News Analysis: Challenges ahead in full implementation of ASEAN economic integration by yearend

There are still many challenges lying ahead in the full implementation of the ambitious ASEAN (The Association of Southeast Asian Nations) Economic Community (AEC) by the end of this year as economic ministers from the group themselves are not quite sure about the prospects of achieving this goal.

A joint statement issued after the 21st ASEAN Economic Ministers' Meeting held in Kota Bharu, Malaysia from Feb. 28 to March 1, 2015, said that "the implementation of the AEC measures does not mean that ASEAN will become a single economic entity by Jan. 1, 2016, rather it sends a strong signal that positive measures have been put in place towards a more liberalized and integrated economic region."

During the meeting, the statement said, ministers focused on how to further simplify within the year Customs procedures, harmonize standards and services, enhance trade facilitation, and conclude the services and investments portion of the ASEAN-Japan Comprehensive Economic Partnership.

While the statement said that the formal establishment of the AEC by end-2015 would mark a major milestone in ASEAN's effort to fulfill the goal of an integrated region, it failed to mention how the goal could be realized within the year.

It said, however, that benefits from the AEC blueprint "are already flowing to ASEAN businesses and consumers, from significant tariff liberalization, progress in trade facilitation measures such as self-certification, simplification of customs procedures, and the mutual recognition arrangements on the movement of skilled professionals in the region."

A recent study conducted early this year by the Manila-based Asian Development Bank (ADB) has a more succinct assessment of the AEC.

The study said that many felt that the regional integration project is unlikely to meet the 2015 deadline "due to an overly ambitious timeline and too many ill-thought-out initiatives."

According to the ADB study, while ASEAN has made some progresses on the four pillars of integration namely a single market and production base, a competitive economic region, equitable economic development, and integration with the global economy, there are still major challenges ahead.

One of them is that non-tariff measures have risen in the biggest ASEAN economies since the global financial crisis. Services trade is also limited due to restrictions in most member economies, the study said.

Another difficult issue cited by the ADB is the legal protection of migrant workers. "While ASEAN adopted the Declaration on the Protection and Promotion of the Rights of Migrant Workers in 2007, there is debate between sending and receiving countries as sending member states push for a legally binding regional agreement, while receiving countries call for non- legally binding guidelines," the study said.

In Manila, the Philippine government is upbeat on the benefits that the AEC would bring to the country. Director General Arsenio Balisacan of the National Economic and Development Authority (NEDA) , the country's highest economic policy-making body, has said that local businesses will have more opportunities for regional expansion and enhanced productivity under the AEC.

Balisacan said that Filipino businessmen can engage more in intra-regional trade, increase their market access within and outside of ASEAN, and expand their production capacities in the course of the ASEAN integration.

He said the Philippine government has already set its key roadmap strategies towards AEC integration in the midterm update of the Philippine Development Plan 2011-2016.

ASEAN has a large market of approximately 600 million people, with a combined gross domestic product of 2.2 trillion U.S. dollars in 2011 and liberalized tariffs.

According to Balisacan, more opportunities for investors and producers of goods and services are expected due to easier movement of goods, services, investment, capital and labor in the region under AEC.

But Korean economist Park Bun Soon said the Philippines appeared to be the least beneficiary of the AEC.

"Due to the lack of natural resources and underdevelopment of basic industrial materials and industrial machinery, the Philippines imports commodities, basic materials and automobile parts and components from other ASEAN countries," Soon said in a paper delivered at the Asian Institute of Management in Manila late last year.

Soon noted that Philippine trade with other ASEAN countries accounted only 19.1 percent of its total trade. Its exports to ASEAN accounts for 16 percent only and import is only 21.8 percent, resulting in the country's trade deficit for most of the ASEAN countries.

In terms of investment cooperation with other ASEAN members, Soon pointed out that the Philippines is one of the lowest recipients of foreign direct investments. "In addition, investment from other ASEAN countries to the Philippines is almost negligible," Soon said.

In 2013, net investment inflow from ASEAN to the Philippines was negative at 1.1 percent share of total intra-ASEAN net inflow compared to Indonesia's 47.3 percent followed by Vietnam with 23. 4 percent, Malaysia's 17.8 percent, Thailand's 9.7 percent and Singapore's 9.4 percent. Endi