1. ASEAN Economic Community
– A Work in Progress
Sanchita Basu Das
Fellow and Lead Researcher (Economic
Affairs), ASEAN Studies Centre, ISEAS, Singapore
April 18, 2013
2. 3
ASEAN Economic Community:
Vision and Blueprint
Single Market and Production Base
Free flow of goods, services, investment & skilled labor; Freer flow of
capital. Focus on PIS
~Highly Competitive Economic Region
Transport facilitation, infrastructure, ICT and connectivity;
IPR, taxation, competition policy
Region of Equitable Economic Development
Narrowing Development Gap; Initiative for ASEAN Integration;
SME development
ASEAN Fully Integrated into the Global Economy
Coherent approach to external economic relations
2
3. 3
ASEAN Integration Matters:
Potential Impact of AEC Measures on AMSs‟ GDP
(Cumulative percentage increase over baseline 2011-2015 in 2015)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
RoSEAsiaCambodia Indonesia LaosMalaysiaPhilippinesSingaporeThailand Viet Nam
A5: Tariff AS:Tariff+ServicesAT: Tariff+Services+ Time
Notes: Brunei is proxied by "Rest of South East Asia"in the simulation. No estimates for Myanmar because
of serious data problems.
Source: Computed by Itakura for MTR project.
4. 3
Official AEC Scorecard
Expected to track the implementation of measures and the achievement of
milestones committed in the AEC Strategic Schedule.
- compliance tool and not a mechanism for impact assessment.
ASEAN Secretariat came out with two official scorecards
2008-09 : 87.6% of 105 total measures
2010-11: 56.4% of 172 measures.
ASEAN
Economic
Community
Pillar I:Single
Market
Production
Base
Pillar II:
Competitive
Economic
Region
Pillar III:
Equitable
Economic
Development
Pillar IV:
Integration into
t h e G l o b a l
Economy
68.2 66.5 69.2 66.7 85.7
5. How is the progress for the member countries and the
businesses?
What are the challenges?
6. Progress in AEC (1)
Free Flow of Goods
ASEAN-6 countries applied zero tariffs on 99.6% of goods.
The CLMV countries are trading 98.86% of goods at 0-5 percent of tariff
rate.
8.00
7.00
6.00
ASEAN-6
CLMV
ASEAN-10
percent(%)
5.00
4.00
3.00
2.00
1.00
-
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
7. Progress in AEC (2)
ASEAN Trade in Goods Agreement (ATIGA) came into effect
in May 2010
Operationalise the customs chapter – 30 April 2012.
Malaysia
It has ratified ATIGA on 17 June 2009.
The tariff levels on imports looks as follows:
12,169 tariff lines (98.69%) have zero import duties
56 tariff lines (0.45%) of selected tropical fruits and tobacco were
reduced to 5 per cent
10 tariff lines (0.08%) on rice were reduced from 40 per cent to 20
percent
96 tariff lines (0.78%) on alcoholic beverages and weapons are excluded
from tariff reduction and elimination.
8. Progress in AEC (3)
Trade Facilitation
~ Progressing on ASEAN Single Window: network of National
Single Window
Single point of decision for the release of cargo
Indonesia, the Philippines, Malaysia, Singapore, and Thailand have
implemented with full roll out plan for significant ports and airports by
2015
Brunei and Vietnam are in advanced stages of development
Malaysia
Implemented its NSW on January 1, 2009.
Supported by 5 core services - e-Declare, e-Permit, e-Payment, e-
Preferential Certificate of Origin (e-PCO) and e-Manifest
Has been in operation since November 19, 2009.
The approval of PCO can now be done within one working day.
9. Progress in AEC (4)
There exist several Non-Tariff Barriers (NTBs)
Custom surcharges, internal taxes, administrative price fixing, single
channel of imports, requirement of product characteristics, labeling
Most NTMs Least NTMs
Country Myanmar, Indonesia, and
the Philippines
and
CambodiaThailand
Industry Food and chemical industry MetalandLight
manufacturing
Source:Ando and Obashi, 2010
ASEAN needs to reduce transportation and logistics costs
between and within member countries.
Logistics Performance Index, 2012: Singapore ranks 1st and
Myanmar 129th out of 155 countries surveyed
Malaysia ranks 29th .
11. Progress in AEC (5)
Free Flow of Services
Completed Eighth packages of commitments to liberalise services trade under
ASEAN Framework Agreement on Services.
BUT services sector liberalisation is far from full integration
Progress in Tourism: 81 million of international arrivals in 2011 with 7.4%
growth; 47% is intra- ASEAN visitors
Mutual Recognition Arrangements
ASEAN has concluded seven MRAs:
engineering, architecture, nursing, accountancy, surveying
services, medical and dental profession
BUT MRAs should not be equated to market access
MRAs do not contain any liberalisation commitments but only frameworks or
procedures to facilitate the flow.
12. Progress in AEC (6)
Investment Liberalization and Facilitation
~ASEAN Comprehensive Investment Agreement is effective since
April 2012
incorporates provisions on liberalisation, protection, facilitation and
promotion
expected to benefit ASEAN-owned investors and companies and foreign-
owned ASEAN-based investors.
Malaysia ratified the agreement on 16 August 2009
BUT ASEAN continues to struggle in raising inward FDI
Regional investment agreements have to be supplemented with effective
and well carved-out domestic investment policies.
14. Progress in AEC (8)
ASEAN‟s competitiveness : Two aspects
Effective standardized competition policy in the region
Singapore, Indonesia, Thailand and Vietnam have established independent
competition authorities.
Malaysia, Philippines and Brunei are lagging on this matter
Infrastructure is a key component
Adopted the Master Plan of ASEAN Connectivity in 2010
Physical, Institutional and People-to-People Connectivity
ASEAN needs US$60 billion a year for infrastructure investment
for the 2010-20 period.
ASEAN Infrastructure Fund in collaboration with ADB – US$485.2
million and Private-Public-Partnership
15. Progress in AEC (9)
Equitable Economic Development
Narrow the Development Gap
Socio-economic Indicators Range Country Representing
Per Capita GDP (PPP US$, 2012) 1,401 – 60,883 Myanmar - Singapore
Population (million, 2012) 0.43 – 245 Brunei - Indonesia
% Share of Agriculture in GDP*, 2010 0 - 36 Singapore - Cambodia
% Share of Industry in GDP*, 2010 23- 67 Cambodia - Brunei
% Share of Services in GDP*, 2010 32 - 72 Brunei - Singapore
Imports /GDP (%), 2010 14 - 153 Myanmar – Singapore
Exports /GDP (%), 2010 20 - 171 Myanmar – Singapore
Human Development Index (Rank) (2011) 26 - 149 Singapore - Myanmar
Poverty (headcount ratio at $1.25 (PPP) a
day, %) **
0 – 33.9 Malaysia – Lao PDR
*Myanmar is excluded as data was not consistently available, ** data is not available for Singapore, Brunei and Myanmar
Initiative of ASEAN Integration (IAI)
Second IAI Work Plan ( 2009- 2015)
BUT IAI program areas does not fully fit the CLMV‟s key priorities
16. Progress in AEC (10)
ASEAN+1 FTAs/ RCEP
ASEAN+ China and ASEAN + Korea
Goods, Services and investment agreements signed
ASEAN+ Japan and ASEAN+ India
Goods completed; Negotiation concluded for services and investment
ASEAN + Australia + New Zealand
Comprehensive agreement implemented – Jan 1, 2010
ASEAN plays a role of “ bridge builder” among countries in the greater
scope of Asia
Total
Population, 2011
TotalGDP, 2011 Total Trade to
theWorld,2011
Persons in million US$ billion PPP$ billion US$ billion
ASEAN-Australia-New
Zealand FTA
635 3,822 4,390 2,983
ASEAN-China FTA 1,955 9,474 14,651 6,036
ASEAN-JapanCEP 736 8,043 7,735 4,072
ASEAN-RoK FTA 658 3,292 4,905 3,474
ASEAN-IndiaFTA 1,815 4,003 7,772 3,162
Author’s compilation/ estimates
17. Regional Comprehensive Economic
Partnership (RCEP)
Characteristics RCEP is led by ASEAN
Born out of ASEAN+1 FTAs with China, India, Japan, South Korea, Australia and New
Zealand
Based on open accession clause, where membership can be expanded later as they sign FTA
with ASEAN.
Negotiation expected to start in May 2013 and be concluded by 2015.
Aims to form an integrated regional economic agreement that are deeper than the existing
FTA co-operations and support equitable economic development.
Areas include: liberalise trade in goods, services and investment, technical cooperation,
intellectual property, dispute settlement (WTO+ issues)
Economic Coverage, 2011*
GDP (% global share) – 28.4
Merchandise trade (% global share) – 27.7
Population (% global share) – 47.9
Concerns Building on “ASEAN way” and differential treatment depending on level of members‟
development could contribute to slow progress.
Conflict due to tension between China and the US.
ASEAN+1 FTAs have different features and are at different stages of implementation.
Author’s compilation/ estimates
18. East Asia Integration Matters:
Economic Impacts of Development of ASEAN++ FTA (Regional
Comprehensive Economic Partnership)
2.3 9.5
5.8
3.0 5.0 3.3 2.9 13.4
8.3
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
ASEAN
Coexistence of Five ASEAN+1 FTAs
Coexistence of Five ASEAN+1 FTAs and CJK FTAs
ASEAN+6 FTA
NOTE: Cumulative Percentage Point, deviation from baseline, 2011 to 2015;
NA for Myanmar due to data availability
18
Source: Dynamic GTAP Simulation by Itakura (2012)
19. Concluding Remarks
The pace of implementation is slow
~ Due to delay in the ratification of agreements; alignment of domestic
laws to regional initiatives
There is lack of awareness on ASEAN matters.
Non-tariff barriers replaced tariff rates as a form of protection
Scorecard defies the understanding of ASEAN public and private sector
BUT efforts of AEC will not be derailed easily.
Private sector is getting increasingly aware
ASEAN-EU Business Summit, Business Dialogue, ASEAN-China
expo, ASEAN-China Business & Investment Summit, ASEAN-US
Business Summit, India-ASEAN Business Fair
TIME is a big constraint
On 31 December 2015, if not all, at least the “core” elements of the AEC is
likely to be in place
tariff reduction, trade facilitation (ASW), liberalization of selected
services (tourism), progress in MPAC, ASEAN+1 FTAs/ RCEP
19
21. ASEAN‟s Engagement with Major
Partners
Bilateral Total
Trade, US$ billion
ASEAN FDI Inflow,
US$ million
Tourist arrivals in
ASEAN, („000)
1998 2010 2003 2010 2011
Intra- 121.0 520 2,712 12,279 37,733 (46.5)
ASEAN (21.0) (25.4) (11.1) (16.1)
Extra- 455 1,525 21800 63929 43496 (53.5)
ASEAN (79.0) (74.6) (88.9) (83.9)
Australia 12.8 55.4 (2.7) 155 1765 (2.3) 3926 (4.8)
(2.2) (0.63)
Canada 4.1 (0.7) 9.9 (0.5) 82 (0.3) 1641 (2.2) 594 (0.7)
China 20.4 232.0 201 (0.8) 2861 (3.8) 7315 (9.0)
(3.5) (11.3)
EU-27 83.6 208.5 6866 17066 7326 (9.0)*
(14.5) (10.2) (28.0) (22.4)
India 6.9 (1.2) 55.4 (2.7) 104 (0.4) 2584 (3.4) 2711 (3.3)
Japan 81.4 206.6 3903 8386 (11.0) 3664 (4.5)
(14.1) (10.1) (15.9)
Rep.Of 17.1 98.6 (4.8) 552 (2.3) 3770 (4.9) 3862 (4.8)
Korea (3.0)
New 1.6 (0.3) 7.3 (0.4) 83 (0.3) 93 (0.1) 390 (0.5)
Zealand
Russia 1.0 (0.2) 9.1 (0.4) -- 61 (0.1) --
USA 115.5 186.6 1363 8578 (11.3) 2838 (3.5)
(20.1) (9.1) (5.6)
Total 576.1 2,045 24512 76208 81,229
ASEAN
Intra-ASEAN trade comprised of one-
fourth of ASEAN‟s total trade.
China, EU-27, Japan and USA continue
to be four major trade partners of
ASEAN. However, the combined share
of EU-27, Japan and USA to ASEAN‟s
total trade has dwindled from 48.7% in
1998 to 29.4% in 2010.
EU-27, Intra-ASEAN, USA and Japan
are the top providers of ASEAN FDI
inflows for 2010.
For tourist arrivals, intra-ASEAN is the
biggest source, followed by EU and
China
Source: ASEAN Statistical Yearbook
(various issues)
Note: * is for EU-25; figures in bracket
give the share in total
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