The 2nd ASEAN Reader

103. Towards an ASEAN Economic Community

Towards an ASEAN Economic Community 503 By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville 103. TOWARDS AN ASEAN ECONOMIC COMMUNITY HADI SOESASTRO Reprinted in abridged form from Hadi Soesastro, “ASEAN Economic Community: Concepts, Costs and Benefits”, Paper prepared for the ASEAN Roundtable 2003 on “Roadmap to an ASEAN Economic Community”, Institute of Southeast Asian Studies, Singapore, on 20–21 August 2003, by permission of the author and the Institute of Southeast Asian Studies. The significance for ASEAN to make a timely move towards deeper economic integration is without any doubt. ASEAN members have realized that they have a much greater chance to maintain their international competitiveness if they work together towards the creation of an integrated market. This led to the historic decision in 1992 to form AFTA. A decade later, with the AFTA project already implemented in the older ASEAN members, it has become all the more important for the group to deepen and accelerate regional economic integration. ASEAN’s position in the regional and global stage had been adversely affected by internal and external developments during the past few years. The challenge faced by ASEAN is not simply to restore its position or to catch up with the rapid progress in the region and the world. It needs to stay ahead of the curve. Deepening and accelerating regional economic integration will significantly elevate ASEAN’s attractiveness as a global production base. Economic integration will also contribute to regional cohesion. This will strengthen ASEAN’s bargaining power and geopolitical influence. Deeper economic integration has been a key element in the grouping’s growing trade and economic ties with extraregional countries. These ties will be further strengthened by the development of closer economic partnerships, including free trade agreements, between ASEAN and a number of its trade partners. The ASEAN-China Comprehensive Economic Cooperation Framework Agreement is the first such initiative that will be followed by similar ones with Japan and other countries or group of countries. In East Asia, ASEAN may even be placed in the position of becoming a “hub”. This is a very strategic and potentially powerful position. It will gain this position perhaps by default as none of the other East Asian economies can gain such a leadership position. The study by the ASEAN Secretariat, Towards a Single Economic Space, made the point that ASEAN’s closer economic partnerships and free trade 103 AR Ch 103 22/9/03, 1:03 PM 503 504 Hadi Soesastro By: ROS Size: 7.5" x 10.25" J/No: 03-14474 Fonts: New Baskerville arrangements with key trade partners are expected to accelerate ASEAN’s own economic integration towards a single economic space in the global economy. The creation of an ASEAN Economic Community in 2020 is a feasible proposition. As stated before, the AEC should be seen as a logical extension of the various initiatives taken and implemented by ASEAN thus far towards greater economic integration. It is the next logical step for ASEAN to take. However, this next step requires strong and firm commitments by ASEAN members to move forward in a credible and timely manner. This can be aided by a clear articulation of the ultimate form of integration as well as the appropriate path to achieving it. Equally important is a commitment by ASEAN members to embark on greater institutional integration. The following discussion on those main elements in the development of an ASEAN Economic Community is based on the ASEAN ISIS Report referred to earlier (ASEAN-ISIS 2003). This Report has also benefited from the ISEAS study (ISEAS 2003). The Report began with a discussion of the ultimate form of integration. It then examined the path towards deeper integration and the institutional design to successfully carry it out, taking into consideration the political factors that are likely to be at play. The Report noted that in a sense ASEAN members have already committed themselves to deeper economic integration. The ASEAN Vision 2020, adopted by ASEAN leaders in 1997, envisaged the creation of “a stable, prosperous and highly competitive ASEAN Economic Region in which there is a free flow of goods, services and investment, [and] a freer flow of capital .....” The ultimate form of integration as proposed in the ASEAN ISIS Report is the creation of a fully integrated market (a Common Market) in 2020 but takes into account areas where members reserve deeper integration for a later stage (beyond 2020). It suggests that ASEAN adopts a “Common Market...