3.3 The ASEAN Economic Community (AEC) from the 2007 Blueprint to ASEAN Vision 2025

3.3

The ASEAN Economic Community (AEC) from the 2007 Blueprint to ASEAN Vision 2025

The scope and intensity of the ASEAN integration counts on the success of the formal and informal cooperation under the framework of all three ASEAN pillars, namely the ASEAN Political-Security Community (APSC), the ASEAN Economic Community (AEC), and the ASEAN Socio-Cultural Community (ASCC). The launch of the AEC, in particular, has had major implications on the regulatory regimes and joint actions on cross-border facilitation of trade in goods, services, and the movement of people in the region. Furthermore, as the goal of the Economic Community is the realization of the ASEAN single market, it can be observed that AEC rules and policies, in comparison with agreements under the other two pillars, have a tendency to impact on the regional economic supply chains and markets. Such dynamics could affect the operations of organized criminal groups in the region. Bearing this in mind, in this Chapter, we mainly focus on the development of the AEC and its consequences.

The economic integration among ASEAN members started in 1992 with the agreement which established the ASEAN Free Trade Area (AFTA) aiming at tariff elimination251 to fulfil the ultimate goal of a single market and production base. Freer flows of capital and senior professional expertise were also encouraged with the ASEAN Investment Area (AIA), effective in 2010.252 The AEC Blueprint 2015 (adopted in 2007) took more decisive action, going beyond trade and investment facilitation. The establishment of the ASEAN Economic Community (AEC) in December 2015 will, according to the Blueprint, transform the ASEAN region into a single market that is moving towards free movement of goods, services, investments, skilled labour, less restricted flow of capital,253 enhanced infrastructure and communications connectivity, and development of electronic transactions.254 One of the most outstanding changes under the AEC is the establishment of Mutual Recognition Arrangements (MRAs) that will standardize qualifications for eight categories of professionals, allowing for their mobility within the region, namely: engineering services; nursing services; architectural services; surveying services; dental practitioners; medical practitioners; accountancy services; and tourism professionals.

251 ASEAN Economic Community Blueprint 2025. Retrieved from http://www.asean.org/storage/images/2015/November/aec-page/AECBlueprint-2025-FINAL.pdf 252 Master Plan on ASEAN Connectivity. (2011). ASEAN, Jakarta. Retrieved from http://www.asean.org/storage/images/ASEAN_ RTK_2014/4_Master_Plan_on_ASEAN_Connectivity.pdf 253 Ibid., 11-15. 254 Master Plan on ASEAN Connectivity. (2011). ASEAN, Jakarta, 18. Retrieved from http://www.asean.org/storage/images/ASEAN_ RTK_2014/4_Master_Plan_on_ASEAN_Connectivity.pdf

With a combined GDP of 2.6 trillion USD, the ASEAN Community is the seventh largest economy in the world and the third largest economy in Asia, following China and Japan. The ASEAN Community is also the third largest market in the world with 622 million people, of whom nearly half are younger than 30 years old. In the period 2007-2014, the region registered a trade increase of one trillion USD, with intra-ASEAN trade representing the largest share of this trade, followed by China, the European Union, Japan and the United States as key trading partners. Over the same period, the region recorded a sharp increase in foreign direct investment (FDI) inflows. The 136 billion USD in FDI attracted by ASEAN in 2015 accounted for 11% of global FDI inflows; European Union countries were the highest source of investment in the region, followed by intra-ASEAN flows. Finally, the region experienced a significant rise of visitor arrivals, increasing from 62 million arrivals in 2007 to 105 million in 2014; nearly half of these were intra-regional movements.255 These figures clearly indicate that the AEC Blueprint economic, financial and connectivity policies implemented towards the establishment of the Economic Community translated into a significant growth of goods, capital and people’s circulation within and to the region.

At the launch of the AEAN community in December 2015, ASEAN endorsed the AEC Blueprint 2025 to set the agenda for deeper and more cohesive economic integration. This Blueprint provides for the implementation of a more unified market by further reducing barriers that impede the seamless flows of goods, services as well as the movement of people. Included among key measures are the realization of National Single Windows, and the simplification of administrative regulatory regimes, documentary requirements as well as customs procedures. It is envisaged that the streamlining of rules and procedures could lead to better harmonisation of practices and greater transparency. Yet at the same time, such dynamics could expose the region to the challenges posed by transnational organized crimes and illicit economic activities.

255 Tariff elimination is regulated by the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area (CEPT-AFTA) embodied in the ASEAN Trade in Goods Agreement (ATIGA).