2025 integration vision needs a reboot

This article is more than 12 months old

Asean Economic Community hindered by different levels of development and priorities

Asean has just turned 50 and is almost a household name today, both within and beyond Asia.

Established in 1967, Asean's initial focus was on politico-security issues.

Its proactive engagement with the region has contributed to sustained peace and stability in South-east Asia.

Asean's greatest economic achievement has been tariff reduction. On average, Asean's 10 member states have cut 96 per cent of tariff lines to zero per cent, and this share is expected to reach 98.7 per cent next year.

Asean's commitment to open regionalism has seen its original member states voluntarily multi-lateralise their trade preferences by also offering them to non-members.

Today, more than 90 per cent of tariff lines offer the same rate to both members and non-members. And more than 70 per cent of intra-Asean trade travels at the Most-Favoured Nation rate of zero.

So what does the future hold for Asean? More specifically, will it achieve its goal of regional economic integration?

Promoting integration in such a diverse region is a difficult challenge, and even harder today given rising pressure globally to adopt inward-oriented trade policies.

The Asean Economic Community (AEC) was not realised by 2015 as initially hoped.

Asean deferred 105 of the 506 required measures, and moved the deadline to 2025. A successor blueprint called the AEC Blueprint 2025 was adopted at the 27th Asean Summit in November 2015.

One objective of the AEC Blueprint 2025 is to complete the unfinished business of regional integration. This includes trade liberalisation, as low tariffs have been partially offset by a rise in non-tariff measures, which increased by more than three-fold between 2000 and 2015.

Pursuing behind-the-border reforms and policy harmonisation is critical to Asean's future economic prosperity.

But it has proved challenging, due largely to differing levels of development and the sometimes-divergent priorities of countries in the region.

The result has been delays in implementing initiatives such as national single windows allowing traders to clear cargo by providing all required information to just one agency, and their integration into an Asean window covering the entire region.

Will AEC 2025 be enough to deliver a "deeply integrated and highly cohesive Asean economy" - as its vision statement proposes?

That will depend largely on whether Asean can do more to encourage compliance with its reform agenda among member states.

AEC 2025 has five broad goals to increase integration, competition, connectivity, inclusion and globalisation.

It focuses on more difficult areas of reform such as reducing non-tariff measures, simplifying rules of origin determining where a product comes from, and deepening trade facilitation measures.

There are plans to push ahead with a new Asean Trade in Services Agreement, including a review of flexibilities that allow Asean countries to implement commitments in line with their own priorities.

The new blueprint places greater emphasis on harmonising standards and regulations.

Its chances of delivering its agenda may depend on whether it can reboot its approach to galvanise the region and provide fewer opportunities for non-compliance.

Jayant Menon is lead economist in the Economic Research and Regional Cooperation Department at the Asian Development Bank (ADB). Anna Cassandra Melendez is a consultant at ADB. This article was published in The Business Times yesterday.