Press Release: The AEC scores high on the institutional frameworks, but implementation lags behind

Professor Jorn Dosch Monash

A report published by the CIMB ASEAN Research Institute (CARI) today finds that the main hurdles in achieving the ASEAN Economic Community (AEC) are a mismatch between political ambitions, a lack of capabilities, and often political will among several member states.

This is based on the report’s independent assessment on key integration areas of the AEC, including free trade, customs harmonization, competition law and policy, investments regimes, free flow of services, SME support, as well as standards and non-tariff-barriers to trade, based on existing data and findings.
The report, entitled ‘The ASEAN Economic Community: The Status of Implementation, Challenges and Bottlenecks’, was presented by Dr. Jörn Dosch, senior fellow of CARI and Professor of International Relations at Monash University.

According to the report, “the AEC scores high on the political, legal, institutional and technical frameworks that govern regional economic integration, but the actual implementation lags significantly behind the stated objectives and timelines.”

In the area of free trade, intra-ASEAN trade (as a percentage of the overall trade of the AMS) has only increased by a mere 4.4% since 1998, but has stagnated around 25% between 2003 and 2011. The utilization of the free trade agreements remains low. Between 2009-2012, ASEAN has however made some progress in the area of customs harmonization; while ‘soft objectives’ of competition law and policy are unlikely to result in a regional regulatory framework.

The report calls for ASEAN member states to take more ownership of the integration process and the expectations of the AEC 2015 may require some adjustment.
“Economic integration cannot work on the basis of non-binding agreements. If Member States are allowed to opt out at any time or choose not to implement agreed actions, integration is hardly achievable,” says Dr. Dosch, who calls the ASEAN Way a dilemma of ASEAN.

The reports states that, “the Member States are trying
to achieve far-reaching visions of economic community-building, which are not that much dissimilar to European integration, without the necessary modifications to the traditional ASEAN Way of cooperation.”

The report also suggests that ASEAN member states’ lack of political will is the biggest roadblock to the implementation of the AEC. “The decisive capacity and implementation gaps are to be found at the national level of the ASEAN Member States. The Member States, not the ASEC, are the bottlenecks in the process of economic community building,” said Dr. Dosch.

“ASEAN needs to get serious. Businesses across ASEAN are banking on AEC to deliver. The issue here is not to criticize the remarkable efforts by our governments, but to constructively examine where the shortfalls are, and identify where these gaps can be closed. The bankability of ASEAN is not in question,” commented Dato’ Sri Nazir Razak, Group Chief Executive, CIMB Group.

“But its time we go beyond rhetoric. The ASEAN Way should still have its place in our culture, but the commitment to integration should be built on binding agreements,” Nazir added.

The report, published by CARI in partnership with Monash University, was released at the CIMB Annual Asia Pacific Conference 2013 by Dato’ Robert Cheim, Director of CARI.
“There’s work to be done. The AEC is too important to be just a top-down effort by the governments. CIMB is doing its small part to put the argument of AEC’s importance across. There’s space for private sector to take part, and CARI is committed to building perspectives for ASEAN stakeholders by connecting the business and the public sector in support of ASEAN integration, and to take ownership of the ASEAN identity,” said Dato’ Robert Cheim.

CIMB ASEAN Research Institute (CARI) was established in 2011 by CIMB Group as a regional public service in support of ASEAN’s programme of economic integration, the ASEAN Economic Community.

To download the full report, please click here >>