Whatever Happened To The ASEAN Economic Community (AEC)?

When ASEAN nations once were very proud of their membership, much fanfare was given to the beginning of what was called the ASEAN Economic Community (AEC). A very watered-down version was launched on January 1, 2015, with a number of critical dates ahead in its implementation and expansion.

Now a decade later while the ASEAN Summit in Kuala Lumpur, its worth reviewing the impact and success of the AEC. A new 41-page strategic plan for 2026-2030 was released for the AEC on May 26. The introduction stated the AEC has created a highly integrated and cohesive economic community that is an attractive interconnected market for trade and investment. In addition, the plan was full of promises that ASEAN would become the fourth largest global economy by 2045, where ASEAN is committed to becoming a single and future ready economy. Much of the rest of the document talked about plans that linked with other plans. A bureaucrat’s delight. 

The new strategic plan outlined eight strategic objectives;

1. The bolster of intra-ASEAN goods,

2. Make ASEAN and attractive investment destination,

3. Strengthen regional services integration and competitiveness,

4. Deepen financial integration and inclusion, 

5. Facilitate the mobility of businesses and people, 

6. Mobilise new sources of competitiveness,

7. Enhance transparency, good governance, and good regulatory practices, and

8. Advance the harmonisation of standards, technical regulations, ease of doing business, and reinforcing good government across cross-border trade and investment activities.

The document certainly looked like it was written by the Economic Planning Unit (EPU) under the Prime Minister’s Department, which is the secretariat for the summit. 

How has the AEC progressed since 2015?

One of the biggest problems in assessing the AEC is the distinct lack of data and statistics. There are a lot of meaningless figures used for ASEAN Secretariat press releases, which are just recaps of data released by unrelated organizations. There is no dedicated data collection body within ASEAN that can be referred to. Blueprints are published. However, there is no reconning of performance against those goals, as new sets of officials tend to focus upon different issues. 

ASEAN nations have achieved a general reduction of tariffs between their respective nations.  However, as many trade practitioners would tell you, non-tariff barriers and licensing are major issues today. This means there is a lack of trade integration between ASEAN nations. The movement of labour between countries is a good example, as each country has its own procedures, given little or no preferences to ASEAN workers. 

One of the only indicators of AEC success is the growth of intra-ASEAN Trade since 2015. According to an S&P Global report intra-ASEAN trade comprises between 21-23 percent of total ASEAN trade. This is stagnant from 2015 figures, where ASEAN trade between China and the EU has grown much more significantly. This infers there hasn’t been the deeper economic integration, as espoused by ASEAN leaders at summits like the one just finished in Kuala Lumpur. 

This is a great disappointment, but shouldn’t be unexpected as the focus of each ASEAN nation has been on their own respective development. BRI projects with China have been a much higher priority than ‘hard projects’ to boost intra-ASEAN trade. There appears to be a major disconnect between the bureaucrats attending the ASEAN summit and what is really happening economically within the region. 

Although there is some espoused agreement to handle the tariff issue with the United States as a block, most ASEAN nations have already made their own bilaterial negotiations with the United States. 

The ASEAN summit will continue to be a talk-fest with no agreed approach on Myanmar, no settlement about Timor Leste’s application to become a full member of ASEAN after so many years (deferred until October), while Indonesia has nominated Papua New Guinea for membership. As predicted the announcement of the “ASEAN Community Vision 2045” kicks the bucket down the road for future leaders to deal with. 

As for the AEC, its once again subjected to bureaucratic solutions that will never be attended to.

Source: eurasiareview