IN the minds of the economic architects of Asean in 2006 as they sat around the table crafting the economic future of the grouping, 2015 would see a region that would be economically integrated. Translation: the free movement of goods and services; and an even freer movement of capital and talents among the 10 member states.
Fast-forward six years and questions remain. In 2012 we see concerns over the eurozone and the future of European Community. Folks now question the viability of the Asean Economic Community (AEC). Is the AEC a good idea after all? Pronouncements have been made. A lot of effort has gone into breaking down trade and investment barriers among the 10 member states. With so much water under the bridge, is the AEC a face-saving fait accompli?
Given the range in economic development, diverse political and economic systems and cultural differences, can Asean be moulded into a community? Should we try to force the formation of the community or should we allow it to evolve organically? These are just some of the questions the regional grouping must grapple with as 2015 begins to dawn upon us.
In 2006, when the proposal to push for the realisation of the AEC by 2015 was mooted, it made economic sense. We had just come out of a major economic crisis, and initiatives towards the Asean Free Trade Area (FTA) were well on the way. We were looking forward to the next steps towards deeper economic integration. So we drew up the AEC blueprint as the guiding framework. And the AEC scorecard to ensure that we did what we said we were going to do. And in all fairness, we have worked tirelessly to ensure that implementation was on track.
But Asean was also pragmatic in its approach to economic integration. Right at the outset, it was clear that the grouping was not looking to be a Customs union. That would evolve with time. Because of the differing economic and political systems as well as differing levels of economic development, the grouping adopted an open regionalism approach. This would mean that regional economic integration would not be a drag on the growth plans of the member states. Rather they took the “rising tide” stance; a “prosper thy neighbour” attitude as they addressed the development gaps among member states.
This approach has panned out successfully for the grouping. It has contributed positively to the region’s economic growth and industrial development. Intra-regional trade continues to grow and now amounts to 25% of the groupings’ global trade of US$2.1 trillion. Its share of global FDI is also up, increasing from 2.8% in 2008 to 4% in 2010 to total US$75.8bil. More importantly, about 50% of FDI inflows into Asean are in the services sectors. And Asean has been growing over 5% per annum in recent years.
Impressive? Perhaps. The challenge is whether Asean can continue to retain its attractiveness and sustain growth and continue to remain dynamic. The economic pressures brought on by global economic uncertainties are putting a strain on efforts towards regional economic integration. Member states must resist the pressures of protectionism. Short-term relief will not augur well for the long-term benefits of the region.
Even as Asean works to ensure we get to our goals, there is no standing still. The year 2015 is just another milestone. The grouping must look beyond 2015. Enter the Regional Comprehensive Economic Partnership agreement (RCEP). If implemented, the RCEP will see the deeper integration of Asean with its FTA partners China, Japan, South Korea, India, Australia and New Zealand. Ambitious? Not really when one considers the fact that the FTAs with these partners are pretty much in place. The challenge is of course putting the pieces together to optimally benefit all parties. An integrated FTA of 16 countries if realised will be a huge market of its own representing 47% of the global population and over 40% of global trade.
But a prerequisite of RCEP is the full and effective implementation of the AEC.
On the AEC: it is now in its third (2012-2013) of its four phases of implementation. To date, close to 70% of the AEC measures under phases one and two have been completed. This is commendable. But the more difficult tasks are still ahead as the grouping confronts the liberalisation of the sensitive sectors in trade, investment and services as well as in economic sectors such as transport, agriculture, tourism and finance. There is the challenge of compliance (doing what we say we will do) and the challenge of impact (getting the outcomes we said we would). With slightly more than three years towards 2015, the heat is on.
Source: The Star Online