The AEC and Domestic Challenges in Malaysia: Examining the Liberalization of Services in AFAS

As the end of 2015 draws nearer, the prospect of meeting all the goals of the ASEAN Economic Community (AEC) Blueprint appears dimmer by the day. The literature identifies two prominent gaps in ASEAN’s journey towards an economic community as defined by its own vision. First, the extensive literature on the AEC, and this includes the scorecard designed to monitor the implementation of its goals, suggests that there appears to be a gap between commitments and the achievements of the AEC Blueprint targets. Second, attaining a “free flow of services” as stated in the AEC goals, is also hampered by a gap between commitments in liberalization and actual practice. The objectives of this paper are twofold. First, it seeks to review the gap between commitments and practice in Malaysia. Second, it aims to examine domestic conflicts that may constrain Malaysia’s services liberalization efforts in ASEAN. A key question considered in the analysis is the source or sources of these conflicts. Is the conflict confined to the private sector or is the government conflicted from within in terms of services liberalization? In other words, are there certain policies that may negate or off-set liberalization efforts? The key finding in this paper shows conflicting objectives in government policies to be the main reason for the slow pace of liberalization thus far.