The association of Southeast Asian Nations

8 August 2016

The association of Southeast Asian Nations (ASEAN) was established in 1967 as an organization for economic, political, social and cultural cooperation among its member countries. Its goal includes also protection of regional peace and stability. The original members are: Indonesia, Malaysia, the Philippines, Singapore and Thailand. Now, there are 10 memberships: Brunei, Myanmar, Cambodia, Laos and Vietnam. ASEAN has a population of approximately 600 million people, which is 8. 8% of the world’s population.

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ASEAN has for objective to create an ASEAN Economic Community (AEC) for 2015. There are 4 pillars of AEC. The first is the creation of a single market and production base (free flow of goods, investments, services, skilled). “Free flow of goods” is central to the establishment of a single market and production base. There will have an E elimination/reduction of tariff barriers in intra-ASEAN trade transactions. The second pillar is created economic competitive region (competitive policy, consumer protection, intellectual property rights, infrastructure development…).

The third is an equitable economic development (SME development, initiative for ASEAN development) and the last is the integration into the Global Economy (coherent approach towards external economic relations, enhanced participation in global supply networks) In a first time, I am going to present the positive points proposed by the ASEAN 2015. Then, I will discuss the threats that may arise during the establishment of this common market and if all the countries of the region will benefit in the same way. Finally, I will talk about the difficulties encountered in achieving this objective in 2015 and what are the ways to remedy it.

The positive points (opportunities) proposed by ASEAN 2015 The emerging markets are located in Southeast Asia, their dynamism is particularly promising when ASEAN countries will integrate their economies in 2015. We found in the Asian region some of the most dynamic economies in the world. Together they form a huge market that is growing faster than any other region around the world and could be a dynamic regional grouping which would be roughly the size of the EU in terms of GDP. In addition, they will have greater significance in the trade than NAFTA and larger international reserves than those of the EU and NAFTA put together.

The creation of an Asian Economic Community will also help the region to play a more effective and important role in the development of a global trading and financial system that is more responsive to its needs. With the AEC, ASEAN will be the biggest single market in the world. ASEAN will be a powerful economic area. Here some data about ASEAN : 10 members / population of 610 million people / Combined income (GDP) of US 2,339 billion / Average GDP per capita of US 3,787. The area will then form a single market and a single production base for the 10 member countries of ASEAN.

There will be benefits for foreign companies: for companies selling products in the region, this means that they target an entire region rather than a single country. For example, if you sell in Malaysia, you could get goods to Singapore much easier than before. Active participation in the AEC will bring benefits to ASEAN as a more sustained growth, job creation, increased foreign direct investment… It is this connectivity that will grow the market, as well as labor costs and land relatively low for manufacturers who will establish their production sites in the region.

The improved economies of scale and scope, raised foreign direct investment, intensify competition and increased productivity. All these reforms should stimulate growth, generate more intra-regional trade, promote the emergence of strong and globally competitive ASEAN companies, and there would be more jobs for everyone. ASEAN will create millions of jobs… All ASEAN countries will be more significant to foreign investors as a single market with about 600 million people and at the same time, there will be moreoopportunities for local SMEs to venture abroad.

Under AEC, there will have some opportunity on tourism. MICE (Meeting, Incentives, Conferencing, and Exhibition) opportunities are particularly large and countries which have more experience in this area such as Singapore and Thailand could render their assistance to those with weaker MICE experience. Regional tourism has a huge potential and becomes more and more important. ASEAN member countries as well as other partners need to form a group and cooperate to promote tourism for the sake of common benefits.

Also, this area is a godsend, especially for SMEs, because in parallel market BRICS, it will know many infrastructure developments and will be able to accommodate new industrial facilities. This is one of the last untapped markets in the world, expectations are so high in terms of economic growth in the coming years In 2015, there will have also some benefit for some country like Thailand. In fact, when the AEC becomes effective, most of big firm (multinational) will move in Thailand, they will move their operation staff and top management.

Thus, these employees will need accommodation and space for work. So, this will bring several opportunities for property firms who develop office and projects. And for example, one property firm in Thailand could expand its activity and its investment in other ASEAN country like on Indonesia, Vietnam … for develops residential projects. Property market will increase. According to studies of the East-West Center (EWC) in Hawaii, the real income of the ASEAN economies would increase by 5. 3% due to their participation in the AEC.

Companies also have the opportunity to cooperate with major partners such as China, Japan, Republic of Korea, Australia, India, New Zealand … through free trade agreements (FTA) between ASEAN and different partners (FTA + 1) and the agreement of comprehensive regional Economic Partnership (RCEP). From 31 December 2015, most imported goods in ASEAN will be exempt from taxes. With one FTA, Vietnamese products and any other products from ASEAN countries exports to China, Japan, Republic of Korea, India, Australia, New Zealand will also be exempt from any customs tax.

All countries from ASEAN can export and import lots of goods between themselves for low price. There will have strong growth in areas such as consumer electronics, vehicles, household goods, clothing, food and luxury products. There will have a boost of the business in the member’s countries by reducing barriers such as tariffs, harmonizing rules, and facilitating the flow of goods and services. It will enhance the regional competitiveness. Building AEC can bring benefits for the emerging market, in particular for Cambodia, Laos, and Malaysia.

For example, Cambodia has many resources, including oil, gas and rare minerals on its soil. And according to my research, the Cambodian people do not know how to exploit this resources, they do not know what to do (most people are farmers and they have not done many studies), may be with the common market, the countries of the region will exploit the oil and gas; this will help the Cambodian people. Poor countries should grow speedily and should profit of the rich countries. It will increase the standard of living for more than half a billion people

We can add ASEAN offers exciting production possibilities. It is a stable platform with good macroeconomic record and fundamentals. Likewise, for most parts of the region there is a young population and people are assets, not liabilities. It means there is a good potential for the ASEAN. Also, there is a strong track record in international production networks already and the region has abundant natural resources and minerals. Under the AEC, ASEAN countries who are actually for a grand part a bureaucracy should adopt democracy.

In fact, When we created a common market, it is imperative that the countries are at peace, on the same wavelength etc… Democracy will therefore be required in all countries. It will help the population to rise, earn more money in the best conditions of life ASEAN 2015 envisages cooperation between the member countries of ASEAN policy, security, and defense. Under the political-security community, the peoples of ASEAN will lead a better life in an environment of peace and friendship to the development and prosperity of the entire region.

Increased cooperation in defense, regular exchanges between officers ASEAN countries will contribute, them, promote mutual understanding and mutual trust between the military, helping to minimize the risk of conflict between countries. Cooperation in the development of human resources, moving towards the harmonization of diplomas and professional certificates among ASEAN countries, will create favorable conditions for the population, especially skilled workers, to find opportunities in the region. Then, we can put on light the internationalization of health care under the ASEAN Economic Community.

One of the sectors to be internationalized is health care sector. This is fatefully a big challenge but it offers potentials for the free flow of health services in the ASEAN region. For example, the largest medical service in Thailand and other Some Thai hospital groups to step up the pace of mergers, acquisitions and joint ventures in other Asian Economic Community countries to help give them a better platform to better take care of expanding opportunities on AEC. Threats for the region and if this single market will benefit all country member.

The ASEAN members have recently moved closer to China. But I think that rapprochement with China is not without risk to the organization that could be quickly overwhelmed despite Beijing have held reassuring statements related to its power. The Prime Minister of Malaysia has recently said, “We have always believed that China was not a threat … We have always regarded China as an opportunity. ” But I think the imbalance is obvious. According to a study by the Office for the Study of The Economist, the only Chinese exports in 2004 exceeded those combined 7 of the 10 ASEAN countries.

Let us continue on the case of Thailand, which I think is the case of several other ASEAN countries. If the country does not take the necessary measures before 2015, it may be threatened in the sense that he cannot fully enjoy the benefits offered by ASEAN. All companies should unite their efforts and take steps to improve and / or maintain their market position. Due to a lack of development of some ASEAN countries, I also think that companies in the ASEAN region will not be able to compete in many areas the major international players in 2015.

There will be a strong dependence on foreign investors. Foreign direct investments are in most countries (except Indonesia), a very large share of industrial added value and exports. The innovation potential of regional companies is limited and there will still be in the future if no appropriate measures are put in place. In addition, ASEAN markets are basically a field of confrontation and western multinationals. Poor countries will not be able to keep pace of the single market in 2015 as the common market does not expect the adoption of a single currency like the European Union.

As a result, these countries just at the level of exchange rate they will be the losers and in any case they will not be favored. Tariff barriers are going to be abolished but in some countries the currency not worth anything so those who come from other countries are going in some ways «takes advantage of the system. ” French that goes into a country in Eastern Europe will be “rich”, which is not normal. Then the common market will certainly create jobs. Where? In poor countries because richer ASEAN countries will exploit the cheap labor in these countries.

Thus, the unemployment rate will increase in their own country. This is particularly the case in the European Union. French factories relocate their factory in Eastern European countries (Romania, Bulgaria … ) because labor is cheaper and taxes too. However, unemployment in France is increasing year by year… It’s the same for FDI, because they will help to develop poor countries by injecting money into the business for example, but as it is poor countries, workers will probably exploited as happened in China in recent years.

We can also point out the brain drain. The free movement of people will generate the movement of skilled workers in the region. A country’s bright young thing will leave to work in a richer country to develop their careers at the expense of their own country. Currently, this is what is happening in Spain since the crisis. Students study in their country and when they graduate, they flee to Spain to work in another country of the European Union like Germany where working conditions are more favorable.

However, Spain suffered lately a major crisis, the unemployment rate is 27% but yet the men flee much to detriment of the country. They run away from one’s problems. Thus I do not think the common market will benefit all countries in the region. At least not in 2015. There are still too large development gap between countries and only 2 years to reach the objectives. At that rate, the CLV countries among others will not fully benefit from the advantages offered by the ASEAN in 2015. Why? They are too late, they do not have adequate infrastructure, appropriate logistics, product not fairly good quality…

Poor countries and in particular CMLV could enjoy the ASEAN 2015 only if the development gap is narrowing. For example, some experts are concerned about the disparities in economic development between Vietnam and ASEAN +6, which have an impact on the implementation of the AEC in Vietnam. One of the problems of greatest concern is that the community of Vietnamese companies is not willing to exploit the opportunities presented by the Asean Economic Community. To prepare, they must improve their production capacity and the quality of their products and their services …

In addition, the authorities should develop appropriate policies to help companies seize opportunities and overcome challenges that arise in the context of the establishment of the AEC. It is the same issue with Cambodia. According an article, there are several constraints that Cambodia needs to address if it wants to have a flourishing integration into Asean Economic Community 2015. Whereas the quality of the Kingdom’s agricultural products and garments and textiles is enough, the quality of some other goods is not so acceptable.

Also, there are some issues with the country’s public administration, labor productivity and production costs. Cambodia doesn’t have abundant products for exporting to other ASEAN countries while imports keep increasing. Therefore, its trade deficit is anticipated to greatly extend in terms of trade in the region of ASEAN. Also, I think countries which speak well English such as Malaysia, Philippines and Singapore will have a real advantage over others countries like Thailand, Myanmar. In fact, education plays an important role.

If one country doesn’t speak well English it will be difficult to trade properly with the rest of the world and the region. English is the base for lots of thing. Some ASEAN countries understood that and took the good measure at school. Does the project will be completed and what the greatest difficulties to reach Despite the efforts made, regional integration remains insufficient. The rate of trade integration between ASEAN countries increased from 15% to 25% in 20 years, and in recent times the dynamics of trade with other Asian countries (China in particular) is much higher than the internal dynamics.

Free trade has come to dominate and should be almost universal by 2015 among the member countries of the organization. But it does not base neither a Customs Union (no common external tariff), neither on the harmonization of standards and procedures, or even a regional financial standardization, so that market integration is far be optimal within ASEAN. Over the past ten years, the intra-ASEAN-5 trade fails to take off the threshold of 23-25?? % of global trade. For these reasons and those previously explained, I do not think the project will be successful in 2015. A large part can be but there is still much work.

For example, the draft ASEAN provides for the abolition of tariffs and the removal of import duties by 2015. But trade within ASEAN are modest and regional bloc (as I said previously) has important differences in terms of economic development between Singapore, one of the leading financial centers in the world, and Burma, a third of the population lives under the poverty line. But in order to create regional bloc, it will incorporate economy as diverse as Singapore and Burma. With a GDP of $ 511 billion, Indonesia has an economy that weighs 100 times more than that of Laos, the smallest country in ASEAN.

Economic activity in ASEAN is also very focused on the five most important countries such as Indonesia, Thailand, Philippines, Malaysia and Singapore, which together account for 90% of GDP of the group. Also, some specialists commented about the lack of leadership. The role of Asean chairmanship is a rotatingopositionmand a series ofoofficials from theepoorer, less developed Asean countriesmwill be theechair of Asean for the next few yearsswhich means that leadershipwwill be inexperiencedaand possibly beeless interested in pushingaahead quickly withhintegration onaall fronts.

For me, there is not a particular point which is harder to achieve than others. It is a set. To make the whole project for me the starting point is the reduction of the development gap, the abolition of corruption in some countries may hinder the project, a perfect agreement between the members (not like Philippine and Malaysia last year for example) because there is still internal tensions and intra-regional conflicts on the ASEAN, which hampers the strengthening of relations and cooperation between the countries of the Asia South-East, establish a business ethics because some countries do not really have.

Here are some ways to reduce economic disparities: Only with strong leadership illustrated byygenerous support to CLMVVcountries, will the AEC be ultimately accomplished. I think 2 immediate measures are needed. The first is the creation of clearly defined financial support to alleviate social costs and to finance infrastructure development and trade facilitation. This can be byyway of the ASEAN-Development-Fund with clearly identifieddfunds to approach keyyissues such financing adjustments costs that are appear as a result of the economic integration.

The European Union, the most successful regional grouping, made easier transition by ensuring sufficient allocation of resources to ASEAN members which required assistance. The European Union established 4 types of structural funds: there are the European Social Fund, the European Regional Development Fun, the EuropeanAAgricultural Guidance, GuaranteeFFund and the Financial Instrument for Fisheries, with the intention to facilitate economic integration process. ASEAN should follow this idea and agree on a method to ascribe resources to this fund on an equitable-basis.

The support of international aid and some donor countries can also help to complete this fund. Then, the development of infrastructure should be an immediate priority for the ASEAN. It should clearly define increasing investment. Infrastructure development, such. as transportation networks, stable supply of utilities like water, energy and telecommunication,…principally in the depressed regions will provide the appropriate incentives for countries’ member to speed up economic integration.

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