With the formation of the ASEAN Economic Community, a US$2.2 trillion regional trade jackpot is up for grabs. But while progress has been made since the commencement of the project in 2007, significant hurdles to achieving full economic integration within 10 years remain.
In the opening session at the Bloomberg Live ASEAN Business Summit 2015, Bloomberg Television’s South-East Asia Correspondent Haslinda Amin discussed the challenges and opportunities further integration will bring with a panel of market experts: Noni Purnomo, President Director at Blue Bird Group; Chartsiri Sophonpanich, President of Bangkok Bank; Michael Zink, Head of ASEAN with Citi; and Wouter Van Wersch, President & CEO of GE, ASEAN.
Here are the highlights from their conversation:
Regional integration won’t arrive with a ‘big bang’
Progress toward economic integration is happening at a slower pace than many private enterprises would like, with ASEAN’s leaders on Nov. 22 signing a document declaring the establishment of the ASEAN Economic Community from Dec. 31, even as the target of achieving free movement of goods, services and skilled labor was missed.
Nevertheless, the effort is achieving what was expected, with tariffs all but eliminated, common standards (such those already implemented in the bond market) coming into force and governments committed to further progress. Integration will gradually gain traction and international investors need to manage their expectations, with the 2015 establishment of the AEC one step in an evolutionary process, rather than a ‘big bang’.
Gaining public acceptance will be key
While small businesses make up 50% of ASEAN GDP and provide 90% of employment, survey data suggest 90% of SMEs are completely unaware of the AEC. What public knowledge there is often comes with a fear that integration will lead to unemployment or other losses. Governments need to balance pushing through the necessary reforms to achieve a trading bloc that would be larger than the EU with carrying public opinion and educating local populations on the opportunities that a single market can bring.
Mobile technology is as important as labor mobility
In an economic region of 600 million people, just 1.5% of the working population has crossed borders within ASEAN to find work. Smoothing the bureaucratic barriers to movement will also require standardizing credentials to allow qualified professionals to more easily gain employment in another nation. While some companies will always need to physically move people, the advances in networking and technology since ASEAN laid out the road map to integration in 2007 mean that services and knowledge can now easily be transferred across borders, enabling the formation of regional cognitive supply chains.
Private enterprise wants to know where it stands
While national governments are the drivers of integration, private companies stand ready to help turn ambition into workable standards and transparent regulations, offering knowledge and expertise gained from years of trying to deploy their products in diverse markets and cultures. The AEC will give ASEAN a presence in the global economy that will enable it to act as a counterweight to China and India in the coming decade, but attracting international and regional investment will depend on whether ASEAN can offer a stable regulatory environment alongside a clear framework for future integration.
Source: http://www.bloomberg.com/
Key words: ASEAN 2025, Global growth engine, or wasted opportunity
