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2014 Trade Agreements: ASEAN Economic Community launch worries its members

The Association of South East Asian Nations has been reasonably successful in dismantling many barriers to trade between its members (Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Cambodia, Laos, Burma, and Vietnam). But it has long had greater ambitions, and in 2007 announced it intended turning into the ASEAN Economic Community by January 1, 2015.

In 2012, this deadline was moved to December 31, 2015. It remains official policy that ASEAN will officially declare the ASEAN Economic Community established then – but spokespeople increasingly insist that will be a process, rather than a major event like the abolition of border controls or the issuing of common passports.

Nonetheless, member states in the second half of 2014 expressed growing worries about the effect of integration processes on their economies, and local businesses doubted the intended pace of regional integration would be achieved:

  • The American Malaysia Chamber of Commerce found in late June asked respondents respondents in its 2015 ASEAN Outlook Survey when ASEAN would reach its AEC goals  (a single market and production base within a highly competitive, equitable economy, fully integrated into the global economy) 52% believed not until 2020 or later.
  • In Indonesia  Indonesia (which has half ASEAN’s population), Industry Minister MS Hidayat sounded a different warned his country must improve the quality of its products if it is to compete at home and in international markets amid heavy regional rivalry once the AEC is launched.

“A lot of foreign products will enter the market and customers will only buy high-quality ones,” he said adding that Indonesian exports had increased 10% over the previous five years while imports had grown 16%.  Indonesian textile manufacturers were even more worried,  claiming textile imports from China grew 30% in 2013.

  •  A joint report by the International Labour Organization (ILO) and the Asian Development Bank warned that ASEAN members had to act decisively in creating a cushion for the poor and unskilled as the benefits of the trading bloc would be uneven and that its success would be determined by how much the ordinary men and women in the region stood to benefit.
  • Other major issues include a lack of completed infrastructure projects, particularly in the Philippines, where an inability to get major engineering projects off the ground has cast a pall over the presidency of Begnino Aquino. In Cambodia, unfinished projects are still creating problems. This includes the all-weather Trans-Asia Highway, which remains incomplete despite repeated promises from its government that its few kilometres through the country needed to connect Singapore, Malaysia and Thailand with Vietnam and China would be finished “soon.”