11 Sep The ASEAN Economic Community (AEC) – The Strategic Importance
Even though the AEC is just three months away from being launched, there has been scepticism associated with ASEAN leaders’ ability to bring the AEC into fruition. Despite the benefits that the AEC may bring to ASEAN, domestic challenges still remain. In spite of the hurdles that the grouping may face, it is imperative that the association remain committed to regional integration. Benefits of the AEC may not be immediate and at times difficult to quantify – but it will provide long term returns to not only businesses but also ASEAN’s citizens.
The AEC is an ambitious project aiming at a single market and production base with a region fully integrated into the global economy. As ASEAN consolidates its economy though the AEC, the grouping’s ability to leverage on its growing economy will be enhanced, boosting its influence as a regional decision maker. This will translate to ASEAN having greater credibility and prowess to lead future negotiations including the Regional Comprehensive Economic Partnership.
As ASEAN strengthens its economy, the grouping has the potential to become a key economic hub that successfully engages with major and middle powers, reinforcing its leadership. This is crucial as China and Japan compete to be Asia’s next leader; the AEC underlines ASEAN’s role as the key decision maker in the region, preventing the grouping from getting side-lined in its own backyard.
However, despite benefits that the AEC may bring to participants, certain ASEAN Member Countries (AMS) have not fully supported it. In particular businesses have doubted the political will of ASEAN leaders as Non-Tariff Barriers to trade and investment coupled with inadequate trade facilitation has signalled that the grouping may not be fully committed to its own regional integration.
As regional economic integration often encroaches on the grouping’s sovereignty, ASEAN leaders may be hesitant to fully liberalise their economies. As such, ASEAN’s sub-regional economic zones, offer an intermediate process, whereby ASEAN states are able to liberalise regions within a country without entirely foregoing its sovereignty. This will result in a gradual process towards economic deregulation whilst reducing the risk of reversion towards protectionist policies. Full liberalisation in ASEAN will take time but sub-regional zones can play a greater role in driving ASEAN’s integration agenda forward as it will connect ASEAN’s peripheral economies to key economic clusters.
The AEC offers AMS a multitude of benefits including an opportunity to capitalise on its comparative advantage. Through tightly linked production networks and a consolidated market, the grouping’s economy will strengthen, making it worthwhile for major and middle partners to engage with the region. Despite the setbacks that ASEAN may face with the AEC’s implementation process, the grouping must endeavour to continue with regional integration beyond the establishment of the AEC as it will provide a solid foundation for long term development for the region.
Photo Credit: Gunawan Kartapranata / CC BY-SA 3.0