Reassessing ASEAN’s Economic Community

I Made Diangga Adika Karang, Bandung | Opinion | Sun, April 28 2013, 11:36 AM

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Good news from recent meetings has given rise to the optimism of ASEAN member states in promoting economic progress. Within the coming two years, members are confident of achieving the ASEAN Economic Community (AEC).

“I believe that under the chairmanship of Brunei Darussalam, we can achieve the goals. And we believe strongly that the 2015 community is on the way,” said Indonesian Coordinating Economic Minister  Hatta Rajasa.

According to the press statement issued after the 9th AEC Council Meeting, ministers noted that 77.5 percent of measures under the AEC blueprint had already been implemented. ASEAN adopted the AEC blueprint at the 13th ASEAN Summit in 2007, which means that for over five years member states have devoted their commitment to the implementation of this grand regional community.

The AEC envisages the key characteristics of the community as 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 (ASEAN Secretariat, 2013).

These characteristics play roles as indicators of achievement to a successful AEC. The more ASEAN people enjoy GDP growth and progressive competitiveness, as well as a free flow of goods and services, the more the AEC will be at the hands of this body. In other words, Hatta’s optimism is triggered by these characteristics that likely touch the reality, thus it serves as an opportunity for ASEAN.

Despite being motivated by such opportunities, however, critics say that challenges to the realization of the key characteristics remain intact.

First, as a single market, ASEAN has applied a common ASEAN visa system that supports people-to-people contact and connectivity, yet Cambodia and Laos are not included. Moreover, small-medium scale companies are unfamiliar with the single market scheme under the AEC (The Jakarta Post, April 8, 2013).

Second, travel and tourism (T&T) has become a reliable sector to boost ASEAN’s economy and competitiveness due to its abundant tourism sites and various cultures. It accounts for 4.6 percent of ASEAN GDP and it employs 9.3 million people, which contribute up to 9 percent of GDP and employment worldwide.

Nevertheless, the competitiveness index gap among ASEAN members is huge. According to the Global Competitiveness Index (GCI), Singapore is the highest (2 out of 144 countries) among ASEAN countries and Cambodia is the lowest at 85. Indonesia’s rank is 50.

Third, it should be noted that the awareness of minimizing the development gap among ASEAN members started in 2000, whereby the Initiative for ASEAN Integration (IAI) was established to accelerate the growth of newer members, including Cambodia, Laos, Myanmar and Vietnam (CLMV).

However, a report from the World Bank in 2011 revealed that ASEAN still had a development gap in which Singapore had the highest GDP per capita (US$46,241), while Cambodia was the lowest ($897). Indonesia’s GDP per capita was at $3,495.

Fourth, proceeding the enthusiasm of the liberal market system, ASEAN successfully formed a Regional Comprehensive Economic Partnership (RCEP) in November 2011 along with Australia, China, India, Korea, Japan and New Zealand, which implies ASEAN’s first step to an integrated global economy (ASEAN Secretariat, 2013). Nonetheless, the challenges to this issue lie in ASEAN’s capacity to maintain its centrality among other global actors.

Recently, ASEAN’s cohesiveness has been threatened by the South China Sea dispute, which involves China, Malaysia, Vietnam, the Philippines and Taiwan. If the dispute continues, it will be hard for the body to operate on the global stage along with its economic cooperation.

Furthermore, ASEAN ministers also noticed that the challenge to implementing the four key characteristics lies in the connectivity problem.

“The challenge is in people-to-people, institutional and infrastructure connectivity. These three structures are what we have to work very hard on,” said Hatta.

As such, ASEAN is committed to enhancing these three kinds of connectivity through the establishment of a Master Plan on ASEAN Connectivity (MPAC). “The implementation of MPAC hopefully will strengthen ASEAN competitiveness as a production base with an abundant potential market,” said Indonesian Ambassador to ASEAN Ngurah Swajaya in the ASEAN Connectivity Coordinating Committee (ACCC) Meeting on April 3-4.

The alternatives to building strong connectivity require a proper approach. It implies that infrastructure, institutional and people-to-people connectivity enhancement should be well-planned, transparent and strategic.

Otherwise, it might pose other challenges, such as funding and technical problem, which might hinder the progress and suspend the realization of AEC.

It is true that ASEAN has undertaken measures to fulfill its commitment. However, challenges remain to achieving the ultimate goal in 2015. Therefore, the 22nd ASEAN Summit, which will be held on April 24-25, should address measures to achieve the AEC, as well as precise and effective alternatives to counter challenges.

The writer is a researcher in the international relations department at Parahyangan Catholic University, Bandung.

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