Economist: Hitting AEC targets unlikely in 2015

CEBU, Philippines - Although Asian nations are now seeing the benefits of an integrated economy, the implementation of the ASEAN community will not fully take off next year but rather will become a continuous process.

This according to Dr. Jayant Menon, the lead economist of the Regional Economic Integration of the Asian Development Bank, saying a lot of efforts still have to be done beyond the December 2015 deadline.

“The bottomline is on December 31 of 2015, we will not see ASEAN achieving all of its AEC (ASEAN Economic Community) targets--this will not really happen,” the economist said during Tuesday’s Entrepreneurship Seminar on Competing in the Global Space as part of the Cebu Business Month.

Menon emphasized that 2015 must “not be seen as a deadline” but should be considered as a “milestone of a long journey” leading to a more cooperative regional economy among ASEAN member countries including the Philippines.

The AEC scorecard has revealed that around 77.5 percent of the targets have been reached between 2008 to March 2013, suggesting a seemingly slow pace toward achieving other desired targets.

Specifically, the AEC target achievement rate between 2012 to 2013 is at 71.9 percent, slightly lower than 72.1 percent of 2010 to 2011 and 89.5 percent of 2008 to 2009.

Menon said “efforts must be intensified” to play the remaining gaps in implementation. 

The ADB executive noted that the low level of awareness of the private sector and national government agencies is one reason that contributes to the barriers in getting the AEC targets.

The 2013 ASEAN-Business Advisory Council survey has indicated that 60 percent of the respondents in the business sector said they have at least general knowledge of the integration initiatives; 32 percent claimed of having only limited understanding; and only 7 percent admitted to have detailed knowledge of the ASEAN initiatives.

In its consultation with businesses, the ADB has said 55 percent of respondents to a business survey said they were unaware of AEC; less than one fifth of ASEAN businesses have made any plans for the end of 2015.

On another note, Menon further cited that 70 percent of the intra-ASEAN trade is now tariff-free and only 5 percent of trading activities is yet subjected to tariff above 10 percent.

Related to this, the ASEAN Free Trade Agreement is the main vehicle of AEC agreement and suggests more Free Trade Agreements among nations.

The ADB economist also said the ASEAN should not only focus on the business sector but promote as well the involvement of the civil society through linking with non-government organizations and civil society groups, noting the two sectors’ participation seems to be limited.

Although AEC is basically a government-led agenda, it cannot still succeed without fully engaging the business community and the public at large, he emphasized.

‘What needs to be done?’

One thing that needs to be done, he noted, is to remove barriers to trade in sensitive areas such as agriculture, steel and the developing areas of services. Another challenge, he added, is to eliminate tariff and border barriers.

There is also a need to promote greater labor mobility of skilled workers and better regulation and management of unskilled labor movements, he continued.

ADB’s Menon also shared that the ASEAN labor markets are becoming increasingly integrated, noting that policies relating to cross-border movements of people continue to lag-behind.

It is also high time to ensure the less developed economies of Cambodia, Lao PDR and Myanmar catch up more rapidly to other economies in the region, he also said.

Menon added the region must also “face the reality” that trade liberalization which is now gradually happening is driven more by market forces than by region agreements.

In addition, more public-private partnerships and innovative financing are critically needed to achieve broader reforms such as investing in both hard and social infrastructures: education and health, increase capital inflows and boost efficiency and productivity.

He also urged the government to pour in huge investment on infrastructure development and establish good business environment, stressing that the AEC is “a grand plan, none of the grand plan comes cheap thus this is an expensive project”.

He said: “Giving AEC commitment more teeth is the key challenge.”