ASEAN Economic Integration

Economic Cooperation

Economic Integration

is a preferential treatment that aims to reduce tariffs and commercial barriers among its member countries

Removal of some measures that discriminates against foreign suppliers of goods and services. Economies of its member nation is completely integrated. Which means establishment of a single market

2015WHAT?

• Single market and production base with the free movement of goods, services, investment, skilled labor and the freer flow of capital

WHO?Brunei, Cambodia, Indonesia,

Laos, Malaysia, Myanmar,

Philippines, Singapore, Thailand

and Vietnam

WHY?

• Increase competitiveness, narrow development gaps and improve resilience against external shocks

4

ASEAN

1967

PTA

19

77

AFTA

19

93

AFAS

19

96

ASEAN VISION 2020

19

97

ASEAN

Community

201520

03

BALI CONCORD II2

00

7

Cebu Declaration on ASEAN Charter

To achieve ASEAN Community by 2015 2

00

9

AEC 2015 in full steam:

• ATIGA

• AFAS –70% Equity Participation

• ACIA

The Evolution of ASEAN

20

08

ASEAN CHARTER

AIA

19

98

Regional conflictsSpread of communism

Tom Yum Kung crisis

20

01

China’s WTO accession

NAFTA/EEC

ASEAN regionalism

• 1976 – Bali Concord I – formally adopted political co-operation as part of ASEAN regular activities

• 1992 – ASEAN Free Trade Agreement

• 1997/98 – economic crisis – acceleration of economic integration initiatives – ASEAN Vision 2020

• 2003 - Bali Concord II – the launch of ASEAN Community by 2020

• 2005 – the launch of ASEAN Charter process

• 2006/07 – the acceleration of ASEAN Community to 2015

• 2007 – ASEAN Charter drafting and the ASEAN Economic Community Blueprint

• 2008 – ASEAN Charter ratification

• 2009 ASEAN Political Community and Socio-Cultural Community Blueprints

ASEAN Community• ASEAN Political-Security Community – peaceful processes in the

settlement of intra-regional differences and it has the following components: political development, shaping and sharing of norms, conflict prevention, conflict resolution, post-conflict peace building, and implementing mechanisms

• ASEAN Economic Community - creating a stable, prosperous and highly competitive ASEAN economic region in which there is a free flow of goods, services, investment and a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities in year 2020;

• ASEAN Socio-Cultural Community - envisages a community of caring societies and founded on a common regional identity, with cooperation focused on social development aimed at raising the standard of living of disadvantaged groups and the rural population, and shall seek the active involvement of all sectors of society, in particular women, youth, and local communities

POLITICAL –SECURITY Blueprint

•Rules based,

shared norms and

values

• Cohesive,

peaceful, stable,

resilient with shared

responsibility

•Dynamic and

Outward looking

ECONOMIC

Blueprint•Single Market and

production base

•Competitive

economic region

•Equitable Economic

development

•Integration into

global economy

SOCIO-

CULTURAL

Blueprint•Human Development

•Social Welfare and

Protection

•Social justice and

rights

•Environmental

Sustainability

•ASEAN Identity

ASEAN Charter - One Vision, One Identity, One Caring and Sharing

Community

ASEAN Community

Three Blueprints• Three “integral” pillars of the

ASEAN Vision 2015: AEC, ASC, ASCC (work in tandem)

• Clear targets and timelines for implementation

• Pre-agreed flexibilities to accommodate the interests of all ASEAN Member

• Binding• General Content –

Policy/Goals; technical, Action plan, Review mechanism

Critics:• No participation, even

secretive process• All about governments

(does not address corruption and repression)

• Whose community is ASEAN?

ASEAN Economic Blueprints

• a single market and production base, • a highly competitive economic region, • a region of equitable economic development, and • a region fully integrated into the global economy• Priority Integration Sectors: agro-based products; air

travel; automotives; e-ASEAN; electronics; fisheries; healthcare; rubber-based products; textiles and apparels; tourism; wood-based products; and logistics (additional sector as may be identified by the Ministers after the agreement)

Economic Blueprint: critics

• Liberalization

• Only protects end-users (consumers)

• What about sustainability? Environment and livelihood

• Disregards existing bilateral economic agreements

• No detail on how the region acts as a whole

Socio-Cultural Blueprints

• promotion of human development and security

• narrowing the development gap

• ensuring environmental sustainability

• building an ASEAN identity

• Wide coverage of issues: Poverty, Health, Disaster Management, Education, Food security, Social impact of integration, Environmental sustainability, Migrant labor, Women and children’s rights, Science and Technology

Socio-cultural: Critics

• Social justice vs. social protection; systemic vs. symptomatic

• Systemic solutions to address social injustice: problems of access, conflicting interests with commercial/industrial interests

• Participation should not be limited to this sphere.

• Diversity and identity of peoples within member countries

Political Security Blueprints

• Framework is based on political and security cooperation where countries live at peace with one another, and the ASEAN, with the world at large.

• Principles are non-interference, consensus, national and regional resilience, and respect for sovereignty.

• Elements of the Blueprint: political development, shaping and sharing of norms on counter terrorism and nuclear free zones, inter-state conflict prevention and post-conflict peace-building; combating terrorism

Political Security: Critics• State-centric in perspective (national security)

– Existing internal conflicts should be addressed: over resources, over self-determination/identity

– Governments (policies) are sources of conflict• Does not provide for political participation and representation of civil

society• No reference to international human rights standards>adherence to

international standards and principles• No dispute mechanism on internal conflicts, intra-state conflicts,

separatism.• No recognition of internally displaced people (IDPs)• Cultural diversity is not addressed >recognition of diversities in ethnicity

and religion, and of marginalization • Strengthen and monitor existing regional instruments on migrants,

women, children, and CSO and public participation in processes• Promote regional civilian peacekeeping forces

VISION OF AEC

29

Why is it happening?

A success story of ASEAN

• Southeast Asia has been one of the most successful economic groupings of recent times. As a bloc, it has seen its real Gross Domestic Product (GDP) increase ten-fold over the last five decades

• If it were a nation, it would be the 7th largest economy in the world1 – with a combined GDP of US$ 2.4 trillion2. In 2013, inbound Foreign Direct Investment (FDI) for the ASEAN-5 was greater than that flowing into China3.

AEC• The AEC aims to transform the economies of ASEAN’s 10

member states - Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – into a single market and production base.

• the AEC translates diversity (often hailed as ASEAN’s weakness) as a strength. With integration, ASEAN’s variety becomes attractive to global investors, combining as it does the capital and skills of its more economically mature member countries (such as Singapore) with the competitive costs and abundant labour and resources of its developing ones (such as Myanmar). Integration should be interpreted to mean connectedness – both within and outside the region.

• the AEC translates diversity (often hailed as ASEAN’s weakness) as a strength. With integration, ASEAN’s variety becomes attractive to global investors, combining as it does the capital and skills of its more economically mature member countries (such as Singapore) with the competitive costs and abundant labour and resources of its developing ones (such as Myanmar). Integration should be interpreted to mean connectedness – both within and outside the region.

The potential gains from implementing the AEC are enormous.

• Move Southeast Asia on to a higher and more sustainable growth path.

• Reduce vulnerability and volatility.

• Leveraging diversity through integration and reduce development gaps that exist both within and between member states

AEC Growth

• The world’s seventh largest market, home to 10% of the world’s population, Asean is expected to grow 5% each year by 2018, surpassing the US, EU and Japan. But the scope of each individual country in the bloc varies wildly, prompting scepticism that a single market can be successfully created by the end of the year.

• Asean is not likely to suffer the same debt concerns as the EU , primarily because the bloc has never planned to adopt a single currency or parliament.

Cost or Benefit?

• The business community wants Asean to be integrated as one entity due to there are border issues, customs, immigration and different regulations.”

Basic Concept

51

Classification of economic integration of Balassa

1. Free Trade Agreement: FTA, liberalization of tariffs and trade in services⇔AEC,EAEC,ACFTA,RCEP,TPP2. Customs Union: a common tariff for the extraterritorial⇔AEC jumped over this criterion3. Common market: liberalization of the movement of production factors such as service, human and capital⇔AEC is not perfect in the movement of services, people and capital, is aimed at comprehensive FTA(EAEC?,RCEP?) 4. Economic union: to adjust the economic policy( including common currency)5. Complete economic integration: to establish a supranational institutions, a unified economic policy 52

53

Field progress (January 2015) Issues

Trade in goods

Tariff elimination:

ASEAN6 already eliminated the

99.2%, CLMV countries eliminated

93% by 2015, almost 100%

elimination will be done in 2018.

ASEAN Trade in Goods Agreement

(ATIGA): Legal framework for

implementing a regional free trade of

goods. Entered into force in 2010.

Non-tariff barriers: Progress in the

elimination is not seen. According to the

ASEAN Secretariat, number of reported

non-tariff barriers of the AEC is about

5,800.

Trade in Services

ASEAN Framework Agreement on

Services(AFAS): 10 rounds of the

package negotiations aimed at

liberalization of the 128 field has

been carried out.

In the first mode (cross border supply)

and the second mode (consumption

abroad), liberalization is progressing. For

the third mode (installed base), although

more than 70% of the foreign equity

participation to ASEAN companies has

become a goal , liberalization is limited.

Investment

ASEAN Comprehensive Investment

Agreement (ACIA): ACIA entered

into force in 2012 , promises to

liberalize the national treatment in

the field of manufacturing and other

industries, and the nationality

requirement of senior management .

ACIA aims to reduce the liberalization

exception areas that are listed in the

reserve table.

Presence of natural

persons

Mutual Recognition Agreement of

Qualification (MRA): agreement

consists of eight fields (engineering,

nursing, architecture, framework

arrangement, accounting, medical

practitioner, dentist, tourism).

Liberalization of the fourth mode under

the framework of the trade in services

(presence of natural persons) is carried

out only to skilled workers.

Progress and challenges of the AEC Blueprint

ASEAN trade liberalization: Average Tariff Rates on Intra-ASEAN Imports

ASEAN Member

• In this January 2013 photo, preparatory students sit for a university admissions test at the University of Tokyo. Singapore has ranked at the top of the 300 best universities in Asia, according to a new poll.

ASEAN BY THE NUMBERS

Soft drink market share of two biggest brand that has been competing in this market since forever such Coke and Pepsi.

Education

10 best universities in ASEAN 2013.

Macroeconomic Level

Cost of Living

ASEAN ‘s Office rental rate

THE IMPORTANCE OFUPCOMING CHANGETO THE ECONOMIC,

POLITICAL ANDCONSUMER CLIMATE

Asean's Infrastructure Crisis

• A shortage of infrastructure investment

Thailand opportunity to become a regional economic, trade, and investment hub.

• Geographic location

• Development level

• Size of the domestic market and land area

• Economic relations with ASEAN

• Association with the global economy

Thailand’s weaknesses

• Lack of understanding and awareness

• Unfamiliar with neighbours

• Some inconvenience in business

• Higher business costs

• Political and administrative problems

• Whatever happens, "2015 is a very tight timetable," said Sanjay Mathur, a Singapore-based analyst at Royal Bank of Scotland. "Malaysia and Thailand are somewhat close to each other in terms of development, but the others are behind, so the whole fiscal monetary mix is significantly different and will be difficult."

Opportunities and fears as Asean prepares for single market

• some communities and even whole countries may lose out because of the risk of human rights being sacrificed to the imperatives of big business.

• In the poorest member state, Burma, three-quarters of the population still lack electricity after half a century of dictatorship; in the richest, Singapore, citizens are among the wealthiest in the world.

Number of Problems in ASEAN

• among them grave human rights violations; corruption and poor governance; state-sanctioned land grabs; authoritarian and military regimes; police brutality, torture and enforced disappearances; modern-day slavery and lack of corporate responsibility and accountability.

• companies are profiting from investment-friendly protection measures at the expense of citizens – with certain member states allowing corporations to sue governments over local laws that may hinder their business.

• conflict between governments, companies and grassroots communities all over the region.”