KUALA LUMPUR, Malaysia – With the symbolic bang of a drum, Southeast Asian leaders declared the establishment of a single market and production base despite predictions that it will take years before it will be fully realized.
The 10 leaders of the Association of Southeast Asian Nations (ASEAN) signed the declaration establishing the ASEAN Community, calling it a “historic milestone” for the regional bloc. It will be Asia's first sub-regional community.
The ASEAN community is set to formally take effect on December 31, 2015. It includes the 3 ASEAN pillars, with economic, political and security, and socio-cultural components. (READ: A united region: The ASEAN Community 2015)
Malaysian Prime Minister Najib Razak, this year's ASEAN chairman, said that the group has a lot of work left to do despite the declaration on the ASEAN Economic Community (AEC).
“We now have to ensure that we create a truly single market and production base, with freer movement of goods and services. For that – with common standards, far greater connectivity, and the removal of the barriers that make our borders a hindrance to growth and investment – will be one that is primed to expand, exponentially,” Najib said at the signing ceremony on Sunday, November 22.
The prime minister cited a forecast that ASEAN has the potential to be the 4th largest economy in the world as early as 2030. If measured as a country, ASEAN is now the 7th largest global economy with a combined GDP of $2.5 trillion.
“There is so much we stand to gain economically that will benefit the daily lives of all our citizens,” he said.
ASEAN includes Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
Protectionist barriers, economic disparity
The AEC aims to facilitate the free flow of goods, services, capital and labor across the region, with some observers comparing it to the European Union. The goal is for investors to tap easier logistics to enter the regional market.
Analysts though said that not much will change when the AEC takes effect by year-end.
Challenges to economic integration include non-tariff and protectionist barriers, infrastructure, multiple and contrasting rules, and improving workers' skills.
Sanchita Basu Das, fellow and lead researcher at the Singapore-based ASEAN Studies Centre, predicts it will take 10 to 15 years more before benefits from AEC are seen.
“What we have to see yet is how the rules and regulations are getting harmonized in the region. So if you have different customs rules, then it's likely taking more time to import and export across the countries in ASEAN,” she said.
Basu Das added that ASEAN members who are not yet ready for integration may become more nationalistic. Traditionally protected sectors in ASEAN include agriculture, steel, and motor vehicles.
Poor infrastructure in many parts of the region also hinder investment and the ease of doing business.
The region also has a wide economic disparity. The rich and middle-income economies – Singapore, Brunei, Malaysia, Indonesia, Thailand and the Philippines – are at more advanced stages of development compared to Vietnam, Laos, Myanmar and Cambodia.
Continuity roadmap
To help monitor the implementation of the ASEAN Community, leaders signed another document called "ASEAN 2025: Forging Ahead Together." It sets the vision for ASEAN in the next 10 years.
Among the goals for the AEC after 10 years is to advance “a single market agenda through enhanced commitments in trade in goods, and through an effective resolution of non-tariff barriers; deeper integration in trade in services; and a more seamless movement of investment, skilled labour, business persons, and capital.”
The leaders also committed to put in place policies supporting innovation, a “science-based approach to green technology and development,” and to embrace digital technology.
ASEAN also pledged to improve policies to support micro, small and medium enterprises (MSMEs), which account for at least 50% of ASEAN economies. (READ: Is Nanay Tess' bagoong ready for ASEAN integration?)
To achieve the vision, the leaders vowed to strengthen the Jakarta-based ASEAN Secretariat, and to increase the efficiency of the work of ASEAN organs and bodies.
ASEAN leaders also plan to increase the organization's presence in national, regional and international levels.
The declaration of the ASEAN Community is part of the bloc's efforts to strengthen ASEAN.
It is deepening ties with its partners, entering into new strategic partnerships with the United States and New Zealand. Other ASEAN partners include Australia, China, Japan, Russia, South Korea, India, and the United Nations. – Rappler.com