Asean economic bloc launched
True common market still a long way off–analysts
JAKARTA—Southeast Asian nations officially launched an EU-inspired economic bloc on Thursday aimed at boosting the region’s trading clout and attracting more investment, but analysts said a true single market was still a long way off.
The 10-member Association of Southeast Asian Nations (Asean) hailed the project as a “milestone” in combining the economic force of a resourcerich and growing market of 622 million people.
The vision for the Asean Economic Community (AEC) is a single market with a free flow of goods, capital and skilled labor, which should help the region compete with the likes of China for foreign investment.
“The realization of the Asean Community has set a milestone in the integration process and will ensure lasting peace, security and resilience in an outward-looking region, with economies that are vibrant,
competitive and highly integrated, and an inclusive community that is embedded with a strong sense of togetherness and common identity,” Asean leaders said in a declaration issued on Nov. 15 at their 27th summit in Kuala Lumpur.
Asean countries had a combined gross domestic product of $2.6 trillion in 2014.
The new bloc “will contribute significantly to the region’s growth and create developmental opportunities for all,” said Vivian Balakrishnan, the foreign minister of Asean member Singapore.
“It will give our people, especially the young, many more opportunities to succeed,” Balakrishnan said.
He added that local businesses, especially small and medium enterprises, also stand to gain from expanding into neighboring markets,” he said in a post on his Facebook wall.
But experts say such an idea is difficult, if not impossible, to achieve in a region marked by extremes in development levels, democratization and institutional capability.
The official launch of the AEC has no practical effect and diplomats have said Asean—regularly criticized for a lack of concrete achievements—was keen not to miss its own deadline of 2015, set several years ago.
Not a game changer
Research group Capital Economics said in a note the establishment of the AEC was “no game changer” and it was likely to fall short in tackling major challenges, such as reducing nontariff barriers and improving infrastructure.
“Asean, with its tradition of non-interference into the affairs of member-countries, an absence of penalties for noncompliance and a lack of a powerful central bureaucracy, is ill-equipped to tackle these obstacles,” it said.
Incremental progress
John Pang, a senior fellow at Singapore’s S. Rajaratnam School of International Studies, said there would be only “slow and incremental progress” in integrating the economies of Southeast Asia.
“The AEC will not be raising the curtain on any radical change,” he wrote in a commentary.
Founded in 1967, Asean includes wealthy Singapore, one of the world’s most developed countries, oil-rich Brunei, developing states such as Malaysia, Indonesia, Thailand, the Philippines and Vietnam, and poorer nations like Cambodia, Laos and Burma (Myanmar).
Its members range from freewheeling to controlled democracies, communist-ruled states and an absolute Islamic monarchy.
Although Asean’s plans were inspired by the developed single market of the 28-member European Union, officials insist they want to pursue integration in a way suitable to the region’s circumstances and have ruled out a common currency.
Changing mindsets
Diplomats have conceded the single market vision is many years away, but insist the project will help change mindsets and provide momentum.
Asean leaders signed a declaration to establish the AEC at the group’s annual summit in November but there was no official ceremony on Thursday to mark the new bloc’s establishment.
Southeast Asia has already made progress on lower-hanging fruit, like cutting tariffs and removing other hurdles such as clashing customs systems but significant nontariff and other barriers remain.
Even as the Asean Community comes into force, Balakrishnan noted the project was still a work-in-progress.
About 20 percent of action lines in the existing AEC blueprint, for instance, remains to be implemented by many member-countries.
“Asean’s community-building is a journey, not a destination. Let us continue to work together to deepen the Asean Community,” he said.