Asean Community draws closer

The Asean Community, which will be launched on Dec 31, is a massive effort by every Asean member country to bring their nations closer through greater economic integration and social uplift, while ensuring the region remains secure and stable.
The Asean Community, which will be launched on Dec 31, is a massive effort by every Asean member country to bring their nations closer through greater economic integration and social uplift, while ensuring the region remains secure and stable.PHOTO: REUTERS

Insight looks at the potential gains and challenges for Singapore from today's formal declaration forming the Asean Community.

Today, Asean takes a big step closer to a historic milestone.

Leaders of its 10 member countries will sign a document to formally declare the formation of an Asean Community at the 27th Asean Summit in Kuala Lumpur.

Consisting of three communities, or pillars - economic, political-security and socio-cultural - the Asean Community will be launched on Dec 31. It is a monumental effort by every Asean member country to bring their nations closer through greater economic integration and social uplift, while ensuring the region remains secure and stable.

But this community is not just the culmination of a journey that began 48 years ago in Bangkok, when five foreign ministers put pen to paper to form Asean. It is the start of a new phase of regional integration that will weave all member countries closer together.

A single market of 625 million people. A collective gross domestic product of US$2.6 trillion (S$3.7 trillion) that makes it the seventh-largest economy in the world.

Fewer barriers to the flow of people, goods and capital.

These changes will place the region in a position to punch well above its weight, boosting investment and business opportunities for member countries, small and big businesses, and regional as well as foreign enterprises.

But amid the fanfare is the sobering recognition that the formation of the Asean Community comes at a time of rising geopolitical uncertainty and tension between superpowers. Threats abound, from territorial disputes to the spectre of terrorist attacks.There is also the development gap. The vast differences in capabilities between the 10 member countries are a challenge.

Will the Asean Community achieve its grand vision of unifying the region through shared prosperity? How much will resistance from members, domestic tensions and the competing influence of China and the United States hinder its plans?

Insight looks at what the Asean Community entails, what has been achieved thus far, and how Singapore and its close neighbours are set to change.


Economics of Asean Community


Najib Razak (centre) and Barack Obama (second from left) walk to attend a dinner for East Asia Summit Leaders at the Kuala Lumpur Convention Centre. PHOTO: AFP

Ten years ago, leaders of the 10 countries in Asean gathered in Kuala Lumpur for a summit to take stock of their efforts at economic integration.

Just two years earlier, in 2003, they had committed to declaring a region-wide economic community by 2020.

But, heartened by the progress they had made, they agreed to bring forward the deadline for a region-wide economic community by a full five years.

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What remains to be done?


A yarn-weaving plant in Ha Nam Province, outside Hanoi in Vietnam. Most Asean countries are about to reap demographic dividends of a workforce that is dynamic and expanding, while the number of dependent youth and elderly persons remains small. PHOTO: REUTERS

With a youthful population where less than 15 per cent are aged 55 and above, most Asean countries are about to reap demographic dividends of a workforce that is dynamic and expanding, while the number of dependent youth and elderly persons is small.

This translates into the coming- of-age of millions of people with greater spending power than ever.

Some may wonder why the region had not seen more spectacular growth over the decades. The reason is the significant diversity between member states, a report by the Economist Intelligence Unit last year noted.

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What is in it for Singapore?


A construction site in Jakarta. When the Asean Economic Community's next round of services liberalisation is rolled out, consultancy services providers in engineering can enjoy full ownership of their investments in Indonesia. PHOTO: REUTERS

Under the Asean Economic Community (AEC), a Singapore-based manufacturer relying on raw materials from, say, Indonesia or Vietnam, would benefit from more affordable goods as tariffs come down.

He would also find it easier to export his goods, and at lower cost too, with lower tariffs and simplified Customs procedures. Meanwhile, service providers should gain easier access to Asean countries as barriers to markets are lifted.

These are among the benefits for Singapore firms and businesses, highlighted by the Ministry of Trade and Industry (MTI) in its recently published guide to the AEC.

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FAQs on the AEC


Flags of Asean members are displayed in a conference room. PHOTO: ST FILE

Q How will the Asean Economic Community (AEC) change the global landscape?

A By transforming Asean into a single market and production base, the AEC will boost the competitiveness and connectivity of the region as a whole. And it could lift aggregate output by 7 per cent by 2025.

Ideally, the AEC will help less developed economies link up with more developed ones, bringing about more equitable economic development across the region. Asean, as a whole, will be better integrated into the global economy.

Asean as a single economy is forecast to become the fourth-largest economy in the world by 2030, behind only the European Union, the United States and China.

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Keeping Asean on an even keel

When the five foreign ministers of Indonesia, Malaysia, the Philippines, Singapore and Thailand came together to will Asean into existence on Aug 8, 1967, squabbles between the young South-east Asian countries were a fresh memory.

Ties between Malaysia and the Philippines were strained by territorial disputes over Sabah, while Indonesia had just wound down its violent campaign of Confrontation against Malaysia and Singapore.

Nationalism was on the rise, and the idea of a collective South-east Asian identity seemed a hopeless ideal. But Asean surprised the doubters, and overcame internal antagonisms to enjoy more than four decades of solidarity.

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A version of this article appeared in the print edition of The Sunday Times on November 22, 2015, with the headline 'Asean Community draws closer'. Print Edition | Subscribe