to unify to ensure peace, security and development in the region. Speaking at the 22nd ASEAN summit in Bandar Seri Begawan, Brunei, which ended yesterday, April, 25, Dung said more co-operation was needed to cope with the global economic crisis, natural disasters, climate change, maritime security and epidemics.

And Asian Affairs reports:

Association of Southeast Asian Nations (Asean) Secretary General Le Luong Minh has affirmed that the association will make stronger efforts to fulfill its goals, fostering the implementation of agreements and Asean integration to successfully establish an Asean Community in 2015 based on three key pillars; politics-security, economics and socio-culture.

Speaking at a recent press briefing, Minh stressed Asean’s requirements, tasks and goals, as well as those of the Asean Secretariat and his own as the Secretary General, in the 2013-2017 period.

It is a significant era for the association as it includes the building of an Asean Community in 2015 and the 50 th anniversary of its establishment in 2017, the Secretary General said.

Minh said the association will priorities improving the Asean Secretariat’s operational efficiency and capacity, strengthening its links with correlative bodies of other organisations in different regions in the world and the United Nations.

He emphasized that Asean member countries should foster cooperation with the Secretariat as well as its dialogue partners to accelerate the Asean connectivity programme, heading towards the establishment of an Asean Community by 2015.

This will make Asean a strong economic bloc integrated with the global economy to cope with common regional and global challenges, he said.

Minh added that the association will also continue to focus investment on human development and other areas such as culture, education, healthcare, environment, and food and energy security.

The Secretary General noted that the deadline to complete the goal of building an Asean Community in 2015 is getting close, therefore it is necessary for the association’s members to speed up their actions, realize agreements and decisions.

In the future, Asean may also consider adjusting and supplementing the Asean Charter in its Summits, he said.

He said ASEAN should make the best use of the Treaty of Amity and Cooperation (TAC), the Southeast Asian Nuclear-Weapon-Free Zone Treaty (SEANWFZ), the Declaration on the Conduct of Parties in the East Sea (DOC), the Declaration on the East Asia Summit on principles for mutually beneficial relations, the ASEAN Regional Forum and ASEAN Defence Ministers’ Meeting Plus.

Regarding the East Sea issue, the PM proposed the association raise a united voice for peace, stability, maritime security and safety.

He noted the effective implementation of commitments and agreements such as the Declaration on Six-point Principles on the East Sea, and the ASEAN-China joint statement on the 10th anniversary of the signing of the Declaration of Conduct, the settlement of disputes by peaceful measures, the respect of international law – especially the United Nations Convention on the Law of the Sea (UNCLOS) – and the early conclusion of the Code of Conduct in the East Sea (COC).

Affirming Viet Nam’s support for Thailand as the coordinator in the ASEAN and China dialogue relations, Dung said the two sides needed to accelerate negotiations.

Dung’s views were shared by other ASEAN leaders, who agreed that the East Sea issue was a matter of concern for the entire organisation as it related to peace and security in the region.

ASEAN leaders also expressed satisfaction at the progress towards setting up an ASEAN Economic Community (AEC) by the end of 2015.

However, ASEAN member countries need to make greater efforts to realise the goal, according to the Chairman’s statement at the Summit.

The statement said 77.57 percent of the AEC Blueprint had been implemented to date.

The leaders agreed to enhance ASEAN’s competitiveness by facilitating trade and investment, leveraging upon on-going work to establish the AEC.

They also recommended rolling out a road-map of initiatives to simplify ways of doing business and addressing investment impediments in the region.

Filipino Trade Secretary Gregory Domingo said ASEAN had already achieved about three quarters of its targets relating to the goal of a single-market since it began the process in 2007.

But he also said many challenges were ahead, including a framework to open up the services sector within ASEAN, which includes banking, insurance, telecommunications and retail.

On trade, Domingo said agriculture was among the most difficult sectors to fully liberalise.

Official statistics show that since the adoption of the blueprint in November 2007, per capita income in the region has risen from US$2,267 to $3,759 a year.

  • ASEAN Must Educate Global journalist such as Reuters!

Clearly, the Reuters journalist who wrote the latest article on ASEAN did not do any background research, or at best have done a selective research. The Reuters journalist exhibit the type of ignorance that ASEAN must address. In sum, ASEAN must increase its education efforts with global journalist.

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