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Asean leaders line up for a photo session at the Japan-Asean Commemorative Summit at Akasaka State Guesthouse in Tokyo
Asean leaders line up for a photo session at the Japan-Asean Commemorative Summit at Akasaka State Guesthouse in Tokyo, Japan, earlier this month. AFP

Low awareness of AEC pact

The Asean Economic Community (AEC) will cut red tape and allow freer trade between the bloc’s 10 member states. But many companies in the region aren’t even aware of the AEC blueprint, a sobering report from the Asia Development Bank has found. The bank also calls the 2015 deadline unrealistic, arguing that at least 10 more years might be needed to fully implement the agreement.

The report, released last week and aptly titled “The ASEAN Economic Community: A Work in Progress”, shows that 55 per cent of all businesses interviewed in the region remain unaware of the AEC’s ambitious plan to abolish trade barriers and reduce government regulation by the self-imposed deadline of December 31, 2015.

Country leaders have been urged to “make good on their commitments” amid the concerning survey results, which was collated from 381 firms in ASEAN, including 13 manufacturing and 40 service businesses in Cambodia.

The report said that “little or no interest” from the business community, a general lack of awareness, contrasting ASEAN government regulations, discrimination against foreign investors and inadequate infrastructure were among the key reasons for the AEC’s hindered progress.

First sketched in 2003, the AEC had a 2020 deadline, but in 2007, that was amended to 2015. In a perfect world, the agreement would transform ASEAN into a trade paradise where goods, services, investment, skilled labour and capital all flow seamlessly across borders.

The ADB concluded in its 530-page report that the fast-tracked due date should not be viewed as a target and should instead be considered a milestone, stating that ASEAN “has no prospect of coming close to a single market by the AEC’s 2015 deadline or even by 2020 or 2025”.

“One should not expect in 2015 to see ASEAN suddenly transformed,” the report said.

“While ASEAN should not be called to account for its members’ failure to make good on their commitments, any failure to deliver will likely lead to a loss of credibility, putting member countries in danger of falling further behind in the global competition for export markets and Foreign Direct Investment (FDI).”

Jayant Menon, lead economist at the ADB’s office of regional integration, said while ASEAN is not aiming to be as complicated or even as similarly united as the European Union, a deadline of 2025 would still seem “more realistic”.

“[AEC] will not require that the same level of sovereignty be surrendered to a central authority, unlike in Europe,” Menon said. “The ASEAN model of regionalism is outward looking, institution light and market driven. Therefore, national and regional interest can more readily coincide.”

Locally, Cambodia’s prospects of achieving the level of regional integration required by 2015 have met with mixed opinions from economists, government officials and academics.

The AEC wants to unify ASEAN economies by streamlining foreign trade agreements, reducing or entirely eliminating conflicting customs procedures, import and export duties and business operational standards.

As of October this year, the AEC “scorecard”, which ranks countries based on their preparedness to join the community, showed Cambodia had met all measures to assure the free flow of capital, labour and competitive policy frameworks required before the deadline, but had yet to achieve the same requirements for the free flow of goods, services, foreign direct investment, food, agriculture, transport and energy.

The scorecard showed Cambodia, Vietnam, Laos and Myanmar lagging behind in reducing tariffs across the region with a combined progress rate of 67 per cent, compared to 99 per cent for the remaining six member states.

Chap Sotharith, a research fellow at the Cambodian Institute for Cooperation and Peace, said that despite the survey’s results, he believes Cambodia is equipped across most sectors to meet the needs of the 2015 AEC launch.

“Infrastructure is admittedly an issue in Cambodia, but we currently have one of the most free foreign trade environments for labour and goods,” he said. “The free movement of service trades, such as lawyers trying to open up businesses in different countries, may take much more time to implement.”

However, Srey Chanty, president of the Cambodian Economic Association, said while other, larger economies such as Singapore, Malaysia and Thailand are prepared for full-scale economic integration, Cambodia’s position is far less convincing.

“I am not confident about Cambodia’s readiness for 2015,” he said. “Nevertheless, it can follow a more gradual, or phased-in approach by integrating aspects such as labour mobility, export of goods and tourism.”

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