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.”