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Looking beyond AEC integration

Forward-looking thinkers are already looking to 2030 even as people anticipate the coming of the Asean Economic Community (AEC) next year.

Last week saw the launch in Singapore of "Asean 2030: Toward a Borderless Economic Community", which came with a two-day policy dialogue conference among scholars and policymakers from around the region.

At the outset, the group articulated its long-term aspiration of achieving by 2030 a "RICH" Asean - resilient, inclusive, competitive and harmonious.

"AEC is taking shape just as the centre of global economic gravity is shifting toward Asia, with China and India catalysing the region's dynamism," the book observes.

Even as few expect full realisation of the envisioned AEC next year, getting to "RICH" Asean in 2030 would require far bolder steps in the economic, social, political, environmental and institutional realms than the region has been willing to take so far.

The study team saw early on that the Asean economies could conceivably follow two alternative paths beyond 2015, depending on how they act jointly and individually. On one hand, they could collectively enter a high-growth scenario leading to a tripling of per capita (average) incomes by 2030 and raising quality of life to levels enjoyed by today's developed economies.

Or they could slow down to no more than 3-per-cent economic growth per year as they fall into the "middle-income trap" and fail to narrow social gaps, manage natural disasters and climate change, or resolve political tensions.

Overcoming these threats and challenges and building a borderless economic region by 2030 would entail practising sound economic management, pursuing inclusive and "green" growth and development, strengthening connectivity across the region in its various dimensions, and strengthening the regional institutional framework. The Asean 2030 study tackled each of these imperatives with a mix of hindsight and strategic foresight.

Strengthening and widening connectivity among Asean countries, economies and peoples is primordial in building a cohesive and "RICH" Asean community. Physical connectivity entails hiked investments and decisive policy reforms in land, water and air transport, and in information and communication technology links.

The Philippines, lacking the land links that mainland member states have, is championing easier maritime linkages through an Asean Roll On-Roll Off system. But the country has yet to ratify the Multilateral Agreement on Air Services on the long-standing, but lame excuse, that our airports and other facilities are not equipped for open skies.

Economic connectivity has advanced with the pursuit of the AEC, with liberalised trade and investment having widened and deepened regional production networks or cross-border value chains in various manufacturing industries.

With the proliferation of such cross-border value chains, trade in Asean is now more complementary rather than competitive in nature, where trade protectionism becomes irrelevant and even self-penalising. The data show that closer economic integration has indeed happened: Asean-to-Asean exports grew from $27.4 billion in 1990 to $98.1 billion in 2000, and $262.2 billion in 2010.

Foreign direct investments across Asean economies amounted to $4.26 billion in 1990, $3.52 billion in 2005 and $20.04 billion in 2012. Meanwhile, people-to-people connectivity would be served by widening intra-Asean tourism, academic faculty and student exchange programs, and active cross-cultural exchanges.

Is Asean headed in the direction of European-style integration? Not quite, the study asserts. It in fact admonishes against "copying" Europe.

While some have seen this as a drawback and source of occasional frustration, it has so far largely served the region well. Asean countries and economies are much more diverse than those of the European Union (EU), and achieving the latter's level of integration is extremely difficult if not impossible. In fact, recent difficulties with some EU members suggest that it may not even be desirable.

Adopting a single currency, for example, is not an agenda that the region's financial managers are in any mood to pursue in the foreseeable future. This would require close synchronisation of the member-economies' monetary and fiscal policies, something even the less-diverse EU economies have found virtually impossible to do.

Still, Asean's widening economic agenda calls for greater efficiency and timeliness than has been achieved under its current institutional and governance structures. Major institutional strengthening and reform is thus in order. The book pushes for a regional institutional infrastructure that goes well beyond AEC but stops short of establishing an EU-style regional government, to whose authority the national governments would submit.

All told, AEC is but an initial step in another new, bolder phase as the nearly grouping marches on to assert its standing as a major force in the world economy.


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