ASEAN Economic Community 2015 Deadline May Not Be Met

April 7, 2014 Posted by ASEAN Briefing Reading Time: 3 minutes

SINGAPORE – Business leaders at the Euromoney ASEAN conference in Jakarta last week gave a pessimistic view over whether or not the ASEAN Economy Community (AEC) deadline, by which all member countries have to be in tariff compliance, would in fact be met on time. While the bigger ASEAN nations are already in compliance with planned tariff and other economic reforms, Cambodia, Laos, Myanmar and Vietnam may need more time to get up to speed. The deadline of December 31, 2015, effectively allows free trade throughout the ASEAN region, and therefore full compliance with important free trade agreements, such as those with China, India, Japan and South Korea.

The Asian Development Bank (ADB) also warned late last year in their Asian Economic Integration Monitor October 2013 that the AEC will fall short of its goals by the 2015 deadline. With less than two years to go till the December 31 deadline, many are still wondering whether the AEC will become a reality. As former ASEAN secretary-general Rodolfo Severino stated, could “regional economic integration [become] stuck in framework agreements, work programmes and master plans, with little real movement on the ground?”

One of the questions raised in the ADB report concerned the significant commitments under the AEC Economic Blueprint, highlighting a number of core elements under these pillars that should be prioritised.

“These cover a host of policy issues (non-tariff barriers, competition policy and intellectual property rights, FTAs), sectoral issues (services, investment), and institutional and governance aspects (dispute settlement mechanism, strengthening monitoring of implementation), among others,” said the report.

The report further stated that “the deadline for realizing the AEC is December 2015. Merely 2 years away – and given all the remaining obstacles and challenges – fully achieving the AEC by the end of 2015 seems highly improbable.”

“Therefore, it is best to view 2015 as an important milestone, and just one – but major – step in establishing an integrated ASEAN economic community,” the report further stated.

“Although often constrained by powerful domestic political and economic lobbies, ASEAN’s leaders need to ensure those in charge of implementing AEC commitments have the power to do so,” it continued. “How close it gets to these targets will depend on the progress of reforms in the next 2 years.”

Chris Devonshire-Ellis, Founding Partner of Dezan Shira & Associates, stated that “the important member to watch here is Vietnam. They have already shown determination to win business from China by implementing income tax reductions, and I feel they are likely to reach compliance. However, reform in countries such as Cambodia, Laos and Myanmar will take time, and these nations may hold back the full integration deadline. I do not see this as so much as a concern, however, as most of the key nations are already in compliance. While trade remains relatively small in Cambodia, Laos and Myanmar, the impact on any incomplete integration by them will be minimal.”

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