Expanding Common Market for ASEAN Economic Community

10:00:15 AM | 1/22/2020

To successfully build the ASEAN Economic Community (AEC), ASEAN countries need to effectively execute strategic solutions for AEC development in 2016-2025 to address all challenges faced by ASEAN.

ASEAN is the 5th largest market in the world, with a total GDP of nearly US$3,000 billion, a population of over 650 million people, and a strategic location in the Indo-Pacific region. This region plays the most important role in the global economy because it is not only a hub of transport and logistics, but also an area with various natural and human resources and dynamic economic development.

The launch of the ASEAN Economic Community (AEC) in 2015 marked an important moment of ASEAN. The action plan towards the AEC 2025 approved by the ASEAN leaders at the ASEAN Summit 2015 paves the way for strategic solutions for AEC development from 2016 to 2025 with the aim of forming a community with five characteristics: (1) A highly integrated and cohesive economy; (2) A competitive, innovative, and dynamic ASEAN; (3) An enhanced connectivity and sectoral cooperation; (4) A resilient, inclusive, people-oriented, and people-centered  ASEAN; and (5) A global ASEAN.

However, to successfully carry out the AEC in a sustainable manner, we need to address some challenges:

1. ASEAN depends too much on external partners. ASEAN’s intra-regional trade currently accounts for less than a quarter of its total trade. Shrinking global trade and unfinished U.S.-China trade tensions will further affect ASEAN's economy. Trade barriers among ASEAN countries are still too large. These risks also lead to trade disputes between countries.

2. Productivity and efficiency of ASEAN economies is not as competitive as other developed regions. ASEAN economic growth is mainly driven by low labor costs and natural resources.

3. The mechanism for administering ASEAN cooperation programs has revealed shortcomings, especially the ASEAN-style consensus mechanism. The ASEAN-style mechanism must ensure consistence with regional diversity on the one hand and also ensure the effective progress-based implementation of integration commitments.

4. Trade costs are high as a result of unequal infrastructure development among countries such as lack of road, railway, airway and maritime cross-border connections.

5. The Fourth Industrial Revolution is likely to increase unemployment, accelerate labor mobility and economic sectors when digital technologies and artificial intelligence are adopted. This is not a small challenge for ASEAN.

Obviously, to successfully build the AEC, ASEAN countries need to effectively carry out strategic solutions for AEC development in 2016-2025 to overcome challenges faced by ASEAN. In particular, trade and deep development of an ASEAN common market will be the key to the future of the Association of Southeast Asian Nations to form a sustainable AEC. To do so, ASEAN needs to gradually remove intra-regional trade barriers, develop infrastructure connectivity, enhance 4.0 scientific and technological applications and perfect the ASEAN-style mechanism in the new situation.

Realizing opportunities and challenges of regional and international integration and adopting effective solutions for AEC development will create basic motivations for ASEAN towards a sustainable AEC. That certainly contributes to realizing the expectation that ASEAN will become the fourth largest market in the world and play a central role in global import and export ahead of its 60th founding anniversary.

Dr. Doan Duy Khuong,
Vice President of VCCI, Chairman of asean bac