AEC Turns One, Much Work Remains To Be Done

By Nurul Hanis Izmir KUALA LUMPUR, Dec 14 (Bernama) -- The ambitious ASEAN Economic Community (AEC) took off smoothly despite the naysayers, and come Dec 31, 2016, it will mark one year in existence with little to boast about but plenty still to achieve. Based on the ASEAN Investment Report 2016, foreign direct investment (FDI) flows to the region slipped by eight per cent to US$120 billion (RM528 billion) in 2015 from US$130 billion (RM572 billion) in 2014. This number is expected to fall further this year as the global economy continues to weaken, mainly due to the United Kingdom's vote to leave the European Union and weaker-than-expected growth in the United States. "Even the second largest economy, China, also sees its growth slowing," ASEAN Business Advisory Council member Ramesh Kodammal told Bernama. But despite the gloomy scenario, the AEC had all the potential to shine, provided a number of challenges in the region were addressed, he said. Among others, more promotions and awareness events need to take place as tough times often lead governments to opt for protectionism policies. "It is a common and easy move but one that ASEAN member countries should unanimously avoid if they want to ensure that the AEC works," he said. On challenges for the AEC, he said protectionism or non-trade barriers (NTBs) had to be removed to better facilitate trade and investment. Currently, a whopping 3,000 tariff barriers have yet to be removed, an area that ASEAN member countries should seriously look into. It was reported that out of the total of 69 NTB cases since four years ago, 49 cases had been resolved through intensive consultation and peer review. However, a new form of NTB takes shape as one gets resolved, and this is an issue ASEAN should permanently resolve. The four identified prioritised sectors for the NTBs include retail (including e-commerce), agri-food, healthcare and logistics. Besides NTBs and tariff barriers, ASEAN has yet to completely achieve tariff abolition even among its six founding members. A fact check revealed that the ASEAN six countries have eliminated import duties on 98 per cent of the tariff barriers, while the figure is 91 per cent for Vietnam, Laos and Myanmar, and Cambodia is expected to rise to 98 per cent by 2018. "The AEC couldn't have come in at a better time especially now that the much talked about trade pact, Trans-Pacific Partnership Agrement (TPP), which involves some of the ASEAN members is seen coming to end. "It is a golden opportunity for ASEAN's AEC to shine more brightly as a way to boost trade as well as attract more FDIs," he said. TPP involves 12 countries, namely the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru. The ASEAN members in the TPP are Malaysia, Vietnam, Singapore and Brunei. The other ASEAN countries that are non-TPP are Indonesia, Thailand, Laos, Cambodia, Myanmar and the Philippines. To-date, Ramesh said investments were mostly coming into the infrastructure sector and this is where the promotional role has to flex its muscles. "We need to see more FDI in the manufacturing segment," he said, noting this was one area the bloc might want to promote a little more. The next phase of the AEC starting 2025 will see ASEAN emphasising on the development and promotion of micro, small and medium enterprises in its economic integration efforts to enhance trade and investments. It would also provide an e-based business platform, promote good governance, and facilitate the use of green technology. However, before the grouping reaches the next phase it has to address some of the challenges it is facing now, especially with the NTBs. Hence, as the AEC turns one and ASEAN turns 50 next year, much work remains to be done to ensure that the regional bloc remains relevant and successful. -- BERNAMA