Southeast Asia is set to be an integrated economy under the ASEAN Economic Community (AEC) by the end of 2015. Our Head of APAC gives an update on the progress of the integration.
Last year, ASEAN member states sailed through the gloomy global economic outlook and expanded 4.4%. The region's economy is expected to exceed the projected average global economic growth of 3.5% by growing another 4.9% this year.
The strong growth in ASEAN is driven by strong domestic consumption and solid inbound Foreign Direct Investment (FDI). The region attracted a total of US$136.2bn in FDI (a 15.7% increase from 2013) and overtook that of China for the second consecutive year. Going forward, FDI inflows to ASEAN will continue to be robust as a result of the ASEAN Economic Community (AEC) implementation.
The integration of ASEAN economies through the establishment of the AEC on 31 December 2015 is expected to further unlock the growth potential of the region. The idea is to create an integrated ASEAN community that would bolster the region's economic competitiveness.
An update on the progress of the AEC was provided in the ASEAN Summit held in Kuala Lumpur last week. To date, 458 out of the total 506 high-priority measures outlined in the AEC roadmap have been fully implemented across all ASEAN countries. This took the AEC's completion rate to 90.5%.
For the remaining deliverables, the ASEAN Economic Ministers' (AEM) has been tasked to identify, prioritise and implement measures that carry the highest economic impact in a bid to achieve 95% implementation rate by year-end. This does mean that ASEAN is not targeting a full implementation of the AEC.
However, the member states are satisfied with the progress of the AEC as various measures on economic liberalisation and investment facilitation have started to bear fruits – seen in the solid FDI inflows and booming domestic economy.
Local small and medium businesses in ASEAN are benefitting from the AEC preparations as integration gives them more flexibility and convenience when investing in regional peers. These measures include tariff elimination, unification of technical regulations and standards, streamlining of customs procedures and the Mutual Recognition Arrangements on the mobility of skilled workers within ASEAN. The intra-ASEAN trade has been rising gradually from about 10% (20 years) of the region's total to 24% today.
ASEAN's leaders have displayed their commitment in realising the AEC for the common good of the region in the recent summit. Let's see what the future holds for the region when the Post-2015 Economic Vision and Plan unfold in July.
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