ASEAN ECONOMIC COOPERATION

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 Economic Cooperation and Integration

 Cooperation = Working together to the same end

 Integration = Combining into a whole

 Economic cooperation = the lowest form of economic

integration

 Economic Integration = the highest form of economic

cooperation
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 Economic Cooperation and Integration
(Cont’d)
6 stages from Economic Cooperation to Economic Integration
 Harmonization: to adjust trade policies to minimize discrimination*
 Free Trade Area (FTA): to remove tariffs between the partners
without adopting a common tariff policy
 Customs Union (CU): FTA adopting a common tariff policy against
third countries
 Common Market (CM): CU removing restrictions on factor
movement
 Economic Union (EU): CM coordinating their policies on fiscal,
monetary, etc.
 Economic Integration: Extreme type of Economic Cooperation
when policy matters and their implementation is governed by some
supra-national agency – highest economic integration.
*PTA: as the lowest form of economic integration, provided for tariff
preferences for trade among ASEAN member countries.

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 ASEAN Trade (2000/2008)
 Country (US$mil.) Export Import Foreign Direct
Investment
 Brunei D. 2,169/8,754 1,068/3,105 549/239
 Cambodia 1,368/4,359 4,417/1,405 149/814
 Indonesia 62,124/137,020 33,515/129,197 -4,550/8,340
 Lao PDR 144*/828 338*/4,417 37/228
 Malaysia 98,154/194,496 79,647/144,299 3,788/7,318
 Myanmar 1,194/6,621 2,219/3,795 208/258
 Philippines 38,078/49,025 34,491/56,646 2,240/1,520
 Singapore 138,352/241,205 134,680/230,760 16,485/22,802
 Thailand 68,709/174,967 61,935/177,568 3,350/10,091
 Vietnam --------/61,778 --------/79,579 1,289/8,050
 Source: ASEAN Trade Statistics Database as of July 2009

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Real Economic Growth 2000-2008
 ASEAN Human Development Indicators (HDI)
 Country HDI Life expect. Adult lit. Gross enr. Expd. Expd.
(Rank) at birth rate (15& ratio for Pri on Heal. On Edu.
 (yrs)* above)* Sec. & Tert* (%GDP)!
(%GDP)^
 Brunei 34 76.6 92.7 77 2.8 --
 Indonesia 108 68.2 90.4 68 1.1 0.9
 Malaysia 61 73.4 88.7 73 2.2 8.0
 Phil1ppines 84 70.7 92.6 82 1.4 3.2
 Singapore 25 78.9 92.5 87 1.6 --
 Thailand 74 70.3 92.6 74 2.0 4.2
 Cambodia 129 56.5 73.6 60 2.1 2.0
 Lao PDR 133 55.1 68.7 61 1.2 2.3
 Myanmar 130 60.5 89.9 49 0.5 --
 Vietnam 109 70.8 90.3 63 1.5 --
*2004, ^2003, #2002-04 Source: UNDP Human Development Report 2006

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Treaty of Amity and Cooperation (TAC)
: Fundamental Principles
 Mutual respect for independence, sovereignty, equality,
territorial integrity, and national identity for all nations.
 The right of every state to lead its national existence free
from external interference, subversion or coercion
 Non-interference in the internal affairs of one another
 Settlement of differences or disputes by peaceful manner
 Renunciation of the threat or use of force
 Effective cooperation among themselves

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 ASEAN Economic Cooperation
 1967 – ASEAN established
 1976 – Regional economic cooperation launched
 1976-83 – major projects ( AIP, AIC, PTA & AIJV)
implemented but all failed.
 1984 – Brunei joined ASEAN
 1989 – A breakthrough in ASEAN economic cooperation as
ASEAN’s strategy for collective FDI- dependent & export-
oriented industrialization established.
 1992 – AFTA established and later AFTA-Plus.
 (1995 – 1999) – Vietnam, Laos, Myanmar & Cambodia as
members
 1998 – Hanoi Plan of Action (to achieve Vision 2020)
 1998 – 2000 – Going beyond AFTA (AFTA Plus, AIA)

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 Factors for Intensification of
ASEAN Economic Integration
* Infrastructure (Transport, Energy, ICT)
• Expansion and Diversification of ASEAN
Economies
• Competitiveness (Improving Standards & Basic
Skills
• Accession of New Member Countries into WTO
• Good Governance (Public & Private Sectors)
• Strictly following the targets of AFTA and AIA

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 ASEAN Economic Cooperation
1. Members of ASEAN
2. To help each other in the tasks of production
goods and services & bringing there to where
they are needed & used.
3. Mechanism: CEPT Scheme, IL, Temporary
E.L. and Sensitive list.

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 ASEAN (Association of South East
Asian Nations)
 Establishment: 8 August 1967
 Members: Brunei, Cambodia, Indonesia,
Laos, Malaysia, Myanmar, Philippines,
Singapore, Thailand and Vietnam
 Total Population: 567 million (2005)
 Total Area: 4.5 mil. sq. kilometers (2005)
 Combined GDP: US$1.07 trillion (2005)
 Total Trade: US$1.44 trillion (2005)
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 Aims and Purposes of ASEAN
• To accelerate the economic group, social progress and
cultural development in the region joint endeavors in
the spin of equality & partnership in order to strength
the foundation for a prosperous and peaceful
community of Southeast Asian nations.
• To promote regional peace and stability through
abiding respect and the rule of law in the relationship
among the countries of the region adherence to the
principle of the United Nations Charter.
• To promote active collaboration & mutual assistance
on matters of common interest in the economic, social,
cultural, technical, scientific, & administrative fields.

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 ASEAN Macroeconomic Indicators (2008)
 Country Total land Population GDP GDP
 area (thousand) at current market prices Per Capita
 (sq. km) (US$ mn) (US$PPP$) (US$) US$ (PPP$)
 Brunei 5,765 397 14,147 11,933 35,623 48,180
 Indonesia 1,860,360 228,526 511,574 901,139 2,237 3,943
 Malaysia 330,253 27,863 222,057 383,059 7,970 13,748
 Philippines 300,000 90,457 166,733 317,215 1,844 3,507
 Singapore 710 4,834 182,103 238,765 37,629 49,338
 Thailand 513,120 66,482 273,729 546,320 4,117 8,218
 Cambodia 181,035 14,656 11,082 27,986 756 1,909
 Lao PDR 236,800 5,763 5,289 13,168 918 2,406
 Myanmar* 676,577 58,510 27,182 68,203 465 1,166
 Vietnam 331,212 86,160 90,701 242,697 1,053 2,817
 ASEAN 4,435,830 583,651 1,504,236 2,758,385 2,577 4,726
 CLMV 1,425,624 165,089 124,253 352,753 813 2,137
 ASEAN 6 3,010,207 418,562 1,369,983 2,405,632 3,273 5,747
* US$-Kyat exchange rates is based on the parallel rate as us in IMF-WEO, April, 2009

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ASEAN’s Phase Of Inertia (1967-74)
 During the period, ASEAN was mainly concerned
with issues political and regional security.
 In 1969, the significance of ASEAN economic
cooperation was perceived – with the assistance of
the UN team.
 In 1974, the report of the UN team (Kansu report)
came out by proposing the Preferential Trade
Agreement (PTA).
 The PTA, as a lowest form of economic integration,
provided for tariff preference s for trade among
ASEAN member countries.

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ASEAN’s surge in momentum: From 1976 to
1983
 Declaration of Asean Concord was signed in Bali Summit (1976).
 The subsequent Bali Summit further affirmed the goals and role of
Asean for economic progress.
 Between 1976-83 – major projects ( AIP, AIC, PTA & AIJV)
were implemented but all failed and the bustles of activities were
not a substitute for meaningful accomplishments.
 It was a record of protracted negotiations, exasperation and
frustrations.
 Moreover, intra-Asean trade was still insignificant and the number
of implemented Asean-wide progress rather small.
 Economic nationalism and the political reality of regionalism were
the causes of so sluggish of the Asean.

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 Impact of ASEAN Crisis (1997-99)
 Falling real incomes and rising incidence of poverty
 Increasing level of unemployment and under-
employment
 Socially destabilization migration flows
 Food shortages and malnutrition
 Declining public health
 Reduces education coverage
 Increasing incidence of crimes
Current global financial crisis seems to be followed the
East Asian crisis.

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 Cross-border Issues in ASEAN
 Informal trade, Illegal trade
 Environment
 Social crimes
 Drugs and narcotics trafficking
 Human trafficking
 Immigration (illegal migration, refugees, illegal
workers)
 Law and legal matters
 Politics
All member countries are trying to resolve the above
issues and so far to some extent.
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 Other Regional Grouping Before
ASEAN
 The economic Commision for Asia and the Far
East (ECAFE – later called ESCAP) (1947)
 The Colombo Plan (1950)
 The Southeast Asian Treaty Organization
(SEATO) (1954)
 The Bandung or Asian-African Conference
 The Association of Southeast Asia (ASA) (1961)
 MAFILINDO (Malaysia, Philippines &
Indonesia) (1963)

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 Regional Economic Integration
Definition: The transitional economic region
established by 2 or more countries (or
territories) to promote free movement of
factors of production and effective distribution
of out puts to gain from the economy of scale
in the region.

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 Forms of Regional Economic
Cooperation/Integration
Forms Free intra- Common Free factor Common
trade trade policy mobility monetary &
fiscal policy

FTA Yes No No No
Customs Union Yes Yes No No
Common Market Yes Yes Yes No
Economic Union Yes Yes Yes Yes

* The “Single Market” is “an area without internal frontiers in which the free
movement of goods, persons, services and capital is ensured”.

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 Regional Trade Comparison

 Asean Nafta EU Mercosur

 Reg. Trade ($bil) 82 494 1,316 15
 Trade Exp. ($bil) 363 991 2,196 88
 Intra Reg. (%) 23 50 60 17
 Inter Reg. Trade in total

World Trade (%) 5 22 33 1

• Trade intensity

Index 4.2 23 1.8 13.3

Source: Comtrade

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 Regionalism
 The cooperation of countries of geographical
proximity either in economic, political or social
fields, by means of setting up a regional organization
for the achievement of common purposes.
Countries must have 1. geographical proximity, 2.
cooperation of the countries either in eco., political or
social fiends, 3. setting up a regional cooperation for
the achievement of common purposes.

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Regional Economic Integration

 Definition: The
transitional economic
region established by 2
or more countries (or
territories) to promote
free movement of
factors of production
and effective distribution
of outputs to gain from
the economy of scale in
the region.

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Regional Eco. Coopn: /Integration
1. The transitional eco. region established by 2
or more countries or territories.
2. Objective: to promote free movement of
factors of production & effective distribution
of outputs
3. Mechanism: to gain from economy of scale.

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 Regional Level Cooperation in 4 Continents
 OAS – Organization of American States
 NAFTA – North American Free Trade Area
 MERCOSUR – (Argentina – Brazil – Paraguay –
Uruguay – Venezuela)
 EU – European Union
 AU - African Union
 GCC – Gulf Corporation Council
 PIF – Pacific Islands Forum
 ANZCERTA – Australia – New Zealand Closer
Economic Relations Trade Agreement

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 Globalization
“Globalization” is shorthand for the way trade,
investment, and industry are spreading around the
world in a more or less uniform pattern, going beyond
political frontiers and national cultures.
Over the last generation, ASEAN & East Asia among the
greatest beneficiaries of the open trading system. The
East Asian “Economic miracle” was founded on
export-led development strategies that tapped into rich
western markets, particularly in the United States.
It also brings foreign investment & technology that
generate new skills & stimulate the creativity &
entrepreneurial energies among the local peoples.

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 Cont’d
• To provide assistance to each other in the form of training and
research facilities in the educational,, professional, technical,
scientific and administrative spheres;
• To collaborate more effectively for the greater utilization of
their agriculture and industries of their trade, improvement the
study the problem of international commodity trade,
improvement of their transportation and communication
facilities and raising the living standards of the peoples;
• To promote Southeast Asian Studies;
• To maintain close & beneficial cooperation with existing
international and regional organizations with similar aims and
purposes, and to explore all the avenues of even closer
cooperation among themselves.

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Continued: Some positive factors
 The success of Asean was found the goodwill and the spirit of
accommodation that is practical among the peoples.
 During the last decades, Asean achieved its recognized stature
in the world of geopolitics and ecopolitics.
 Asean people are proud of the fact that we are respected for
our peaceful manner in resolving conflicts and for our
consistent friendly relationships with all nations.
 It was the private sector in Asean that was and still now should
be congratulated that private entrepreneurs have become an
important driving force behind the governments.

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Dialogue of Asean intellectual people
contributed to the solution of the
crisis
 Promote good public-policy decision making on
complex societal problems through objective research
 Stimulate new ideas drawing on multinational &

multidisciplinary backgrounds
- Propagate knowledge for dealing with common
problems
- Promote mutual understanding & with it mutual
confidence
- Build community with shared aspiration and values

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 Tackling of Environment Issues
#Haze issue:
- ASEAN agreement on transboundary haze pollution
- Regional Haze Action Plan (RHAP)
- ASEAN Centre for Biodiversity
- Coastal and Marine Environment
# Global Environmental Issues
- Promote common points of understanding in the negotiations and meetings
- Promote capacity building
- Implementation of multilateral environmental agreements
- Note the importance of trade and environment issues
# Integrated Water Resource Management
- Adoption of Long-term Strategic Plan for Water Resource management to
meet the needs in terms of health, food, security, economic and environment

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 Tackling Environment Issues: Contd.
# Adoption of the Framework for Environmentally
Sustainable Cities
- Awareness of the challenges in the areas of clean air, clean
water and clean land
- Implementation of best practices of lessons and experiences
of ASEAN member countries
# Other Environmental Activities
- Launching of ASEAN Environmental Education Action Plan
(AEEAP) which includes formal education, non-formal
education, manpower capability building, and networking,
colarborating and communication

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 Transnational Crimes
 Forms of cross-border crimes: drug production and
trafficking, arms smuggling, money laundering, human
trafficking, piracy, as well as new forms of transnational
crimes such as, credit card fraud, fraudulent foreign travel
documents, cyber crime, and terrorism
 Tackling cross-border crimes:
- Adopting the Work Programme of the ASEAN Plan of
Action to Combat Transnational Crime (2003)
- Main activities: Information exchange, cooperation in law
enforcement, law and legal matters, training capacity building
and extra regional cooperation

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 Drugs and Narcotics
 Strengthening cooperation and coordinating of ASEAN Senior
Officials on Drugs (ASOD) with the ASEAN Official Meeting
on Transnational Crime (SOMTC), ASEAN Directors-General
of Immigration Department and Heads of Consular Affairs
Divisions of the Ministries of Foreign Affairs (DGIOM), and
Asean Inter-Parliamentary Organization (AIPO) in combating
illicit drug trafficking
 AIPO is looking into possibility of harmonizing and bridging
the gaps in the anti-drug laws in the region, especially on the
issues of punishment and ASOD is also looking into the
ASEAN Work Programme to Combat Transnational Crime,
particularly the component on illicit drug trafficking.

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 Migration Issues
 Combating Illegal Migration:
- Implementation of Asean Plan of Action on Immigration by
DGIOM adopting a Work Programme which includes
development of an Asean immigration network, visa exemption
travel within Asean in line with the jurisdiction of the
immigration authorities, and collaboration with international
orgainations like the International Organization for Migration
(IOM) and United Nations High Commissioner for Refugees
(UNHCR) on legal migration on the existing bilateral basis.
- Other measures to combat illegal migration include
harmonization of migration policies & legislation, training in
management, and protecting the integrity of travel documents

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 Political Issues
 Some political issues came out on 2008
between Cambodia and Thailand due to the
border land and pagoda building.
 It happened the cross-border few fighting with
small guns and battles.

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 Law and Legal Matters
 Harmonizing of Law and Legal matters:
- Cooperation of ASEAN countries takes the forms of collation of legal
materials, establishment of local points, sharing of research, study tours and
government officers programme
- Cooperation in mutual legal assistance in criminal matters including
extradition
- Introduced the Mutual Assistance in Criminal Matters Treaty which is
intended to operate in conjunction with existing mutual assistance in criminal-
matters mechanism s, both formal anf informal, and also seeks to support the
implementation of the regional cooperation component of ASEAN Work
Programme to Implement the Combat Transnational Crime.
- ASEAN agreed to establish an ad hoc group to study criminalizing acts of
terrorism and harmonization od anti-terrorism laws in the region, formulating
the ASEAN convention on combating terrorism

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 Disaster Management
 Tackling of Disaster management
- The ASEAN Experts Group of Disaster Management
(ACDM) has adopted the ASEAN Regional Programme
on Disaster Management (ARPDM) to enhance
cooperation in disaster management, including natural
disasters and man-made disasters, in order to minimize
the adverse consequences of disasters on the social and
economic development of the member countries

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 ASEAN-China Cooperation in Tackling the
Narcotics Problem
 Adoption of the ASEAN-China Cooperative Operations in Response to
Dangerous Drugs (ACCORD): Plan of Action 2005-2010
* Four central pillars: civic awareness, demand reduction, law
enforcement, and alternative development
* Examples of cooperation:
- Establishment of over 40 Border Liaison Officers
- Two-boat operation by Thailand and Laos in Mekong river
- Establishment of China’s bilateral ties with Myanmar & Laos
- Cooperation between China, Myanmar, Thailand & Laos seized heroin
and arrested suspects
- Cooperation between China and Malaysia dismantled several
amphetamine- types (ATS)
- Sharing national drug abuse information through the Drug Abuse
Information Network for Asia and the Pacific (DAINAP)

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 ASEAN FREE TRADE AREA (AFTA)
What are objectives of AFTA?
1. AFTA was to liberalize of trade in Asean by
progressively removing intra-regional tariffs and,
ultimately, non-tariff barriers.
2. AFTA would attract FDI to the region by
presenting a larger coordinated market.
3. AFTA will adapt ASEAN to changing
international economic conditions, in
particular the rise of regional trading
arrangements (RTA) in the developed world.

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 AFTA Plus
 AFTA is for tariff reduction only & tariff reduction is nor
enough
 Need to expand liberalization from goods & capital to services
 Various measures beyond trade liberalization is needed such
as increase in cooperation in – banking, finance, transport &
telecoms, harmonization of standards, harmonization of
customs procedures, removal of obstacles to FDI, rules for fair
competition, etc.
 Since 2000/01, it spread to the following areas: Services
(liberalization, facilitation & cooperation), Industry (AICO,
SMEs, IPR), Infrastructure (transport, energy & telecoms),
Finance (CMI, ASEAN Surveillance Process, ect.), and ICT,
tourism, GMS, food & agriculture).

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 ASEAN Investment Area (AIA)
• Created in 1995 & inaugurated in 1999
• Why AIA? Trade alone is not enough; decline in FDI after the
regional crisis & competition for FDI.
• Objectives: -To realize goals to increase FDI flows in 2010 to
make the region competitive, open & liberal investment area.
- Seek private sector participation, free flow of capital, skilled
labour & technology among members, transparency of
investment policies, rules, procedures & procedures
administrative processes, coordinated ASEAN investment
cooperation, facilitation & promotion
- To give national treatment to all investers
- To establish FDI statistics & monitor & Investment Portal
- To organize FDI road shows

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 ASEAN FREE TRADE AREA (AFTA)
What is the framework of AFTA ?

 The Common Effective Preferential Tariff (CEPT)

Scheme is the centerpiece of the AFTA.
 A cooperative arrangement among ASEAN members
that would reduce intra-regional tariff and remove
NTBs (Non-Tariff Barriers) over a 15 year period
starting from January 1, 1993.
 It covers all manufacturing products, including
capital goods and processed agricultural products and
those outside the definitions of agricultural products
as defined in Article1 (7) of the agreement.

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 Goals of AFTA

AFTA Tariff Reduction

0- 5% 0%
ASEAN 6 2003 2010 2007
CLMV
V 2006 2015 2012
L 2008
C 2010
M 2010

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 ASEAN FREE TRADE AREA (AFTA)
Why AFTA is necessary for ASEAN?
 Political reason: To sustain and enhance
regional cooperation
 Economic reason: More of “reactive” or
“defensive” to the establishment of NAFTA
and to enhance regional economic cooperation
 AFTA will liberalize trade in ASEAN by
progressively removing intra-regional tariff
( to achieve tariff rates to 0 to 5 per cent),
ultimately, non-tariff barriers (NTBs).
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 Intra-Asean Trade: Exports (1995-2004)

(US$ mil.) 1995 1997 1998 2000 2003 2004

Brunei 1,119.6 1,333.9 685.2 533.3 735.1 870.0
Cambodia -- -- -- 855.4 1.211.5 4,089.0
Indonesi 36,435.2 36,266.7 22.777.6 26,733.6 24,520.4 34,838.0
Laos -- -- -- -- 373.0 455.0
Malaysia 58,917.3 62,148.3 48,036.4 63,712.6 65,761.6 79,104.2
Myanmar -- -- -- 1,106.1 875.4 981.9

Philipp 19,150.8 31,059.7 27,231.0 26,432.0 31,098.4 35,683.4

Singapore85,577.7 105,575.8 77.848.3 101,388.8 96,664.2 125,868.8
Vietnam -- -- -- 14,483.0 20,176.0 26,660.0
Thailand -- -- -- 67,889.0 78,105.0 94,041.0

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 Intra-Asean Trade: Imports (1995-2004)

(US$ mil) 1995 1997 1998 2000 2003 2004

Brunei 1,013.0 2,848.6 591.1 534.4 616.9 644.5
Cambodia -- -- -- 549.1 1,694.1 673.5
Indonesia 4,218.9 5,413.0 4,559.2 6,781.2 8,030.3 11,686.0
Laos -- -- -- 535.0 500.0 600.0
Malaysia 12,522.6 14,840.1 12,940.0 15,934.8 14,329.5 26,195.1
Myanmar -- -- -- 1,113.3 967.8 951.1
Philippine 2,489.1 4,872.8 4,461.0 4,955.4 6,398.1 8,355.9

Singapore 24,537.6 30,396.1 23,674.6 33,291.3 31,226.5 37,456.0

Thailand 8,820.8 8,121.6 5,438.1 10,306.4 12,616.3 15,834.6
Vietnam -- -- -- 15,637.0 24,776.0 31,600.0

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55
 Regional Trade Comparison
(ASEAN, NAFTA, EU, Mercosur)
ASEAN NAFTA EU Mercos
ur
Regional Trade ($ billion) 82 494 1,316 15

Trade Exports ($ billion) 363 991 2,196 88

% Intra Regional Trade 23 50 60 17

% Intra Regional Trade in 5 22 33 1

total World Trade

Trade intensity Index 4.2 2.3 1.8 13.3

Source: Comtrade 56
 AFTA’s Weakness
 ASEAN way and ASEAN minus X
 AFTA only covers 15 major commodity
groups
 Non-tariff barriers need to be lifted
 Do not trust one another despite their
consensus on CEPT
 Do not negotiate collective deals with
outsiders
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 AFTA’s Weakness (cont’d)
 Tariff cuts and self-interest
 Malaysia - imported cars
 Philippines – petrochemicals
 Indonesia – textiles

 Thailand
Rice
 Vietnam

 No independent dispute settlement mechanism

 Effort to draw up shared procedures and standards for
imports lag far behind tariff cuts 58
 AFTA: Prospects

 1. AFTA may be completed in time

 2. AFTA will have a beneficial impact on ASEAN

REASONS:
1. Unless ASEAN moves rapidly to create a single market, it
will become less attractive than NAFTA, EU, MERCOSUR &
China
2. Complementarity has increased in the past and has been
enhanced with enlargement
3. While reduction of trade barriers could lead to short-term
dislocations, long-term efficiency gains are in their favour.

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 ASEAN’s cooperation has widened
 Since 1999, ASEAN represented the whole Southeast Asia.
Brunei joined it in 1984, Vietnam in 1995, Laos and Myanmar
in 1997 and Cambodia in 1999.

 External multi-lateral linkages with APEC, ANZCERTA, EU,

MERCOSUR, NAFTA, UNDP and Dialogue Partners.

 Bilateral relations with Australia, Canada, China, India, Japan,

New Zealand, Republic of Korea, Russia, US, and Pakistan.

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Motivating Factors/ Building Blocks
 Political
- collapse of the Soviet Union & CMEA
- US embargo
- Thawing of political tension
- ASEAN’s adoption on constructive engagement

 Social & Physical

- historical links
- cultural and ethnic ties
- geographical proximities
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Motivating Factors/ Building Blocks
Economic
- Competition for FDI
- Economic Complementarity
- Economic Reforms in CLMV
- Emergence of regional and sub-regional
groupings
- Formation of Trade Blocks and Trade
Protectionism
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 Conditions for joining
ASEAN/AFTA (cont’d)
 An embassy in every ASEAN Capital
 Establishment of an AFTA unit and a national
ASEAN Secretariat
 Acceding to basic agreements of ASEAN
 To participate in all levels of ASEAN
activities (Head of States, Ministerial, SOM,
technical staff working groups and projects)

63
 Implications of Joining ASEAN
A. Political Implications
1. One and the only Southeast Asia
2. Peace and stability in the region/regional harmony
3. Better confidence building THE ASEAN WAY:
4. Improved dispute resolution Agreeing to disagree without being disagreeable
5. More collective bargaining power --Noordin Sopiee

6. Region’s external security concerns will be strengthened

7. China’s influence ?

B. Social-cultural Impact
1. More tolerance of outside cultures in the region by socio-cultural and
information exchanges
2. Development of “Asian Values” as a response to the perceived
“Westerenization” of the region.

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Implications of Joining ASEAN (Cont’d)
C. Economic Implications
I. Overall impact
1. More trade and investment links within the region
2. More attractiveness of FDI from outside the region
3. Higher development level expected

II. For old members

1. Greater competition will lead to increase in efficiency
2. Increase in imports of labour-intensive products from new members
3. Increase in exports of more capital-intensive products to new members
4. Lower costs of labour-intensive products will lead to lower prices (hence
lower inflation)
5. More foreign direct investment (FDI) to new members
6. Greater market access

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Implications of Joining ASEAN (Cont’d)
III. For new members

1. Easier to sell agricultural products to old members due to

reductions of tariffs and trade barriers
2. Imports of manufactured goods and services will increase.
3. More FDI from the region as well as from the outside
4. More gain in entrepreneurship from ASEAN experience
5. Can plug into old ASEAN members in order to expand trade with
partners
6. Should accelerate and strengthen the economic reform
7. Greater market access
8. More economic reforms expected
9. Less state revenue due to tariff reduction
10. Increase in tourism
11. More competitiveness

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 ASEAN’s External Linkages

 A. ASEAN + 3 (China, Japan and S. Korea)

 B. Dialogue partners: Australia, Canada, China, EU,
India, Japan, Republic of Korea, New Zealand,
Russian Federation, United States, and UNDP
 C. Sectoral Dialogue partners: Pakistan
 D. ASEAN + 3 + 3 (India, Australia and New Zealand)
 Cooperation with other international organizations:
Group of 8 (Industrialized countries), World Bank,
WHO, ASEM, East Asia-Latin America Forum,
APEC, etc.
 ASEAN Regional Forum with 22 member countries

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 Benefits from Joining ASEAN
 Greater trade and investment links
 Increased attractiveness to foreign investors outside the region
 More secured access to a larger ASEAN market
 Benefit from improved resource allocation from specialization
according to competitive advantage
 Greater economy of scale in an enlarged regional market
 Enhancement in industrialization prospects of SMEs
 Greater spill-over effect, demonstration effect, and industrial
learning effect
 Improve quality control, design and marketing
 May improve its competitiveness in the world market.

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 Costs of Joining ASEAN

- Reduction in their capacity to determine their own

macroeconomic, trade and investment policies
- Inability to protect their infant industries and SOEs
- Balance of payment & balance of trade are affected
- Customs revenue is affected
- There may be potential adjustment problems such as budget
deficits, current account deficits, and increasing foreign
- Increased inflation
- Increased in social costs and social crimes

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 Prospects
Optimistic for the following reasons:
 All members believe that unless ASEAN
moves rapidly to create a single market, it will
become less attractive than NAFTA, EU,
China etc.
 Complementary has been increased in the past
and has been enhanced with the enlargement
of ASEAN since 1995.

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 Prospects (cont’d)
Optimistic for the following reasons:
 All members believe that while reduction in
trade barriers and non-trade barriers could lead
to short term dislocations, long term efficiency
gains are in their favor.
 ASEAN has 17 years to realize ASEAN 2020.
Given the rapid globalization and expected
accession to throne of CLMV into WTO during
period, targets of Vision 2020 could be realized.

71
 Stumbling Blocks
 Ideological Differences
 Refugees Problems
 Territorial Disputes
 Differences in Economic System
 Differences in Development Levels
 Historical Rivalry and Mistrust

72
 ASEAN’s cooperation has also deepened its
economic, political, social and security
 It moved forward from PTA to FTA. AIA has been
introduced.
 Number of ASEAN summits increased from 3 in 10
years (between 1967 and 1987) to once in every three
years with informal meetings between them.
 Established ARF and it expanded from 18 members
to 22.
 Established COCI and COSD to deepen social and
cultural relations among members.

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 ASEAN Plus Three (ASEAN+3)

 Informal organization
 Regular meeting since 1994
 Involves economic, social, political, monetary, financial,
cultural and transnational issues
 Miyazawa Plan after the Regional Crisis in 1998 with $30 mil.
as a rescue package
 The pace of cooperation accelerated since 1999 after the joint
statement on East Asian Cooperation
 Currency swap arrangement to be used in emergencies
surveillance program and Asian Monetary Fund in 2002
 Chiang Mai Initiative (CMI), in 2001, outlined a set of
financial self-help and support mechanism among 13 countries

74
 AFTA Plus
 AFTA is for tariff reduction only and tariff reduction is not enough
 Need to expand liberalization from goods & and capital to services
 Various measures beyond trade liberalization is needed such as increase in
cooperation in
- banking, finance, transport & telecoms, harmonization of standards,
harmonization of customs procedures, removal of obstacles to FDI, rules
for fair competition, etc.
Since 2000/01, it spread to the following areas:
- services (liberalization, facilitation,& cooperation)
- industry (AICO, SMEs. IPR)
- Infrastructure (transport, energy and telecoms)
- Finance (CMI, ASEAN Surveillance Process, etc.)
- ICT, tourism, GMS, food, and agriculture
This AFTA Plus pushes on feasibility of Asean’s economic cooperation and
pointing to how it is made possible.

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FACTIORS FOR INTENSIFICATION OF ASEAN
ECONOMIC INTEGRATION
 Infrastructure (Transport, Energy, ICT)
 Expansion and Diversification of ASEAN
Economies
 Competitiveness (Improving Standards & Basic
Skills)
 Accession of New Member Countries into WTO
 Good Governance (Public and Private Sectors)
 Strictly following the Targets of AFTA and AIA

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 Critical Success Factors for ASEAN
Economic Integration
 External climate for trade and peaceful
relations
 Appropriate macroeconomic management of
the economy
 Continuation of economic reform process
 Human resource development
 Political will of the governments

77
 ASEAN Institutions to Strengthen
Integration
 ASEAN Investment Area (AIA)
 ASEAN Vision 2020

 Hanoi Plan of Action (HPA)

 Vientiane Action Programme (VAP)

 ASEAN Economic Community (AEC)

Note: The first 4 institutions will reinforce

and strengthen the AEC.
78
 ASEAN Investment Area (AIA)

 - Created in 1995 and inaugurated in 1998

 - Why AIA? Trade alone is not enough; decline in FDI after the regional
crisis, and competition for FDI from China

Objectives:
 - To realize goals to increase FDI flows in 2010 to make the region
competitive, open and liberal investment area
 - Seeks private sector participation, free flow of capital, skilled labour &
technology among members, transparency of investment policies, rules,
procedures & administrative processes, coordinated ASEAN investment
cooperation, facilitation & promotion
 - To give national treatment to all investors
 - To establish FDI statistics and monitor & Investment Portal
 - To organize FDI road shows

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 ASEAN Vision 2020

 Launched in December 1997

 Deals with peace, freedom, justice, rule of law, neutrality,
national and regional resililience, development & shared
prosperity, confidence building and conflict resolution in
broad terms
 ASEAN charts a future direction: outward-looking, living in
peace, stability & prosperity, bonded together in partnership
in a just, democratic, & harmonious environment, dynamic
development & ever-closer economic integration & in a
community of caring societies, conscious of its of history,
aware or its shared cultural heritage & bound by a common
regional identity

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 ASEAN Vision 2020 (continued)

Objectives:
 to enhance integration by attempting to strengthen
macroeconomic & financial cooperation, science &
technology, greater eco. Integration, HRD, environment, etc.
 seeks to chart a new direction thro partnership in development
to forge closer eco. integration within ASEAN with emphasis
on sustainable and equitable growth & national & regional
resilience
 seeks to create “a stable, prosperous & highly competitive
ASEAN in which there is free flow of goods, services &
investment, a freer flow of capital, equitable development &
reduced poverty & soc. eco. disparities
 Underlies the importance of regional macroeco. & financial
stability, modern & competitive SMEs, development of
science and technology, food security, improved infrastructure
& communications, HRD, etc.
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 Declaration of ASEAN Concord II
(Bali Concord II) (2003)
 Seeks to bring the ASEAN Vision 2020 into
reality by setting the goal of ASEAN
Community by 2020
 ASEAN Community comprising 3 pillars;
political-security community, economic
community & socio-cultural community
 3 pillars to accelerate the establish the ASEAN
Community by 2015 agreed in Cebu,
Philippines in 2007

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 Hanoi Plan of Action (HPA)
 Launched in 1998 ASEAN Summit in Hanoi
 Time frame: 6 years (1999-2005)
 Attempts to
- strengthen macro-economic financial cooperation
- enhance greater economic integration
- promote S&T and telecoms infrastructure
- promote social development & address impact of 1997 crisis
- promote HRD
- protect environment and sustainable development
- strengthen its role in regional peace and security
- Promote awareness standing in the world community &
improve its structure and mechanism

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 ASEAN Integration in IT

 S’pore Technical Assistance to CLMV

 Asian IT Belt ( KL – S’pore – BKK –
Shanghai – Tokyo – Seoul)
 Japan’s IT Cooperation Fund ( US $ 15
million)

84
 ASEAN Economic Community (AEC)

 Extension of AFTA
 To form a single market and production base
 To form a law-based institution
 Similar to EEC in 1960s and 1970s
 Integration stage: between Customs Union and
Common Market
 Goal of AEC: 2015

85
 AEC: Historical Background
 ASEAN Summit in Kuala Lumpur in Dec.,1997, decided to transform
Asean into a stable, prosperous & highly competitive region with equitable
eco. Development & reduced poverty & socio-eco. disparities (ASEAN
Vision 2020).
 Bali Concord II (October 2003) declared the AEC shall be the goal of
regional economic integration by 2020. In addition, the Politico-Security
Community and Socio-Cultural Community are the other two integral
pillars.
 AEM, held in August, 2006, Kuala Lumpur, agreed to develop “a single
and coherent blue for advancing the AEC by 2015”.
 ASEAN Summit in Jan., 2007, in Philippines, affirmed their strong
commitment to accelerate the establishment of an ASEAN community by
2015. In particular, the Leaders agreed to hasten the establishment of AEC
& to transform Asean into a region with free movement of goods, services,
investment, skilled labour, & free flow of capital.

86
Three Pillars of ASEAN Community
 The ASEAN Security Community (focusing
on regional political & security cooperation)
 The ASEAN Economic Community (focusing
on regional economic integration)
 The ASEAN Socio-Cultural Community
(focusing on regional socio-cultural co-
operation)

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 Recommendation of Economic
Integration for AEC
 Fast-tract integration of priority sectors
 Faster customs clearance & simplified customs
procedures
 Eliminations of barriers to trade
 Accelerated implementation of the Mutual
Recognition Arrangements for key sectors (eg,
electrical and electronic equipments and
telecommunications equipments)
 Harmonization of standard & technical regulations

88
 Objectives of AEC: Vientiane Action Plan
2004-2015
 Intensify current Eco. Cooperation initiatives which
are targeted for completion on or before 2010 as well
as accelerate the integration of the 11 priority sectors.
 Remove barriers to free flow of goods, services, and
skilled labour and free floor of capital by 2015.
 Development and implement economic measures that
would put in place the essential elements for ASEAN
in function as a single market and production base.

89
 Agreement on 3 Pillars
 All Heads of ASEAN members also agree that
the ASEAN Political-Security Blueprint, the
AEC Blueprint, and the ASEAN Socio-
Cultural Blueprint.
 In addition, IAI Work Plan 2 (2009-2015), as
annexed, shall continue the Roadmap for an
ASEAN Community (2009-2015) and each
ASEAN Member State shall ensure its timely
implementation.

90
 Replace the Vientiane Action
Programme
 According to the Cha-am Hua Hin Declaration
on the Roadmap for the ASEAN Community
(2009-2015), all Heads of ASEAN states agree
that the Roadmap for an ASEAN Community
(2009-2015) shall replace the Vientiane Action
Programme.

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 AEC’s 11 Priority Sectors
 AEC’s 11 priority Sectors:
Sector Coordinator
Electronic industry Philippines
Wood-based & Automotive Indonesia
Rubber-based and Textiles Malaysia
Agri-based & Fisheries Myanmar
e-ASEAN & Health Care Singapore
Airlines and Tourism Thailand

92
 ASEAN Economic Community
Blueprint
 I. Introduction
 II. Characteristics and Elements of AEC
 A. Single Market and Production Base
 A. 1. Free flow of goods
 A. 2. Free flow of services
 A. 3. Free Flow of Investment
 A. 4. Free flow of capital
 A. 5. Free flow of skilled labour
 A. 6. Priority integration sectors
 A. 7. Food, Agriculture and Forestry

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 Characteristics & Elements of AEC
 The ASEAN Summit in 2009 launched for IAI to narrow the development
divide & enhance ASEAN’s competitiveness as a region to provide a
framework for regional cooperation.
 In 2001, Foreign Ministers adopted the Hanoi Declaration on Narrowing
the Development Gap (NDG).
 Vientiane Acton Programme 2004-2010, a medium term development to
realize ASEAN Vision 2020, highlighted the strategic importance of
narrowing the development gap to realize the ASEAN Community, and at
the IAI be strengthened to address the needs of CLMV and sub-regional
areas.
 The 13th ASEAN Summit in 2007 agreed the narrowing the gap which will
ensure the benefits of ASEAN’s integration efforts are fully realized. The
leaders realize that efforts to narrow the development gap should be
aligned with the broader aspects of ASEAN integration initiatives. With
the acceleration of realization of the ASEAN Community to 2015, these
efforts have become even more urgent.

94
 Characteristics of AEC
 1. Asean shall act to an open, outward looking, inclusive, &
market-driven economy consistent with multilateral rules,
rule-based system for effective compliance & implementation
of economic commitments.
 2. AEC will be a single market and production base making
Asean more dynamic and competitive new mechanism&
measures. And as a first step towards realizing the AEC,
Asean has been implementing the recommendation of the
High Level Task Force (HLTF) on ASEAN Integration
contained in the Bali Concord II.

95
 Cont’d:
 3. At the same time, AEC will address the development divide & accelerate the
integration of the CLMV through the initiative for Asean integration & other
regional initiatives. Other areas of cooperation are also to be incorporated such as
human resource development & capacity building , recognition of professional
qualifications, closer consultation on macroeconomic & financial policies, trade
financing measures, enhance infrastructure & communications connectivity,
development electronic transactions through e-Asean; integrating industries across
the region to promote regional sourcing; and enhancing private sector involvement
of the building of the AEC.
 4. Based on the above & taking into consideration the importance of external trade
on Asean & the need for the ASEAN Community as a whole to remain outward
looking, the AEC envisages the following key characteristics: (a) a single market &
production base, (b) highly competitive economic region, © a region of equitable
eco. development, and (d) a region fully integrated into the global economy. These
characteristics are inter-related and mutually reinforcing, incorporating the required
elements of each characteristics in one Blueprint shall insure the consistency &
coherence of these elements as well as their implementation & proper coordination
among relevant stakeholders.

96
 Single Market & Production
Base
 An Asean market & production base shall
comprise 5 core elements: (i) free flow of
goods; (ii) free flow of services; (iii) free flow
of investment; (iv) free flow of capital; & (v)
free flow of skilled labour.
 In addition, the single market & production
base also include 2 important components,
namely, the priority integration sectors, &
food, agriculture and forestry.

97
Elements of AEC (A): Single Market
& Production Base
A.1. Free flow of goods
A.2. Free Flow of Services
A.3. Free Flow of Investment
A.4. Free Flow of Capital
A.5. Free Flow of Skilled Labour
A.6. Priority Integration Sectors
A.7. Food, Agriculture and Forestry

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 Elements of AEC (B): Competitive
Economic Region
B.1. Competition Policy
B.2. Consumer Protection
B.3. Intellectual Property Rights (IPR)
B.4. Infrastructure Development
B.5. Taxation
B.6. E-Commerce

99
 Elements of AEC ©: Equitable
Economic Development
C.1. SME Development
C.2. Initiative For ASEAN Integration (IAI)

100
 Elements of AEC (D): Integration
Into the Global Economy
D.1. Coherent Approach Towards External
Economic Relations
D.2. Enhanced Participation in Global Supply
Networks

101
 III. Implementation
 A. Implementation Mechanism
 B. Resources
 C. Communications
 D. Review

102
 Strategic Schedule for AEC
 Please see Roadmap for an ASEAN
Community 2009-2015: One Vision, One
Identity, One Community, ASEAN
Secretariat, 2009, p. 41-65

103
 Hope
 AEC may be fully implemented in
2015 to widen and deepen the
ASEAN economic integration.

104