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From Ten to one: ASEAN Economic Community Building

Mr. Chea SocheatDirector

Department of Europe, Middle East, and AfricaCAMBODIA Ministry of Commerce

01 December 2015

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Outline of Presentation:

- Overview of ASEAN

- What is AEC?

- Four pillars of AEC

- AEC Progress

- Desired benefits of AEC

- ASEAN Challenges

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10 MEMBER STATES Built on 8th August 1967 against the backdrop of the Cold War era

• Brunei Darussalam (7 January 1984)

• Cambodia (30 April 1999)

• Indonesia (8 August 1967)

• Lao PDR (23 July 1997)

• Malaysia (8 August 1967)

• Myanmar (23 July 1997)

• Philippines (8 August 1967)

• Singapore (8 August 1967)

• Thailand (8 August 1967)

• Viet Nam (28 July 1995)

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• Diversity– Political systems: Democracies, Dictatorships, Monarchy– Economic development• HDI (2014): Rank 9 to 150• GDP (2014): $998 to $56,319

– Economic systems• Shift from state-centric to people-oriented• ASEAN with its diverse socio –political and economic

milieu, but ASEAN has a goal to materialize, and that is to create a single market for the entire region.

Overview of ASEAN

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Overview of ASEAN: Key Indicators of ASEAN (2014)

• Population 625 million (youth 60%)• GDP USD2,570 billion• GDP growth rate 4.7%• Per capita USD 3,837• Total trade USD2,511 billion (intra ASEAN USD 608 billion,

ratio to GDP 104.7%)• FDI USD136.2 billion• 3rd largest labor market in the world• If ASEAN were a single country, it would already be the 7th

largest economy in the world.• It is projected that ASEAN will be the 4th largest economy by

2050.

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Overview of ASEAN: Journey to Community Building

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Overview of ASEAN: Journey to Community Building

• First 10 years (1967-1976): establishment, solidarity, dialogue partners

• The next 20 years: (1977-1997): expansion - Brunei (1984); Vietnam (1995); Lao PDR and Myanmar (1997); and Cambodia (1999)

• The next 10 years: (1998-2007): vision, formalization• The next 7 years: (2008-2015): Community building• The next 10 years: AEC Blueprint 2025.

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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

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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

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Overview of ASEAN• On 7 October 2003, Bali Concord II states that an ASEAN

Community shall be established comprising three pillars and the timeline is 2020.

• At 12th ASEAN Summit in Cebu in 2007, ASEAN Leaders agreed on acceleration of ASEAN community to 2015.

• Signed by the leaders of the ASEAN at the 13th ASEAN Summit on 20 November 2007, AEC Blueprint lays the foundation for realizing the goal of ASEAN as an integrated economic region by 2015.

• The 19th ASEAN Economic Ministers Meeting held in Hanoi on 08 March 2013, reaffirmed ASEAN’s determination to establish the AEC by 31 December 2015.

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What is ASEAN Economic Community?

• ASEAN Economic Community shall be the end-goal of economic integration measures as outlined in the ASEAN Vision 2020.

• AEC will establish ASEAN as a single market and production base with the goal of making ASEAN more dynamic and competitive.

• Transform ASEAN into a stable, prosperous, and highly competitive region with equitable economic development and reduce poverty and socio-economic disparities.

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What is AEC?• In short, It is a new era of economic cooperation of ASEAN,

deeper economic integration.• AEC is work in progress.• Nevertheless, AEC is not yet a community which is politically

cohesive, economically integrated, socially responsible and a truly people-oriented, people-center and rules-based ASEAN.

• AEC 2025: 1- a highly integrated and cohesive economy, 2- a competitive, innovative, and dynamic ASEAN, 3- enhanced connectivity and sectoral cooperation, 4- a resilient, inclusive, people-oriented, and people-centred ASEAN, 5- a global ASEAN.

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What is AEC? AEC Blueprint• AEC Blueprint signed on 20 November 2007 at the 13th

ASEAN Summit in Singapore tells about what ASEAN wants to be in terms of economic integration and how to achieve each targets within the specified timeline.

• The blueprint serves as a coherent master plan guiding the establishment of the ASEAN Economic Community 2015.

• Through the blueprint, It defines that the AEC will establish ASEAN as a single market and production base with the goal of making ASEAN more dynamic and competitive.

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What is AEC?AEC Blueprint and Strategic Schedule

• List down what to do in each sector of trade in goods, service, and investment, and so on.

• It also dictates the timeline for each sector to be achieved.• For strategic schedule, it tells about concrete actions to be

carried out to achieve each sector and pillar with the specified timeframe.

• There are 4 implementation phases: 2008-2009, 2010-2011, 2012-2013, 2014-015.

• Implementation guided by AEC Blueprint, progress measured by AEC Scorecard

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Four Pillars of ASEAN Economic Community

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Four Pillars of ASEAN Economic Community

Free Trade Area

Customs Union

Common Market(range of nuance)

Economic & Monetary Union

AEC 2015 is more than FTA. It aims for a common market but not quite a single market. It is not a customs union and does not aim for economic and monetary union.

NOTE: Common Market range of nuance: from free movement of goods and freer flow of services, capital and labor on one end, and on the other end, a single market.

ASEAN

Four Pillars: AEC Scorecard Key Deliverables

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*as of Dec 2014

83.8%

Single

Mark

et & Producti

on Base

Competitive

Economic R

egion

Equita

ble Eco

nomic Deve

lopment

Integrati

on into th

e Global

Economy

0%10%20%30%40%50%60%70%80%90%

100%

OngoingImplemented AheadNot ImplementedFully Implemented

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Four Pillars of AEC: AEC Scorecard

• According to the Chairman’s statement at the 26th ASEAN Summit in April 2015, ASEAN has fully implemented 458 out of the total 506 high priority measures targeted for the period 2008-2015 as outlined in the AEC roadmap. This took the AEC’s implementation rate to 90.5 percent.

• New baseline of 506 measures.

• As of July 2015, 11 out of 54 high-priority measures have been implemented resulting in an increase implementation rate of 91.5%.

463 out of 506 measures

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Progress : Achievements under Pillar 1

• Tariffs– Import duties for 99.20% and 90.85% of committed tariff lines

have been eliminated by ASEAN-6 and CLMV, respectively.– On the average, ASEAN member states have 96% Tariff Lines

at 0% .• Trade Facilitation

– National Single Windows have gone live in the ASEAN-6; ASEAN-6 plus Viet Nam have tested preliminary exchange of trade data and information through the ASEAN Single Window (ASW)

– Protocol on the Legal Framework to Implement the ASW has been signed

– Pilot programs for Self-Certification System and ASEAN Customs Transit System have been launched

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WIP: under pillar 1

• Removal of equity restrictions on services and investments in ASEAN;

• Removal of other forms of impediments, such as limiting the number of services providers;

• Trade and investment facilitation through removing cumbersome procedures, rules and regulations;

• Facilitating the mobility of skilled people.

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WIP: under pillar 1

• ASEAN Framework Agreement on Services: ease restriction in at least 80 subsectors; gradually allow 70% foreign equity participation for all service sectors.

• The liberalization of air transport, financial and services incidental to non-services are undertaken by ASEAN sectoral bodies .

• Equity participation to be increased for foreign investor.

• PIS: 49% in 2008, 70% in 2010, 70% logistics in 2013. For Non PIS: 49% IN 2008, 51% in 2010, 70% in 2015

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WIP: under Pillar 1• Services Liberalization

– MRAs: architecture, accountancy, surveying, engineering, medical practitioners, dental practitioners, tourism professionals, and nurses

– MRAs provide for recognition of qualification, authorization, licensing and certification to enable service providers to work in different AMS in a regulated manner.

– ASEAN Economic Ministers and the ASEAN Education Ministers endorsed the ASEAN Qualification Reference Framework (AQRF) which will: • enable comparisons of qualifications of skilled labor • provide a standard for cross-referencing among the

different National Qualification Frameworks across ASEAN Member States

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WIP: under pillar 1

• ASEAN Movement of Natural Persons Agreement (MNP) outlines the immigration formalities for the temporary entry or temporary stay of natural persons:– limited to business visitors, intra-corporate

transferees, and contractual service suppliers,– does not cover permanent entry and unskilled labour. – ASEAN Comprehensive Investment Agreement:

investor state dispute settlement mechanism based on non-discrimination principles; investment protection.

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WIP: Achievements Under Pillar 2• Eight AMS have enacted competition laws; Cambodia and

Lao PDR to do so by December 2015• ASEAN Experts Group on Competition now working on

new targets and regional plan of action on competition post-2015

• ASEAN Working Group on Intellectual Property Cooperation assessing the implementation of the ASEAN IPR Action Plan 2011-2015

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WIP: Achievements Under Pillar 3

• Some evidence that the process of convergence has begun, as newer members begin to catch up

• Implementation of flagship projects under the Strategic Action Plan for ASEAN SME Development (2010-2015); successor plan being developed

• Implementation of ASEAN Framework for Equitable Economic Development (AFEED), adopted in 2011; second phase being considered

• Some positive results from subregional arrangements such as the Initiative for ASEAN Integration (IAI)

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WIP: Achievements Under Pillar 4

• The region’s openness has enabled a thriving ‘Factory ASEAN’

• 5 ASEAN countries rank among the world’s 50 most connected nations, based on the MGI Connectedness Index: Singapore (ranked fourth), Malaysia (18th), Thailand (36th), the Philippines (45th), and Viet Nam (48th)

• However, there has been a shift from unilateral liberalization to preferential liberalization (through free trade agreements)

• Two mega-regionals involving ASEAN Member States: Regional Comprehensive Economic Partnership (RCEP) and Trans-Pacific Partnership (TPP)

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AEC Benefits• Expansion in trade and investments, including intra-

ASEAN trade and investment.• Sustained FDI flows to the region and technology

transfer.• Job creation and sustained economic growth.• Economic development of newer members of

ASEAN.• ASEAN is well positioned in the center of global

supply chain activities.• Developed strong trade links with major regional

economies opening new business opportunities.

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The ASEAN Challenges

• Narrowing the development gap within the region• Ensuring that the different Regional Trade Agreement

will be consistent with the ASEAN Vision and will not have a “spaghetti bowl effect”.

• Lack of participation from the Civil Society Organization – CSO’s could also provide important insights, feedback to make ASEAN more people oriented

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• The need to strengthen the Political and Social Pillar of the ASEAN Community so we can create a cohesive community, since ASEAN is composed of countries with varying nature

• Making the ASEAN concept meaningful to all the citizens in the region, this must be understood and embraced by all.

• Weak institution• Diversity

The ASEAN Challenges

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