AEC: All talk and no do

AEC: All talk and no do


Samantha Deave, Corporate Services Manager

There was some frustration at the World Economic Forum on ASEAN last week as discussion continued on the opportunity of the ASEAN Economic Community (AEC) but lack of movement on the agreement.

‘Enthusiastic but pessimistic’ was the general rhetoric coming out of the discussion. The AEC was launched in 2015 and was seen as a milestone for the region. With a blueprint for 2025, the AEC was meant to push the ASEAN region towards a globally-competitive single market and production base, with a free flow of goods, services, labour, investments and capital across the 10 member states.

Member states, however, have struggled to work within the AEC integration timetable and multinational companies still tend to approach the ASEAN region by individual nation. The ASEAN Single Window, a regional initiative to allow free movement of goods across borders, has been achieved, but otherwise progress is slow. Of particular note is the rise in non-tariff measures (NTMs) across the region since 2015. While tariffs have been reduced by about half, the number of NTMs has risen from around 1,600 to more than 5,970. This increase is often blamed for ASEAN’s lack of integration.

According to the United Nations Conference on Trade and Development (UNCTAD), the exact impact of NTMs on trade flows is not well understood, despite their growing importance on regulating trade. UNCTAD says there is an urgent need to develop better understanding and transparency of existing NTMs.

Furthermore, the ASEAN Secretariat lacks financial and human capital, weakening its power to pull the AEC along. Without a strong central body at the helm, the region can only proceed at the behest of national governments, and a common vision between every ASEAN country can be difficult to reach.