The ASEAN Economic Community: What's In A Name?

ASEAN has long had distaste for missing deadlines. The 1st of January 2016 was no different. ASEAN, the broad coalition of South East Asian nations launched, without much fanfare, the ASEAN Economic Community (AEC), fulfilling a goal to establish an integrated economy within the region by the end of 2015. But what does it actually mean? The AEC at first glance sounds and looks like a fantastic idea, another step in ASEAN’s slow rise in prominence, from loose affiliation to EU pretender (unlike the European Union, the AEC aspires for economic and financial integration without a monetary union or political integration). However on closer inspection the actual changes to economies in the area are minimal at best and smoke and mirrors at worst. It seems that there was little fanfare precisely because there was little to be celebrating except another deadline met.

If ASEAN were a single economy it would be the seventh largest in the world, with a combined GDP of $2.4 trillion in 2013, it would be the fourth largest by 2050, if current growth trends continue. With over 600 million people, the potential market in the region is larger than either the European Union or the United States. However it is hard to argue against the assertion that the region is underperforming. With 8.7% of the global population, the region's GDP output represents only 3.2% of the global economy. Thus, the appeal of a single economic community; the opportunity for growth is enormous.

The AEC represents ASEANs most ambitious undertaking. For years, ASEAN was less about regional integration than it was the grouping together of smaller states in an effort to counteract the strategic and economic weight of India and China, the two behemoths that ASEAN nations find themselves wedged between. However, the AEC represents a genuine opportunity to grow regional links and develop trade, to cement a strategic and economic partnership that for too many years was simply a loose affiliation of non-aligned nations with a non-intervention agreement and a charter. The potential in the area is great and the leaders know it.

The goal of the AEC was to establish a union of nations where tariffs and trade barriers were eliminated and the free flow of labour could be facilitated. The long-term objectives are clear, integrate the region into a single market and production base; turn Southeast Asia into a highly competitive region; ensure equitable development across ASEAN and to fully integrate ASEAN into the global economy. These are admirable and lofty goals for an organisation that until recently accepted the hermit-like status of Myanmar as an internal matter and not as the political and economic drag on the region it actually was. Nobody is denying that there is the political will and the strategic and economic need to begin the greater economic integration of ASEAN, however, succeeding requires the passage of legislation in each country and a greater appreciation for liberalised markets.

So what actually happened on the 1st of January this year? Well it’s hard to argue that what the AEC currently looks like is what the ASEAN leaders envisioned when they signed the ASEAN Charter in November 2007. Trade liberalisation in the region has been progressing at a snail’s pace. Tariff barriers in the region were successfully removed in 2010, however despite this, non-tariff barriers to trade remain in abundance. The much-touted labour mobility goal of the AEC has also been left largely unfulfilled. ASEAN labour mobility, long the subject of xenophobe's fearing an influx of foreign workers, has been reduced to skilled labour Mutual Recognition Agreements for only eight professions (engineers, nurses, architects, tourism operators, geospatial surveyors, accountants and medical and dental practitioners); professions which represent less than 1.5% of ASEAN’s 300 million person labour force. Labour mobility remains elusive.

The AEC is a fantastic idea, and the idea alone is expected to raise growth for the region to 5.6% through to 2019. However, sovereignty issues are, as always with ASEAN, the problem with greater integration. ASEAN nations continue to have large segments of their populations whose nationalist sentiment confounds attempts at integration. Yet, The AEC still represents the culmination of massive integrationist leaps made by ASEAN since the early 2000s. This move toward greater integration should be seen as making good economic sense, however it should also be seen as a logical strategic response to a growing and more assertive China. The AEC may have launched on time at the end of 2015, however, while the intentions are good, a great deal of work still needs to be done, however the future is bright for ASEAN and opportunity abounds.

Alexander Willox is an Analyst at Political Monitor and the Commissioning Editor of the website Insights. He tweets @frederickcon.

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Image credit: M M (cropped) (Flickr: Creative Commons)