What 2016 will bring for the ASEAN Economic Community

What 2016 will bring for the ASEAN Economic Community2016 may well be a pivotal year for Thailand and it neighbours. Thailand be facing a new constitution and parliamentary elections next year but aside from the political issues, which have embroiled Thailand in recent times, December 31st 2015 is the scheduled launch date of the AEC – The ASEAN Economic Community.

The ASEAN Economic Community, founded in 1967 by five regional states including Thailand, now comprises ten members – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, The Philippines, Singapore and Vietnam in addition to Thailand. ASEAN was founded during turbulent military and political times to promote regional peace and stability and to accelerate the economic growth, social progress and cultural development through active collaboration and mutual assistance on matters of common interest.

As the political issues lessened, the focus moved more towards economic development. December 1997 saw ASEAN, at its summit in Kuala Lumpur, adopt its ASEAN Vision 2020, an ‘ASEAN as a concert of Southeast Asian nations, outward looking, living in peace, stability and prosperity, bonded together in partnership in dynamic development and in a community of caring societies.’ The ASEAN leaders pledged to make the vision a reality by 2020.

At the 2003 summit in Indonesia ASEAN leaders resolved to establish an ASEAN Community by 2020

In 2007, at the ASEAN summit in The Philippines, the launch date for the community was brought forward to 2015. However by 2012 when they met in Cambodia, ASEAN leaders decided to delay the launch for 12 months until 31 December 2015 to allow more time to prepare regulations. Despite the then ASEAN Secretary General, Surin Pitsuwan publicly stating that ‘there will be no more delays and that all ten ASEAN countries will participate” and despite the progress that has been made there are many who believe that the launch date will once again be delayed with some believing that it will be as late as 2020, the original date.

The concept of the ASEAN Community was built upon three pillars – Political-Security, Socio-Cultural, and Economic – and blueprints were drawn up for each of the three providing a road map for the ASEAN member states to follow.

The goal of the Economic blueprint is the establishment of the ASEAN Economic Community (AEC). The goal of the AEC is to create a highly integrated economic community based on four key elements:

  1. A single market & production base
  2. A competitive economic region
  3. Equitable economic development
  4. Integration into the global economy

For the above to happen the following will need to be in place:

  1. The free flow of goods
  2. The free flow of services
  3. The free flow of investment
  4. The free flow of capital
  5. The free flow of skilled labour

It is highly doubtful that all this can be achieved by year’s end as progress to date has been uneven across the various requirements. While much work still needs to be undertaken towards integration in many areas there is significant potential, if or when the ASEAN leaders are able to create an AEC as envisaged by ASEAN Vision 2020,.

Should the ASEAN Economic Community be considered as a single country its combined land area would make it the 7th largest country in the world and its population of more than 600 million people would make it more populous than either the European Union (EU) and the North American Free Trade Agreement countries (NAFTA) with a potential labour force that, in terms of numbers, sees it third behind only China & India. Yet ASEAN would rank around 120th in terms of GDP per capita and inter-ASEAN trade is only half that experienced in either the EU or NAFTA.

So whenever the actual launch date it should not be doubted that 31st December 2015 will be another important milestone on the road to an integrated economy. The AEC is a work in progress. It has already started to happen and companies can already benefit in areas such as reduced tariffs on the flow of goods from the changes that have taken place to date.

There will no doubt be other challenges ahead on the road to the ASEAN Community as envisaged by the ASEAN leaders in Malaysia in 1997, but the AEC offers an opportunity to create a seamless regional market and production base in which the whole exceeds the sum of its parts.