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AseanAffairs Magazine January - February 2011



With the growth of the Asean economies, David Swartzentruber reports on the entry of Dark Pool electronic trading platforms into the region.

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Noel Jones, Ph.D


 International consultant looks at Asean and Thailand as they approach the beginning of the Asean Economic Community in 2015c

  The start of the Asean Economic Community (AEC) in 2015 will be a singular journey for the 10 Asean members bringing with it opportunities as well as risks and threats.

Noel Jones, Ph.D., an Irish management consultant currently on the staff of Assumption University, Bangkok and formerly at the World Bank and International Monetary Fund, has been examining the issues leading up to the advent of the AEC.

Before the five original members, Indonesia, Malaysia, Philippines, Singapore and Thailand formed Asean on 8 August 1967, there were strained cross-border relations among many of these states as well as the subsequent members, Cambodia, Laos and Vietnam. Thailand, he noted, stands out among the Asean group as the only country among the Asean members that was not colonized.

The parallels between Asean and the European Union (EU) are numerous with geographic and population sizes and multiple languages, however, a major difference is that in Asean, “it is not clear how each member country is obligated to implement the guiding principles of Asean,” Jones says. While in the EU the 27 member countries are required to implement the EU’s rules and regulations. If not, member countries may be penalized or fined.

Going forward toward the AEC, Jones lists the many strengths of Asean. Asean Plus 3 has led to the establishment of close relations with China, South Korea and Japan. Asean exports to the Plus 3 countries increased to US$225.4 billion in 2008 and imports stood at US$254.7 billion. Total Asean trade with the Plus Three countries reached US$480.1 billion in 2008, a 28.1 percent share of total Asean trade. The current Asean Plus 6 expansion includes Australia, India and New Zealand.

Trade has expanded with many Free Trade Agreements (FTA) among the nations and within Asean, as the China and South Korean FTAs came into effect in January 2010. Within Asean, more than 60 percent of the products traded between member countries have zero tariffs.

Foreign Direct Investment with China, the EU and Japan have increased global FDI flows to Asean to US$1.2 trillion in 2010 and this should hit $1.3 to 1.5 trillion in 2011.

Looking at Asean weaknesses, a key issue for Jones is, “An emerging issue for Asean is how to ensure that each member is obligated and held accountable for the effective progression of the many important dimensions of the AEC 2015 and Vision 2020?”

Jones believes this weakness of Asean makes it vulnerable to respond assertively to such global powers as China and the United States on matters of trade, investment and security. A good test case will be how Asean deals with Myanmar. A related issue is the status of an estimated 3 million legal and illegal Burmese, most of them illegal, in neighboring countries. An estimated 1.5 to 2 million legal and illegal migrants are in Thailand alone.

Turning to opportunities, Jones sees opportunities in Information Technology, labor and trade. He feels an e-Asean approach should be adopted for member countries to better access and address Asean matters. E-Asean developments such as the establishment of the Asean

Information Infrastructure can pave the way for greater “B2B” trade among its members. The freer movement of labor promised by the AEC may well be dependent on “how well Asean ensures that its work force shall be prepared for, and benefit from, economic integration by investing more resources for basic and higher education, training and science and technology development, job creation and social By Noel Jones, Ph.D. protection,” as stated in the Asean Vision, according to Jones.

Asean is not without its threats and perhaps a major concern among member countries is a fear of being obliged to choose between China and the United States, as most would not want to make such a choice. The second threat is the continuing South China Sea conflict between Asian nations, including Asean members, Brunei, Indonesia Philippines, Malaysia, Singapore and Vietnam. China wants to resolve territorial issues by unilateral negotiations with each involved country, while the countries wish to resolve the issues with a multilateral approach in a common forum. The United States has weighed in on the side of a multilateral approach.

With the renewed focus of the U.S. on the importance of Southeast Asia, Jones suggests that closer economic links and trade with the U.S. might blind it to the potential problems that might result from closer links to the U.S. economy. Perhaps a solution might be closer economic ties with the BRIC (Brazil, Russia, India and China) countries, according to Jones.

He states that another side to the U.S.-China issue is: “With China now the world’s largest creditor nation and the U.S. being the world’s largest debtor nation, the interdependence of these two global trading powers has major implications for global trade and investment, especially in Asean.”

Another cautionary note that could become a threat to the AEC is Jones’ observation that “Free Trade” is not as advertised     .....................



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