AEC: Will it just remain a vision?

Reading Time: 2 minutes
Arno Maierbrugger
By Arno Maierbrugger

The 22nd ASEAN Summit in Brunei on April 24 and 25 has made a very clear statement with regards to the formation of the ASEAN Economic Community (AEC), which has originally been announced to come into effect by end-2015 by former ASEAN Secretary-General Surin Pitsuwan.

However, things change. It turned out that ten-member bloc of the Association of Southeast Nations (ASEAN) will most likely not be able to meet this ambitious target.

While it has been acknowledged that the group has implemented 77.5 per cent of AEC measures, up from 74.5 per cent in October 2012, it is also clear that the remaining steps are the tough ones, including the removal of trade barriers in government-protected sectors and certain investment restrictions, as well as the implementation of free labour movement

It seems that the ASEAN member states are actually doing the opposite of an economic integration. For example, Malaysia 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 said were aimed at shielding domestic businesses from competition. Indonesia, Southeast Asia’s biggest economy, had taken a protectionist turn over the past year by capping foreign ownership of mines and introducing a 20 per cent export tax on metal ores in an effort to boost its industry, and also introduced import restrictions on certain goods such as fruits and other agricultural products.

Furthermore, domestic political pressures had limited steps to liberalise worker migration within ASEAN to a handful of professions. Singapore is currently shielding its labour market and has imposed strict immigration controls even for its ASEAN neighbours. Complex and unpredictable import standards in some countries are further holding up the liberalisation of agriculture trade.

In this respect, it takes wonder that the ASEAN Summit is pressing further with its idea of a common ASEAN visa that includes not only tourists but also business people and investors.

While, at first sight, it looks like a step towards free movement of labour and skills in the region, such as visa would only be reserved for “recognised professionals” who would be allowed to move freely within ASEAN, according to acting ASEAN Secretary-General Le Luong Minh.

He did not specify what sort of professionals, but stated that it would not be restricted to any industry and “will depend on the labour demands of the individual country”. Seen from close, such a concept is not really reflecting the idea of ASEAN’s borderless future.

While no higher ASEAN official would definitely say it, it has become clear that it is highly unrealistic that the AEC will be reality at the proposed date. Too many countries still have to do their homework and are seemingly focusing more attention on alternative trade blocs such as the Trans-Pacific Partnership pushed by the US or the rival pact of the Regional Comprehensive Economic Partnership moved forward by China. This is unfortunate as the idea of the AEC is getting diluted.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

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Reading Time: 2 minutes

By Arno Maierbrugger

The 22nd ASEAN Summit in Brunei on April 24 and 25 has made a very clear statement with regards to the formation of the ASEAN Economic Community (AEC), which has originally been announced to come into effect by end-2015 by former ASEAN Secretary-General Surin Pitsuwan.

Reading Time: 2 minutes

Arno Maierbrugger
By Arno Maierbrugger

The 22nd ASEAN Summit in Brunei on April 24 and 25 has made a very clear statement with regards to the formation of the ASEAN Economic Community (AEC), which has originally been announced to come into effect by end-2015 by former ASEAN Secretary-General Surin Pitsuwan.

However, things change. It turned out that ten-member bloc of the Association of Southeast Nations (ASEAN) will most likely not be able to meet this ambitious target.

While it has been acknowledged that the group has implemented 77.5 per cent of AEC measures, up from 74.5 per cent in October 2012, it is also clear that the remaining steps are the tough ones, including the removal of trade barriers in government-protected sectors and certain investment restrictions, as well as the implementation of free labour movement

It seems that the ASEAN member states are actually doing the opposite of an economic integration. For example, Malaysia 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 said were aimed at shielding domestic businesses from competition. Indonesia, Southeast Asia’s biggest economy, had taken a protectionist turn over the past year by capping foreign ownership of mines and introducing a 20 per cent export tax on metal ores in an effort to boost its industry, and also introduced import restrictions on certain goods such as fruits and other agricultural products.

Furthermore, domestic political pressures had limited steps to liberalise worker migration within ASEAN to a handful of professions. Singapore is currently shielding its labour market and has imposed strict immigration controls even for its ASEAN neighbours. Complex and unpredictable import standards in some countries are further holding up the liberalisation of agriculture trade.

In this respect, it takes wonder that the ASEAN Summit is pressing further with its idea of a common ASEAN visa that includes not only tourists but also business people and investors.

While, at first sight, it looks like a step towards free movement of labour and skills in the region, such as visa would only be reserved for “recognised professionals” who would be allowed to move freely within ASEAN, according to acting ASEAN Secretary-General Le Luong Minh.

He did not specify what sort of professionals, but stated that it would not be restricted to any industry and “will depend on the labour demands of the individual country”. Seen from close, such a concept is not really reflecting the idea of ASEAN’s borderless future.

While no higher ASEAN official would definitely say it, it has become clear that it is highly unrealistic that the AEC will be reality at the proposed date. Too many countries still have to do their homework and are seemingly focusing more attention on alternative trade blocs such as the Trans-Pacific Partnership pushed by the US or the rival pact of the Regional Comprehensive Economic Partnership moved forward by China. This is unfortunate as the idea of the AEC is getting diluted.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

Brunei Times logo

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