Lao Economy

AEC Effects Unlikely To Be Seen For Years

It could take up to a decade for substantial changes to be seen after the Asean Economic Community (AEC) goes into full effect at the end of this year, a Bangkok seminar heard yesterday.

The dream of a single market with free flows of trade, labour and investment will take up to 10 years to be realised, and it will take three or four years before the effects of lowered trade barriers will truly be seen, experts said.

Some tariffs have already been lowered but in many cases this has led to more non-tariff barriers in the past five years, as businesses in the region want to see a broader market for their products but at the same time want their own production bases to be protected.

The seminar at the 39th annual conference of the Federation of Asean Economic Associations (FAEA), “Beyond AEC 2015”, was hosted by the Economic Society of Thailand.

Mia Mikic, economic affairs officer with the Trade and Investment Division at the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), said everyone was now talking about the AEC beyond 2015 because it is clear that almost none of its dreams will be implemented by the end of this year.

“It is still relatively more expensive to trade with each other than to trade with some of the partners outside Asean,” such as those in North America and Europe, she said. “This on its own proves that borders still exist [in this region] and we have not done enough to remove their effects.”

Asean Economic Community (AEC)

Mikic said the reasons for the high costs of trade within Asean were the poor transport and digital infrastructures in most of the region along with tariff and non-tariff barriers.

Sutapa Amornvivat, chief economist and first executive vice president of Siam Commercial Bank, said there was very little awareness of Asean outside the region itself, especially in North America. As a trading bloc, Asean will not be as attractive as China and India in the eyes of the West until the AEC dream is realised.

She said non-tariff barriers in the region had been increasing dramatically in the past five years. This had a lot to do with the language barriers in the job-certification process and protectionism, while the “unrealistic expectations of what the AEC means” was another obstacle to the dream of an Asean single market.

She said that because of persistent high costs of trading with Asean, intra-region trade and investment had stagnated over the past decade despite all the efforts to increase integration.

“If we could become much more integrated as a bloc, intra-trade would improve dramatically, though the external investment that flows into Asean would not change that much. But once Asean can negotiate as one market, we will become a much more powerful market, as Europe has done,” Sutapa said.

Ponciano Intal Jnr, senior economist at the Economic Research Institute for Asean and East Asia, said foreign direct investment in Asean was now more than that received by China and India. However, much of that FDI is going to one state – Singapore.

Meanwhile, the biggest challenge for Asean becoming a borderless region has remained the domestic regulations of each country.

“Improved trade facilitation in the region would improve the incomes of literally everyone in Asean, and a more liberalised service trade would have an even greater effect,” he said.

“But unfortunately Cambodia, Laos and Myanmar are still way behind schedule, and you cannot [have] a national single window without a modern customs system,” he said.

Source: The Nation