The ASEAN Economic Community (AEC) officially launched in January 2016. The 10 members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam) agreed to a comprehensive set of commitments.
Of greatest importance to companies was the pledge for the “free movement of goods, services, investment, skilled labor and freer movement of capital.”
Previous Talking Trade posts noted that this goal was never going to be met. It was simply too highly ambitious, with an original deadline that was moved forward by five years. ASEAN officials shifted the rhetoric as the deadline loomed to argue instead that the AEC itself should be viewed as process and not a destination.
Unfortunately, as leaders met in Vientiane, Laos, for the annual ASEAN summit in early September, the preference for process over destination seems firmly entrenched. Rather than spending the past months locking down at least a handful of concrete deliverables of greatest interest to companies, little appears to have been done.
This is particularly problematic, since ASEAN has already shifted its attention to the AEC Blueprint 2025. The very first objective in the Blueprint was the implementation of all missing items from the AEC in 2016.
A review of the Chairman’s Statement from the 28th and 29th ASEAN Summits shows the limited progress made in advancing the missing pieces under the AEC that matter most to companies.
A lack of forward momentum is not at all obvious from reading this document, however. Instead, the paper is littered laudatory phrases like, “we are pleased with the progress on x or y,” or “we noted with satisfaction that…” and “we welcomed the initiative shown by…”
It should be noted, of course, that ASEAN does more than just economic activities. Much of the focus coming out of the Vientiane meetings was on the portion of the statement on the South China Sea. These non-trade and non-economic aspects of ASEAN may have taken significant time and attention in 2016.
Nevertheless, a key element of ASEAN has always been economic integration. Here, the actual record in the Summit statement is problematic.
As is often the case, finding more information on many of the initiatives and documents mentioned in the Summit statement is difficult or impossible. While some of the initiatives launched by ASEAN, such as the National Trade Repository (NTR), will eventually allow companies to find all ASEAN-relevant information in one place, the system falls short of this promise.
One other potentially helpful mechanism for the future announced in Laos was the launch of ASSIST, the ASEAN Solutions for Investments, Services and Trade (http://assist.asean.org) that is meant to help companies register their own issues.
ASEAN also set up the ASEAN tariff finder (http://tariff-finder.asean.org/). This tool is meant to help small companies more easily use ASEAN agreements. However, I put in three items yesterday (two agricultural items and one manufactured good) as a demonstration. The system crashed. When it got working again, it yielded some interesting surprises. First, while ASEAN always touts zero tariffs for inter-ASEAN trade, my simple agricultural goods still had tariffs for a surprisingly long time.
Second, the manufactured product really tested the system. It generated 19 pages of items and nearly all were so far from what I wanted to export, and in some cases unrecognizable, that it was hard to imagine most smaller firms in the region using the tool (particularly in English only).
Third, the tool does not really help small companies use the rules of origin, which are complicated, especially for the ASEAN+1 agreements.
Hence, the tool is unlikely to actually provide a great deal of benefits for the intended recipients. But at least it is possible to get information on tariff rates—this is the sort of concrete detail that is critical for companies.
Compare this to services and investment commitments. The 9th package for services (AFAS) finished last year. This is already a significant delay for ASEAN, as all services are supposed to be moving freely. The Summit statement now notes that the 10th package is not due until next year.
The 10th and final AFAS package will have to be amazingly ambitious to get anywhere close to better services provisions. While ASEAN officials have been touting the ever-expanding number of service sectors covered by AFAS, a close inspection of the 9th package commitments throws up some interesting examples.
Indonesia—to pick just one ASEAN member—added coverage of 15 new service subsectors in the 9th package (out of a possible 160 services subsectors). This sounds impressive, until you look at what was opened to ASEAN services firms:
· CPC 832 now allows ASEAN firms to rent out video tapes
· CPC 873 was added to allow ASEAN firms to investigate shoplifting
· CPC96321 lets ASEAN firms open up museums—as long as they are jewelry museums
· Or my personal favorites—passenger and freight transportation are opened but with one rather significant caveat—you must use either man or animal-drawn vehicles (CPC 71224 and CPC 71236)
These kinds of commitments make paragraph #38 ring a bit hollow: “We were pleased to note that in 2016, the inaugural year of the AEC, efforts have been focused on completing the remaining AEC 2015 measures as well as initiating the implementation of new measures under the AEC Blueprint 2025.”
Companies have taken ASEAN at its word. They have created ASEAN strategies and staffed up ASEAN regional headquarters. They expected to see an AEC in place—if not exactly in early 2016, certainly in relatively short order. They are not going to be pleased to find that free movement of services means that you can provide all the video tape rental services you want.
The ASEAN-Business Advisory Council should also provide concrete recommendations. ASEAN leaders must go beyond thanking the Council for their inputs and actually implement business suggestions.
Doing so also requires ASEAN leaders to do more than just note with satisfaction that all recommendations to strengthen the Secretariat have been addressed (paragraph #7). The staff members at the Secretariat are doing what they can with a dramatically overloaded calendar and an insufficient budget.
Perhaps the most honest statement in the entire document is this one: “Most of the recommendations are perpetual in nature and will remain relevant as we continue our integration efforts.”
It may be time for ASEAN to simplify the agenda and focus on actually delivering results. In the economic sphere, companies are not going to go on a journey forever without reaching a destination.
***Talking Trade is written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***