||Asean Affairs 23 July 2013
M'sia plays key role in steering Asean into an economic community
The year 2015 is expected to be very busy for Malaysia.
That is when the country assumes chairmanship of Asean ahead of the scheduled roll-out of the Asean Economic Community (AEC).
The AEC will merge the economies of the 10-member Asean into a unified production, trade and investment bloc.
It will create a single market for a region home to 600 million people with a combined gross domestic product of US$2 trillion.
The AEC will be a landmark achievement for the regional grouping. Its success could help drive strong economic growth for member countries.
That the AEC is set to be inaugurated during Malaysia’s term as the Asean chairman means that the country must play a key leadership role in the region when it assumes the position.
“As the Asean chair in 2015, Malaysia will have the responsibility to explain and convince the world about the significance, achievements and vision of the AEC,” said Professor Hidetoshi Nishimura, executive director of the Economic Research Institute for Asean and East Asia (ERIA).
“Without a successful roll-out of the AEC in 2015, stakeholders all over the world will find it hard to trust the real power and potential of Asean,” said Prof Nishimura in an interview on the sidelines of the 10th Asean Leadership Forum in Kuala Lumpur on July 18.
Will a single market in Asean really emerge in 2015?
Many who spoke at the event, which was organised by the Asian Strategy and Leadership Institute and Asean, were optimistic.
They included Malaysia’s Inter?national Trade and Industry Minister Mustapa Mohamed.
“Governments in the region are committed to ensuring that the core economic integration initiatives are realised.
“We recognise that we must deliver on our promises,” said Mustapa.
Asean countries have stepped up efforts to prepare for integration by removing a substantial portion of tariffs, liberalising their services sectors and easing restrictions on foreign investments.
To date, over 77.5 per cent of the regulatory and economic measures that member countries must undertake before the AEC can become a reality have been done.
Malaysia, on its part, has implemented 88 per cent of the measures required.
Despite the progress, Nishimura acknowledges scepticism in proclaiming the birth of a single market based solely on the completion of a readiness checklist.
“A compliance scorecard cannot measure the real problems faced by people on the ground or by businesses.”
To give member countries time to complete any unfinished actions to achieve a single market, Asean last year decided to delay the inauguration of the AEC from Jan 1 to Dec 31, 2015.
“A 100 per cent integration in 2015 will be difficult to achieve, so ERIA’s interpretation of a successful roll-out of the AEC is the implementation of all 10 priority measures which we have outlined.”
The specific measures include removal of tariffs, increasing trade facilitation, and liberalising services and investments.
Asean will also need to have under its belt several success stories to increase public confidence that regional economic integration is the best way forward.
This is important as another key plan to integrate Asean economies lies just beyond the AEC inauguration.
Known as the Regional Compre?hensive Economic Partnership (RCEP), the pact will bind Asean’s 10 member countries with New Zealand, Australia, South Korea, India, Japan and, most importantly, China, into one mega regional free trade agreement (FTA).
The objective would be to strengthen supply chain activities not only with the regional grouping’s member countries but also with the six additional countries, which all have FTAs with Asean.
Negotiations started this year to set up the RCEP, which Nishimura said would provide many growth opportunities especially for the region’s small and medium scale enterprises (SMEs).
The RCEP, he said, would also help change the very concept of labour mobility in the region.
Citing an example, Nishimura said that with the RCEP in place, villagers in Laos would no longer need to go to Thailand to find work at car assembly plants.
They could remain in their own country to work in factories set up there under the “production block” concept in which a company’s manufacturing operations are spread out in several countries.
SMEs would also find it easier to set up production networks in other Asean countries, something which only large multinationals are able to do at present.
“Once RCEP is completed, SMEs throughout the region can come together to create what would become the world’s largest production network.”
Apart from talks to join the RCEP, Malaysia is also currently in negotiations for another mega-FTA, namely the Trans-Pacific Partnership Agreement (TPPA).
The TPPA involves Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam, representing about 40 per cent of world trade and a population of more than 750 million people.
By being part of both the TPPA and RCEP, Malaysia could enjoy the best of both worlds, benefiting from an advanced production network offered by the RCEP as well as an opportunity to sell to developed markets under the TPP, Prof Nishimura said.
The next two and a half years, said Prof Nishimura, would be a busy and exciting time for the region as it aimed to become a global economic powerhouse.
“For Asean, the most pressing economic issue right now is how it can husband the RCEP negotiations to a successful conclusion.
“Asean and Malaysia will definitely have a very full plate into and in 2015,” he said.