Asean Economic Community 2015: Player or Spectator?

Asean Economic Community 2015: Player or Spectator? Mudrajad Kuncoro1 Abstract Basically the blue print of AEC is to build Asean Economic Community as an integrated area for the distribution of goods, services, investment, capital, and skillful work force. 2008 is the year to start establishing the area in that 2015 is expected to be the time for the implementation. It can be said that AEC is nonetheless AFTA plus. This article analyzes the methods and steps in realizing AEC. The question is, are we ready? Will we be the player ot the spectator in AEC 2015? Perhaps the myth of united ASEAN will vanish should AEC be really established. However, there must be some barriers in the ways of establishing AEC 2015. This article identifies the obstacles in both Indonesia and in ASEAN. There is a big gap among the ten members of ASEAN. As the commitment to carry out the programs of AEC heading a competitive economic area, Indonesia has issued two outputs: first, Government Regulation on the Ratification of Protocol to Implement the Third Package of Commitments on Financial Services under the ASEAN Framework Agreement on Services (AFAS). Second, Government Regulation on the Ratification of Protocol to Implement the Fourth Package of Commitments under the ASEAN Framework Agreement on Services (AFAS). Keywords: ASEAN, AEC 2015, barriers, ratification The 13th ASEAN Summit held in Singapore on November 20th 2007 made a new history. In its 40th birthday, the leaders of the state members of ASEAN came to an agreement of declaring the blue print of ASEAN Economic Community (AEC). The target says that in 2015 ASEAN will “one country”, where goods, services, investment, work force, and capital will freely flow from one to another country within ASEAN. The emerging question that is interesting to study further is: Are we ready? Will we be a player or a spectator in AEC 2015? 1 Professor of Faculty of Economic and Business, Universitas Gadjah Mada, Indonesia. Volume 1, Number 1, November 2010 A. Blue Print of AEC 2015 Since AEAN Summit in Bali in October 2003, the ASEAN leaders have declared AEC as the goal to integrate the regional economy in the big frame of the Vision of ASEAN 2020. In Bali Concord II, besides AEC, two other pillars were declared in the construction of ASEAN Community i.e. ASEAN Security Community and the ASEAN Socio-Cultural Community. Thus, those three pillars are expected to fully function when the ASEAN Economic Community comes to reality in 2020. This blue print of AEC contains the ambition of building ASEAN as the trading center of an integrated area. It is targeted that the starting point is in 2008 and the implementation will be in 2015. AEC is expected to be equal to European Union 45 Figure 1. Mechanism to Attain AEC 2015 Preferential Tariff Arrangement (PTA) ASEAN Free Trade Area (AFTA) ASEAN Economy Community Tariff Non-Tariff Facilities Trading ASEAN Framework Agreement on Services (AFAS) Free Flowing Goods Free Flowing Services ASEAN Investment Area (AIA) ASEAN Investment Guarantee Agreement (IGA) Free Flowing Investme nt 12 Priority Sectors Development of Food, Faming, and Forestry Sectors AEC 2015 Other Sectors ASEAN Comprehensive Investment Agreement (ACIA) Mutual Recognition Agreement (MRA) Visa and Employment Pass Free Flowing Skillful Work force Core Competencies & Qualification Stock Exchange Integration and Development Capital Flow Liberation Free Flowing Capital Flow Source: Djaafara, et al. (2008) (EU)2. It is also expected that investors will be attracted to make investment in ASEAN because of its being one of the world’s big markets. Unlike EU, AEC still applies different currencies referring to its members. Furthermore, AEC is not a free passport area, and it does not have a central bank. Technically, the embodiment of AEC 2015 applies the mechanism and initiative already built by ASEAN and strengthened by increasingly strong-bonded institutions A more detailed study on the development of European Union from European Economic Community, European Single Market, until European Monetary Union can be seen in Kuncoro (2002: chapter 26). 2 46 in the frame of ASEAN cooperation. Each institution and intitative involved within the five elements of single market and a production basis can be seen in Figure 1. Concerning the element of the free goods inflow, for example, the initiative of tariff and non-tariff reductions and the trading facilities reaching the free AEC are based on the development and the perfection of the available mechanisms i.e. Preferential Tariff Agreement (PTA), ASEAN Free Trade Area and the blue print of AEC. The same thing happens to other elements within this pillar. In the document signed by the ASEAN leaders, the blue print of AEC has four main features: (1) single market Journal of World Trade Studies and production basis; (2) competitive economic area; (3) area for an apportioned economic development; (4) an area that is fully integrated with global economy. These four characteristics interconnect and strengthen each other. Box 1 explains further the four main characteristics of AEC. • • Box 1. Four Characteristics of AEC I. Single Market and Production Basis with 5 core elements (see Table below). Priority Integrity Sector conducting study every semester to monitor the status, process, and the effectiveness of the road map of Priority Integrity Sector to ensure the that the implementation is done in time identifying project sector specifically or gaining initiative through dialogue or routine consultation with the concerned parties especially private sectors Five Core Elements of Single Market and Production Basis Liberation Facilities Tariff and Non-Trade Free Goods Inflow Barriers write off, Custom standard integration external tariff and technical trade barriers synchronization Free Services Inflow Free Investment Inflow Full access to the market MRA (Mutual Recognition and removal on all Arrangement) on professional substantial restrictions of services; professional resources services trade exchange Services and industries Transparency; slim procedure, supply for ASEAN double-tax removal; common investors marketing Simplifying the Free Capital Inflow regulations on investment control of intra-ASEAN portfolio Free Workforce Inflow Workforce discrimination abolition Volume 1, Number 1, November 2010 Standard harmony for stock exchange; market strength to create stock exchange bonding Common standard for education and training; MRA for vocation training 47 • • • 12 priority sectors covering up electronics, e-ASEAN, healthcare, wood based products, fishery, aviation, tourism, and logistic are determined Food, Farming, and Forestry increasing trading and long term competitiveness of ASEAN food, farming, and forestry products encouraging cooperation with regional and international organizations, and private sectors II. Competitive Economic Area • • develo (...truncated)