SEATTLE — The ASEAN Economic Community (AEC), which was introduced in December 2015, hopes to bridge the divides between the ten countries that make up the Association of Southeast Asian Nations (ASEAN).
Altogether, the countries export $1.2 trillion annually, seven percent of the world’s total. Combined, they have a Gross Domestic Product of $2.4 trillion and a population of 600 million, most of them young. Yet, they remain divided and underdeveloped.
ASEAN was formed in 1967 by Indonesia, Malaysia, Singapore, Thailand and the Philippines with the goal of fostering regional cooperation. Its charter proclaims that the nations will bind together in friendship, cooperation and sacrifice in order to secure peace, freedom and prosperity for their people. Brunei joined ASEAN in 1984, and Vietnam, Laos, Myanmar and Cambodia joined in the late nineties.
Yet, economic integration has proven difficult. While 95 percent of goods traded across the region have zero tariffs, non-tariff barriers have proliferated. Southeast Asia lacks common laws on intellectual property rights, land use and investment, making cross-border deals painful for companies and business people.
There is also a labor crisis. Most ASEAN nations restrict the ability of firms to hire skilled foreigners, limiting their ability to grow. In the unskilled sector, millions illegally migrate between the ten countries to work as domestic helpers, farmers and fishermen.
All of this translates into economic growth that fails to meet potential. Without access to skilled workers, companies cannot compete with their Western or Chinese counterparts. Without recognition, illegal migrants operate in the shadows and lack the protection necessary for a stable life.
The ASEAN Economic Community hopes to change this. The goals of the AEC are to fully integrate the ASEAN nations economically, allowing a free flow of goods, services, investment, capital and people. This means removing nontariff barriers to trade as well as immigration and investment restrictions.
This unification is reminiscent of the European Union (EU), although the ASEAN Economic Community has no plans to have a single currency. This will let countries adjust their own currencies and avoid situations like the Greek government debt crisis. The economies of Vietnam, Laos, Myanmar and Cambodia are significantly underdeveloped compared to the original six countries. Thus, they are more susceptible to debt crises in a downturn and require the autonomy that a separate currency provides.
If successful, the ASEAN Economic Community will bring power to its people through economic development. By taking the first step in launching the AEC, the countries of ASEAN show that they are ready to become an economic powerhouse. Just as China and the EU are now the two most important trading partners of the U.S., ASEAN may join them in the near future, raising tens of millions out of poverty in the process.
Sources: ASEAN, Asian Development Bank, The Diplomat