Time to push ahead with Asean Economic Community

THE year started with a bang for Asean. After eight years of preparation, leaders of the 10-nation regional association launched the ambitious Asean Economic Community (AEC), a treaty aimed at creating a single, seamless production base and consumer market - the world's third largest in terms of population. But the months that followed weren't so kind. A wave of protectionism in the West not only engendered local market volatility but also derailed the 12-nation Trans Pacific Partnership trade deal that would have provided a tangible boost to export growth and spurred vital reforms. At the same time, the region has been suffering from depressed global trade volumes while some of its high-value supply chains have come under competitive pressure from China.

What progress has been made with the AEC? Let's just say it's still early days. The official start of the AEC on Jan 1, 2016, should have been seen as a milestone rather than an inflection point. The treaty built on Asean's past economic integration; after all, free trade in goods and some services liberalisation has, in principle, been in place for almost a decade now, but the broader goal of a true economic community isn't close to being realised yet. Meanwhile, the most ambitious and attractive aspects of AEC, such as investment liberalisation and the free flow of skilled labour (at least from an investor perspective), may not be fully realised for years to come, at best.

Asean leaders know well that the AEC is a work-in-progress. Last year they released a new blueprint outlining additional steps that need to be taken through 2025. But in order to fulfil the AEC's commitments, Asean's institutional framework must be upgraded. The Asean Secretariat is notoriously ill-equipped in both resources and authority and lacks a monitoring mechanism to do a better job of implementing the AEC's provisions. In Asean's defence, this was discussed in the updated blueprint, but these words urgently need to be turned into actions.