©2019 LSESU ASEAN Society

On the ASEAN Economic Community

In our final series of interviews on ASEAN, we feature the ASEAN Economic Community and its future trajectory. We have the privilege of discussing these issues with Ms. Sanchita Basu Das, head of research (Economic Affairs) at the Yusof Ishak Institute of Southeast Asian Studies in Singapore

1. Why should one be concerned about the enormous efforts expended by ASEAN countries to ensure the success of the AEC?

At this moment AEC is a work in progress. While tariff elimination has been achieved between ASEAN countries, there are several facilitation measures under trade and investment (like non-tariff measures, customs modernisation, standards and conformance, single window, streamlining investment procedures and others) that are yet to be fully implemented by the member countries. ASEAN also suffers from development divide and hence the region is viewed as 10 separate economies rather than a single market and production base, as stipulated in the 2007 AEC blueprint. The private sector is still learning about AEC, leading to low utilisation rate of ASEAN preferences.

2. What is the impact of the AEC on the different economies in the ASEAN region?

There are couple of econometric modelling done to estimate the impact. However, it is difficult to be accurate as AEC goes much beyond than liberalisation. AEC’s main value addition is in facilitation initiatives, thereby acting as a catalyst for the member countries to undertake domestic reform under changing global circumstances. AEC  also helps less developed ASEAN members to attract support in terms of capacity building exercises and technical knowledge building and prepare them to participate in low value added activities of production networks. As AEC follows principle of open regionalism, it connects the member economies to the bigger economies of Asia- China, South Korea, Australia, India, New Zealand and Japan.

3. What are the biggest challenges facing the idea of the AEC and do you think that ASEAN can successfully overcome these problems? 

The biggest challenges facing the idea of AEC are the non-tariff measures, awareness of businesses and people and ASEAN development divide. For NTMs, although there are ways suggested under ASEAN trade in goods agreement (ATIGA) to minimise such barriers, it’s voluntary in nature and there are no ways to distinguish a ntm to non-tariff barriers. With global economic uncertainties, NTMs will be on the rise. For business awareness, ASEAN has set up ASEAN business advisory council and also running several workshops in national economies. However, it will take some time to change attitudes of businesses. Regarding people, they are yet to see any benefits in terms of rising income or more job opportunities due to AEC. Lastly, development divide will continue to challenge ASEAN integration due to lack of policy, human resource and physical infrastructure in less developed countries.

Yes, ASEAN can address these issues and there are already mechanisms mentioned in the new AEC blueprint 2025 (ASEAN connectivity plan, initiative of ASEAN integration, building ASEAN identity). There are indeed progress happening in facilitation measures in national economies- customs, national trade repository, national single window and others. With countries aspiring to join trans-Pacific partnership in the future, fulfilling AEC goals is a necessary action in that direction.