AEC is a work in process
Not a day passes in the Philippines when there is no conference, meeting, workshop or academic lecture on the planned Asean Economic Community (AEC), which is targeted for 2015. I myself have been actively talking about the AEC in investment road shows both in and outside the Philippines. My most recent audience was a group of yuppies in their twenties who wanted to know what the AEC would mean to their future careers in business and other professions.
It is for the members of this twentysomething generation that the AEC will blossom from today’s work in process to a fully developed common market in the next 20 years. By the time they reach the peak of their professional life, the AEC will be what the European Economic Community (EEC) is today, with all its strengths and weaknesses.
I made it clear to my audience that the year 2015 is not to be given any special significance. Economic integration will not come in one fell swoop just because there is an agreement among the 10 members of the Association of Southeast Asian Nations to bring down their tariff rates to zero in 2015 for Indonesia, the Philippines, Malaysia, Singapore, Thailand and Brunei, and a few years later for Burma (Myanmar), Cambodia, Vietnam and Laos. Economic integration—as it was in the European Community—will be a work in process: two steps forward and one step backward.
Already in the attempts of some of the Asean members to consider the Trans-Pacific Partnership being promoted by the United States, there is some resistance resulting from deep-seated protectionist mindsets in such countries as Indonesia and the Philippines. All sorts of nontariff barriers are being set up, like the provisions in the Philippine Constitution seriously restricting foreign direct investments or the recent moves in Indonesia to ban certain types of exports and to require more local equity in strategic industries. These should be taken as par for the course in any attempt to achieve economic integration in a region as culturally and politically diverse as the Asean region.
The vision of the AEC is no different from what European countries—devastated by two world wars—conceived as early as 1951 through the fledgling European Coal and Steel Community. Like the EEC, the AEC is founded on a vision of a single market and production base for the member-countries to promote free movement of goods, services, investment, and skilled labor across the Asean region.
It took almost 50 years for the EEC to attain an integrated community that was strong enough to challenge the two economic global powers—the United States and Japan—for economic supremacy in the last century. My view is that the AEC will take half the time to gather enough economic strength as a fully integrated common market to be able to challenge the two Asian giants—China and India—for economic supremacy in the first half of the 21st century.
The diverse cultures and political systems prevalent in the Asean are actually an advantage for greater speed in economic integration, rather than a handicap, as some analysts have articulated. Precisely because cultures and political ideologies are so different across the 10 countries, the leaders will waste no time dreaming of a political union, as the European Community has been attempting with very limited success. The experiment on a common currency, the euro, has faltered precisely because a monetary union presupposes a fiscal union, which in turn requires a political union. It is clear that the dream of a united political community in Europe is still far from being realized.
The Asean will not even attempt it and, therefore, will avoid introducing a common currency like the plague. The single focus will be on the advantages of forging a common market that will allow economies of scale and healthy competition among all the economic sectors in the region, leading to higher productivity and lower prices for the consumers.
This single-minded concentration on the economic benefits of the AEC can accelerate the attainment of a real common market.
Bernardo M. Villegas ([email protected]) is senior vice president of the University of Asia and the Pacific.
