The Association of Southeast Asian Nations (ASEAN) has proved to be one of the most successful regional organizations after the European Union (EU). Started off as an association of 5 member countries with a shared vision to promote cooperation and economic growth, it has now transformed into a major economic force. With real gross domestic product (GDP) growth of the 10 member countries estimated at 4.9% in 2017 as per the OECD Economic Outlook 2017 report, ASEAN is currently the 7th largest economy in the world.
On August 8, 2017, ASEAN will celebrate its 50th anniversary, marking a milestone in the history of the organization. As celebrations commence, we evaluate the progress and future endeavors by ASEAN in the section below.
ASEAN’s Commitment to Regional Integration and Trade
ASEAN strives to ensure regional integration and trade promotion among its member countries. Consequently the ASEAN Free Trade Area (AFTA), which is a trade bloc agreement among ASEAN’s member countries, was established. Main objectives of AFTA were to create a single market, attract FDI, and expand intra ASEAN trade. These were achieved by implementing the Common Effective Preferential Tariff (CEPT) scheme which aimed at reducing tariffs to 0-5% on all goods originating in the organizations member countries.
Today ASEAN has both intra and extra free trade agreements, being a key driver of the Southeast Asian economic community. To enhance the CEPT scheme and realize the ASEAN Economic Community (AEC) 2015, ASEAN Trade-in Goods Agreement (ATIGA) was introduced in 2009.
As of 2016, 99.20% tariff lines in ASEAN-6 member countries and 90.90% for Cambodia, Laos Myanmar, and Vietnam are at 0% import duty according to the ATIGA Tariff Schedule data. This reduction would open up the regional market for these countries, giving them access to economies with a robust population, thereby improving investment potential in the long run.
ASEAN Economic Community (AEC)
The ASEAN Community Council was formed in December 2008 that aimed at providing a framework to achieve ASEAN Community by 2015, as approved by the ASEAN Charter. One of the three pillars that formed the backbone of this council was the ASEAN Economic Community (AEC). It focuses on promoting regional economic integration between ASEAN’s member countries by operating as a single market and production base through the free flow of goods, services, investment, capital and labor. Additionally, AEC strives to be a highly competitive market, with equitable economic development that is integrated into the global economy. In this regard the AEC Blueprint 2015, a comprehensive plan to realize the vision of AEC 2015, was adopted and signed in 2007.
Ever since its establishment, AEC has made significant progress to achieve its objectives. Some of the key achievements of the AEC Blueprint from 2007 till 2015 have been highlighted below.
- Tariff liberalization through drastic reductions in tariff and non-tariff barriers
- Boost in intra-regional trade by 58% from 2007 to 2014
- Adoption of common centralized frameworks and mutual cooperation in competition policy, intellectual property and financial services, creating a business friendly and innovation supporting environment
- Reduction in trade costs through improvement in transport connectivity and infrastructure networks
- National Single Windows of 5 member countries have been implemented
- Signing of 7 Mutual Recognition Agreements (MRAs) to promote mobility of labor
- Signed new FTA agreements with Australia, New Zealand, China, India, Japan and Korea
- As per the ASEAN Secretariat monitoring report, AEC has achieved 465 of 506 measures laid out in the blueprint
ASEAN Economic Community 2025
After substantial implementation of AEC 2015, ASEAN is ready to step into its next phase of economic revolution by adopting the AEC Blueprint 2025. The new blueprint retains the vision of AEC 2015 while enhancing its potential. It prioritizes elimination of Non-Tariff Measures (NTMs) that impede trade. Another major focus is to expand the scope of National Single Window in all ASEAN member countries, navigating it toward an environment that fosters integration of trading and customs procedures. This will be implemented by a one-step information submission process, leading to reduced transaction costs and improved efficiency in procedures. In the case of free flow of investment the new blueprint focuses on the implementation of ASEAN Comprehensive Investment Agreement (ACIA), steering increased transparency, protection of investments, and liberalization of restrictions in sectors such as manufacturing, agriculture, fishery, forestry, and mining. The blueprint also highlights the aim of ASEAN toward ensuring financial stability, integration, and inclusion by encouraging intra-ASEAN trade and investment through integrated insurance and capital markets. With Regional Comprehensive Economic Partnership (RCEP) negotiations underway, trade between the Southeast Asian countries is likely to accelerate, making ASEAN a force to be reckoned with.
ASEAN has gained considerable attention due to its accelerated success in the last 5 decades. However, addressing the economic divide among member countries and undergoing various structural reforms are some of the challenges that ASEAN needs to overcome in the next 15 years in order to transform itself into the leading economies of the world. Regardless it continues to expand as a single united force, with expected growth rate of 7% annually in 2020, and is forecast to be the 4th largest economy in the world by 2030. Keeping with the vision for ASEAN 2030, the organization will move toward complete economic integration and borderless society. By 2030, ASEAN will be an organization that will be resilient, competitive, inclusive, and harmonious. This refers to preparing for an economic crisis by handling volatility, narrowing gaps to achieve equitable economic development, increasing productivity by introducing innovation oriented policies, and fostering sustainable growth and development through peaceful relationships.