Asean to declare economic union
KUALA LUMPUR, Malaysia—The leaders of Southeast Asia will formally declare their diverse region is now an economic community that in some ways resembles the European Union, but they have a long way to go before the project becomes fully functional. The declaration will be made at a weekend summit that will also focus on the long-seething maritime rifts in the South China Sea and terrorism.
After 12 years of hard work and five years earlier than initially planned, an integrated region will debut this weekend as the leaders of the Association of Southeast Asian Nations launch the Asean Economic Community (AEC) at the 27th Asean Summit in Kuala Lumpur, Malaysia.
Founded in 1967, Asean groups the Philippines, Malaysia, Indonesia, Singapore, Thailand, Brunei, Cambodia, Laos, Burma (Myanmar) and Vietnam.
“With the launch of the Asean Economic Community, Asean will become a full-fledged politically cohesive, economically integrated, socially responsible community,” Asean Secretary General Le Luong Minh said in a statement.
Overall implementation of the AEC Blueprint is 92.7-percent complete as of last Oct. 31, according to a report from the Jakarta-based Asean Secretariat.
This means that 469 of 506 measures required to build the AEC—as listed in the blueprint—have been achieved.
The 10 leaders of Asean will also hold talks with their counterparts from eight other countries, including US President Barack Obama of the United States. A look at the key topics in the meetings:
Asean leaders will on Sunday formally launch the Asean Community that has been 10 years in the making, encompassing three key pillars: economic, political-security and socio-cultural.
Asean is scheduled to formally sign on Sunday a charter to announce the creation of the AEC. It will become a formal entity on Dec. 31.
The transformation of the disparate region into a unified market forms the core of the community. The Asean Economic Community, or the AEC as it is known, is aimed at bolstering the region’s economic clout and counterbalance a rising China and an America that is increasingly assertive in Asia. It goes beyond liberalizing trade in goods. Services, investment, skilled labor and capital will also be allowed to move across borders more freely, a landmark step in economic cooperation for the region.
In one key development, easing restrictions on work visas will make it easier for people from one country to seek employment in another, but so far it applies only to eight professions, including medical, accounting, engineering and tourism.
Who are in the community?
Its members are the 10 Asean countries with a total population of more than 600 million people, larger than either the European Union or North America. Asean was set up in 1967 as a bulwark against communism in the Cold War era but it was only in the last two decades that attention shifted to economic integration. A wide economic gulf divides Southeast Asia’s rich and middle-income economies—Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines—and its four less developed members, communist Vietnam and Laos, Burma and Cambodia.
Unlike the European Union, the 10 members will maintain their economic and financial independence. There will be no central agencies such as a common central bank, parliament or court as in Europe, and no common currency. The AEC is based more on consensus than creating overarching institutions that take on some of the powers of member governments.
Changes will not be abrupt because many of the targets have been implemented gradually over the last five years. While tariff on most goods traded in the region have been largely eliminated, Asean still falls short on more politically sensitive areas of reform such as opening up protected sectors like agriculture, steel and motor vehicles. Intra-regional trade has remained around 24 percent for the past decade, far lower than 60 percent in the EU.
The Asian Development Bank in a research paper earlier this year warned that creating a fully functional economic community by Dec. 31 is impossible. Southeast Asian officials, however, stress that the formation of the AEC is not the destination but a journey to deeper integration.
They say more work is required on domestic reforms, infrastructure and strengthening skills. Efforts must also be made to address trade and investment impediments, nontariff barriers and other regulatory hindrances that are increasingly replacing tariffs as protective measures for some industries. At the same time, government corruption and unreliable courts in the region also create roadblocks to trade because they make contracts hard to enforce.
South China Sea
The maritime conflict in one of the world’s busiest waterways has long been a sore point in the region. China claims most of the South China Sea, creating a fault-line in relations with its regional neighbors. Taiwan and Asean members Brunei, Malaysia, the Philippines and Vietnam also have overlapping claims across the sea. The Philippines and Vietnam in particular have been at odds with China over the region in recent years, with diplomatic squabbles erupting over oil and gas exploration and fishing rights.
Through land reclamation, China has created artificial islands from reefs to bolster its claims. At the Asia-Pacific Economic Cooperation leaders’ summit in Manila earlier this week, Obama renewed calls for China to halt land reclamation, construction and militarization in the disputed area, and is expected to repeat the same message at the Kuala Lumpur meetings.
Fight against terror
Asean and its partners are expected to increase commitment and cooperation in the war against terrorism following last Friday’s deadly attacks by the Islamic State extremist group in Paris, which killed at least 129 people and wounded hundreds.
Malaysian Deputy Prime Minister Zahid Hamidi this week voiced concerns that the simultaneous bombings at a stadium, concert hall and cafes in Paris could spark copycats in the region.
Security measures have been enhanced for the regional summits in Kuala Lumpur, with checks stepped up at all entry and exit points to the country. Some 10,000 police and army personnel have been deployed at the meeting venue, hotels and other strategic locations in the city. The US, China and Russia have been given permission to bring their own armed security teams.
The head of the Asean Secretariat on Friday said the region needs a legally binding agreement to ensure that a maritime dispute with China is resolved peacefully, because an existing declaration of amity has proved to be useless.
The 10 Asean members and China signed the declaration, known by its acronym DOC, in 2002, promising in good faith to resolve their territorial and jurisdictional disputes by peaceful means, without “resorting to the threat or use of force.”
But, according to Asean Secretary General Minh, “the DOC has never been fully and effectively implemented and that’s why we need a new agreement which would be legally binding.”
He said such an agreement should be capable of not only preventing but also managing incidents such as “the ones that have been taking place.” He did not name China but was referring to Beijing’s recent land reclamation and the construction of artificial islands in the South China Sea.
4th largest market
Addressing a business conference on Friday, Malaysian Prime Minister Najib Razak said Southeast Asia will be the fourth-largest market in the world by 2050, with the formation of a regional economic community.
“The coming into being of the Asean community marks a new beginning for more than 630 million people, the birth of an integrated region an entity that is a global economic force,” he said.
He said that last year, collective foreign investment in the region hit $136 billion, more than in the US or China. He said Asean is expected to post an average annual GDP growth of 5.6 percent through to 2019.
Najib said the AEC will benefit poor and unskilled workers. He said strong economic growth and an inflow of foreign direct investments have created jobs, with the average Asean unemployment rate at a low of 3.3 percent.
He said there are huge opportunities for skilled workers, as countries look to grow from higher value-added activities and knowledge-based sectors.
Najib said there is still more work to be done, as creating an integrated economic community cannot be done overnight. AP with a report from Ronnel W. Domingo
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