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

2015 WHO? Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam

WHAT? • Single market and production base with the free movement of goods, services, investment, skilled labor and the freer flow of capital WHY? • Increase competitiveness, narrow development gaps and improve resilience against external shocks

The Evolution of ASEAN

NAFTA/EEC

Tom Yum Kung crisis

2009

2008

2007

2003

China’s WTO accession 2001

1997 1998

1996

ASEAN 1967

1993

1977

Regional conflicts Spread of communism

ASEAN

Community 2015

PTA AFTA

ASEAN CHARTER

AFAS ASEAN VISION 2020 AIA BALI CONCORD II

AEC 2015 in full steam: • ATIGA • AFAS –70% Equity Participation

Cebu Declaration on ASEAN Charter

• ACIA

To achieve ASEAN Community by 2015 4

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

ASEAN Community

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

SOCIOCULTURAL 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

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

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Why is it happening?

A success story of ASEAN • Southeast Asia has been • If it were a nation, it one of the most would be the 7th successful economic largest economy in the groupings of recent world1 – with a times. As a bloc, it has combined GDP of US$ seen its real Gross 2.4 trillion2. In 2013, Domestic Product (GDP) inbound Foreign Direct increase ten-fold over Investment (FDI) for the the last five decades 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

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Classification of economic integration of Balassa 1. Free Trade Agreement: FTA, liberalization of tariffs and trade in services⇔AEC,EAEC,ACFTA,RCEP,TPP 2. Customs Union: a common tariff for the extraterritorial⇔AEC jumped over this criterion 3. 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

Field

Trade in goods

Trade in Services

Investment

Presence of natural persons

Progress and challenges of the AEC Blueprint progress (January 2015) Issues Tariff elimination: Non-tariff barriers: Progress in the ASEAN6 already eliminated the elimination is not seen. According to the 99.2%, CLMV countries eliminated ASEAN Secretariat, number of reported 93% by 2015, almost 100% non-tariff barriers of the AEC is about elimination will be done in 2018. 5,800. ASEAN Trade in Goods Agreement (ATIGA): Legal framework for implementing a regional free trade of goods. Entered into force in 2010. 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.

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 . Mutual Recognition Agreement of Qualification (MRA): agreement consists of eight fields (engineering, nursing, architecture, framework arrangement, accounting, medical practitioner, dentist, tourism).

ACIA aims to reduce the liberalization exception areas that are listed in the reserve table.

Liberalization of the fourth mode under the framework of the trade in services (presence of natural persons) is carried out only to skilled workers.

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ASEAN trade liberalization: Average Tariff Rates on Intra-ASEAN Imports

ASEAN Member

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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 OF UPCOMING CHANGE TO THE ECONOMIC, POLITICAL AND CONSUMER 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 Singaporebased 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, threequarters 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; statesanctioned 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 investmentfriendly 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.”