ASEAN Economic Community– A Work in ProgressSanchita Basu DasFellow and Lead Researcher (EconomicAffairs), ASEAN Studies Centre, ISEAS, SingaporeApril 18, 2013
3ASEAN Economic Community:Vision and BlueprintSingle Market and Production BaseFree flow of goods, services, investment & skilled labor; Freer flow ofcapital. Focus on PIS~Highly Competitive Economic RegionTransport facilitation, infrastructure, ICT and connectivity;IPR, taxation, competition policyRegion of Equitable Economic DevelopmentNarrowing Development Gap; Initiative for ASEAN Integration;SME developmentASEAN Fully Integrated into the Global EconomyCoherent approach to external economic relations2
3ASEAN Integration Matters:Potential Impact of AEC Measures on AMSs‟ GDP(Cumulative percentage increase over baseline 2011-2015 in 2015)5.04.54.03.53.02.52.01.51.00.50.0RoSEAsiaCambodia Indonesia LaosMalaysiaPhilippinesSingaporeThailand Viet NamA5: Tariff AS:Tariff+ServicesAT: Tariff+Services+ TimeNotes: Brunei is proxied by "Rest of South East Asia"in the simulation. No estimates for Myanmar becauseof serious data problems.Source: Computed by Itakura for MTR project.
3Official AEC ScorecardExpected to track the implementation of measures and the achievement ofmilestones committed in the AEC Strategic Schedule.- compliance tool and not a mechanism for impact assessment.ASEAN Secretariat came out with two official scorecards2008-09 : 87.6% of 105 total measures2010-11: 56.4% of 172 measures.ASEANEconomicCommunityPillar I:SingleMarketProductionBasePillar II:CompetitiveEconomicRegionPillar III:EquitableEconomicDevelopmentPillar IV:Integration intot h e G l o b a lEconomy68.2 66.5 69.2 66.7 85.7
How is the progress for the member countries and thebusinesses?What are the challenges?
Progress in AEC (1)Free Flow of GoodsASEAN-6 countries applied zero tariffs on 99.6% of goods.The CLMV countries are trading 98.86% of goods at 0-5 percent of tariffrate.8.007.006.00ASEAN-6CLMVASEAN-10percent(%)5.004.003.002.001.00-19961997199819992000200120022003200420052006200720082009201020112012
Progress in AEC (2)ASEAN Trade in Goods Agreement (ATIGA) came into effectin May 2010Operationalise the customs chapter – 30 April 2012.MalaysiaIt has ratified ATIGA on 17 June 2009.The tariff levels on imports looks as follows:12,169 tariff lines (98.69%) have zero import duties56 tariff lines (0.45%) of selected tropical fruits and tobacco werereduced to 5 per cent10 tariff lines (0.08%) on rice were reduced from 40 per cent to 20percent96 tariff lines (0.78%) on alcoholic beverages and weapons are excludedfrom tariff reduction and elimination.
Progress in AEC (3)Trade Facilitation~ Progressing on ASEAN Single Window: network of NationalSingle WindowSingle point of decision for the release of cargoIndonesia, the Philippines, Malaysia, Singapore, and Thailand haveimplemented with full roll out plan for significant ports and airports by2015Brunei and Vietnam are in advanced stages of developmentMalaysiaImplemented 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-ManifestHas been in operation since November 19, 2009.The approval of PCO can now be done within one working day.
Progress in AEC (4)There exist several Non-Tariff Barriers (NTBs)Custom surcharges, internal taxes, administrative price fixing, singlechannel of imports, requirement of product characteristics, labelingMost NTMs Least NTMsCountry Myanmar, Indonesia, andthe PhilippinesandCambodiaThailandIndustry Food and chemical industry MetalandLightmanufacturingSource:Ando and Obashi, 2010ASEAN needs to reduce transportation and logistics costsbetween and within member countries.Logistics Performance Index, 2012: Singapore ranks 1st andMyanmar 129th out of 155 countries surveyedMalaysia ranks 29th .
Progress in AEC (5)Free Flow of ServicesCompleted Eighth packages of commitments to liberalise services trade underASEAN Framework Agreement on Services.BUT services sector liberalisation is far from full integrationProgress in Tourism: 81 million of international arrivals in 2011 with 7.4%growth; 47% is intra- ASEAN visitorsMutual Recognition ArrangementsASEAN has concluded seven MRAs:engineering, architecture, nursing, accountancy, surveyingservices, medical and dental professionBUT MRAs should not be equated to market accessMRAs do not contain any liberalisation commitments but only frameworks orprocedures to facilitate the flow.
Progress in AEC (6)Investment Liberalization and Facilitation~ASEAN Comprehensive Investment Agreement is effective sinceApril 2012incorporates provisions on liberalisation, protection, facilitation andpromotionexpected to benefit ASEAN-owned investors and companies and foreign-owned ASEAN-based investors.Malaysia ratified the agreement on 16 August 2009BUT ASEAN continues to struggle in raising inward FDIRegional investment agreements have to be supplemented with effectiveand well carved-out domestic investment policies.
Progress in AEC (8)ASEAN‟s competitiveness : Two aspectsEffective standardized competition policy in the regionSingapore, Indonesia, Thailand and Vietnam have established independentcompetition authorities.Malaysia, Philippines and Brunei are lagging on this matterInfrastructure is a key componentAdopted the Master Plan of ASEAN Connectivity in 2010Physical, Institutional and People-to-People ConnectivityASEAN needs US$60 billion a year for infrastructure investmentfor the 2010-20 period.ASEAN Infrastructure Fund in collaboration with ADB – US$485.2million and Private-Public-Partnership
Progress in AEC (9)Equitable Economic DevelopmentNarrow the Development GapSocio-economic Indicators Range Country RepresentingPer Capita GDP (PPP US$, 2012) 1,401 – 60,883 Myanmar - SingaporePopulation (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 - SingaporeImports /GDP (%), 2010 14 - 153 Myanmar – SingaporeExports /GDP (%), 2010 20 - 171 Myanmar – SingaporeHuman Development Index (Rank) (2011) 26 - 149 Singapore - MyanmarPoverty (headcount ratio at $1.25 (PPP) aday, %) **0 – 33.9 Malaysia – Lao PDR*Myanmar is excluded as data was not consistently available, ** data is not available for Singapore, Brunei and MyanmarInitiative of ASEAN Integration (IAI)Second IAI Work Plan ( 2009- 2015)BUT IAI program areas does not fully fit the CLMV‟s key priorities
Progress in AEC (10)ASEAN+1 FTAs/ RCEPASEAN+ China and ASEAN + KoreaGoods, Services and investment agreements signedASEAN+ Japan and ASEAN+ IndiaGoods completed; Negotiation concluded for services and investmentASEAN + Australia + New ZealandComprehensive agreement implemented – Jan 1, 2010ASEAN plays a role of “ bridge builder” among countries in the greaterscope of AsiaTotalPopulation, 2011TotalGDP, 2011 Total Trade totheWorld,2011Persons in million US$ billion PPP$ billion US$ billionASEAN-Australia-NewZealand FTA635 3,822 4,390 2,983ASEAN-China FTA 1,955 9,474 14,651 6,036ASEAN-JapanCEP 736 8,043 7,735 4,072ASEAN-RoK FTA 658 3,292 4,905 3,474ASEAN-IndiaFTA 1,815 4,003 7,772 3,162Author’s compilation/ estimates
Regional Comprehensive EconomicPartnership (RCEP)Characteristics RCEP is led by ASEANBorn out of ASEAN+1 FTAs with China, India, Japan, South Korea, Australia and NewZealandBased on open accession clause, where membership can be expanded later as they sign FTAwith 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 existingFTA 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) – 28.4Merchandise trade (% global share) – 27.7Population (% global share) – 47.9Concerns 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
East Asia Integration Matters:Economic Impacts of Development of ASEAN++ FTA (RegionalComprehensive Economic Partnership)2.3 188.8.131.52 5.0 3.3 2.9 13.48.316.014.012.010.08.06.04.02.00.0ASEANCoexistence of Five ASEAN+1 FTAsCoexistence of Five ASEAN+1 FTAs and CJK FTAsASEAN+6 FTANOTE: Cumulative Percentage Point, deviation from baseline, 2011 to 2015;NA for Myanmar due to data availability18Source: Dynamic GTAP Simulation by Itakura (2012)
Concluding RemarksThe pace of implementation is slow~ Due to delay in the ratification of agreements; alignment of domesticlaws to regional initiativesThere is lack of awareness on ASEAN matters.Non-tariff barriers replaced tariff rates as a form of protectionScorecard defies the understanding of ASEAN public and private sectorBUT efforts of AEC will not be derailed easily.Private sector is getting increasingly awareASEAN-EU Business Summit, Business Dialogue, ASEAN-Chinaexpo, ASEAN-China Business & Investment Summit, ASEAN-USBusiness Summit, India-ASEAN Business FairTIME is a big constraintOn 31 December 2015, if not all, at least the “core” elements of the AEC islikely to be in placetariff reduction, trade facilitation (ASW), liberalization of selectedservices (tourism), progress in MPAC, ASEAN+1 FTAs/ RCEP19