ASEAN Secretary-General: regional economic integration is on target

The goal of regional economic integration in the Association of Southeast Asian Nations (ASEAN) – the ASEAN Economic Community (AEC) – will be realised by 2015 even though not all the measures will be implemented, the ASEAN Secretary-General says.

Mr Minh was a keynote speaker at Asia House at the conference ‘ASEAN Strategy-Seizing the New Regional Opportunity,’ which was held in partnership with KPMG.

However, whether the integration goes far enough to convince EU officials to resume negotiations on the FTA with ASEAN hangs in the balance as an European Commission representative, also at the conference, said the EU wanted to see further integration in ASEAN.

Yet HE Le Luong Minh was confident the deadline would be achieved. “We shall launch the AEC by the end of this year as it has been determined,” he said in an interview with Asia House on the sidelines of the conference.

Mr Minh said that so far 91 per cent of the total of 506 measures of the AEC had already been achieved since the AEC Blueprint was formalised in 2008. “The focus in the remaining six months or so will be the implementation of 54 high priority measures, which were identified by the ASEAN Economic Ministers,” he said.

“Implementing the AEC does not mean that 100 per cent of the 506 measures have to be implemented, but most of them, including the 54 high priority ones, such as customs integration, financial integration, transport should be,” he said.

He admitted that customs integration has proved to be one of the hardest measures to implement because it involved lots of processes and changes of law in each country.

“These high priority measures are the key deliverables with the highest trade impact which can be realistically implemented within the year. The remaining AEC measures that are deemed to be vital to deeper regional integration will be addressed and given priority under the post 2015 agenda,” he explained.

He said that full implementation of all Blueprint measures by the end of 2015 was “not realistic as the context had evolved, unanticipated external factors came to play and processes and institutions took longer to deliver than expected.”

“The implementation of the AEC measures does not mean a single economic entity by 1 January 2016, rather it sends a strong signal that rules, frameworks and measures are being put in place, from which the region can move forward as a true economic community. Community building itself is an ongoing endeavour, rather than a static goal, which requires continuous reinvention in the constantly evolving global context for the region to remain relevant,” he explained.

He said that countries like Indonesia had a “high stake in integration” and admitted there had been talks among some ASEAN officials of dropping some measures which were “merely aspirational in nature.”

He said that a ‘successor’ to the AEC Blueprint was being developed which would outline the strategic measures for the AEC for the coming decade, while at the same time take into consideration any remaining key measures under the AEC 2015 within a “renewed, updated vision of the AEC.”

Representatives from multinationals who were panellists at the conference said they were not fussed about the exact date of the AEC implementation.

Sean Severn, Head of Markets at KPMG in Thailand, Myanmar & Laos said: “It’s not in the spirit of countries coming together if we focus on a deadline. It’s quite new for them to come together in this way. A lot has been achieved and we are going in the right direction.”

Sean Severn, Head of Markets at KPMG in Thailand, Myanmar and Laos, discusses the direction KPMG is taking in ASEAN. Copyright Miles Willis Photography

Tom Homer, CEO EMEA and Americas at Telstra, said he would like to see the AEC implemented as soon as possible to keep things simple but he said there was no need to “fixate on a date when you can get most of the benefits now. It does not dictate our strategy.”

Vasuki Shastry, Global Head of Public Affairs at Standard Chartered Bank, said “ASEAN has younger and newer leaders who are less insecure about non-tariff barriers. Political will will drive this so I am very hopeful.”

However the lack of integration is still holding back talks being resumed on the EU-ASEAN FTA. Negotiations for an EU-ASEAN FTA were launched in 2007 with seven ASEAN Member States but both sides agreed to pause the negotiations in March 2009. Instead the EU started bilateral FTA negotiations with Singapore and Malaysia in 2010, with Vietnam in June 2012 and with Thailand in March 2013. The European Commission finalised the negotiation of a bilateral FTA with Singapore in October 2014. The EU is also negotiating an investment protection agreement with Myanmar.

It was widely expected that negotiations for an EU-ASEAN FTA would resume after the implementation of the AEC at the end of this year.

Marjut Hannonen, Adviser at the Directorate General for Trade of the European Commission, who was a panellist at the conference, said the EU remained cautious in the immediate future about an EU-ASEAN FTA as the EU Commission was not convinced that the ASEAN region was fully integrated yet.  She said: “We will not hop into this and fail one year later. We will need to be sure it will succeed.  We tried it in the past and it did not work out. Every country in ASEAN is slightly different,” she said.

“It is not easy to regulate when all the countries are so different and regional integration is not there yet, so that is why we have started negotiations country by country but we would like to do it when there is enough regional integration.

“We have the impression that a lot of work needs to be done on the AEC. EU Trade Commissioner Cecilia Malmström met ASEAN Economic Ministers in April and both sides agreed to explore the possibility of resuming negotiations. Senior Officials of ASEAN and EU will meet towards the end of the year to take stock and explore the way forward.  It would depend on the level of ASEAN integration, what status the bilateral ones are and what the added value of a regional approach is. There is no automatic approach that in 2016 this FTA will happen.”

The publication MNCs in Southeast Asia –The view of multinationals in ASEAN was launched at the conference.

The report contains insights from CEOs from some of the world’s leading multinationals with a presence in ASEAN. They discuss how to successfully execute in ASEAN, where to centralise operations and where to localise, where the AEC is likely to provide immediate gains and where the obstacles remain and what the future holds for multinationals in the ASEAN region.

It can be downloaded here.

naomi.canton@asiahouse.co.uk

Gregory Domingo, the Philippine Secretary of Trade and Industry, will brief corporate members on the trade and investment environment in the Philippines on 18 June. To find out more click here.  He is also the keynote speaker at our investment business conference being held the same day ‘The Philippines: Asia’s Bright Spot.’ To find out more click here.