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What is AEC 2015 and How Does It Impact the ASEAN Company?

There has been much interest and discussion in the media of late regarding the ASEAN Economic Community ("AEC") 2015. This article presents a general outline of what the AEC is and how it will affect companies in South East Asia once it takes effect in 2015.

AEC 2015 was conceived as a vision for the economic integration of the countries in the Association of South East Asian Nations ("ASEAN") by 2015. The main objectives of AEC 2015 include: a single market and production base, a highly competitive economic region, a region of equitable economic development, and a regional economy fully integrated into the global economy.

The AEC began its life as a master plan adopted by ASEAN leaders during the 13th ASEAN Summit in 2007, titled the "ASEAN Economic Community Blueprint" ("Blueprint"). It ambitiously sets out four main aims for the AEC:

1. Single Market and Production Base – where there shall be a free flow of goods and services, investments, capital and skilled labour. There are twelve economic sectors which will be given priority in integration (including air transport, healthcare products, textiles, electronic goods and tourism); and food, forestry and agriculture will also be given emphasis.

2. Competitive Economic Region – this relates to the implementation of competition laws/policies in all ASEAN states, strengthening consumer protection, establishing intellectual property regulatory frameworks, developing transportation and other infrastructure to facilitate trade, and completing the bilateral agreements for avoidance of double taxation amongst member states.

3. Equitable Economic Development – addressing the different levels of development amongst the various ASEAN countries, with a view to accelerate the economic integration of the less-developed countries so that all ASEAN countries can move in a unified manner.

4. Integration into the Global Economy – ASEAN countries, while strengthening the AEC framework, should also keep a lookout for how their policies impact on and interact with international rules and regulations. For example, free trade agreements between ASEAN members and external countries could be relooked in light of the AEC commitments.

As to how these plans will be carried out, the Blueprint mentions certain strategic arrangements which have already been set up, which are to be use to drive some of the initiatives. Examples include: the Common Effective Preferential Tariffs for ASEAN Free Trade Area Agreement ("CEPT-AFTA Agreement") which facilitates the free flow of trade throughout ASEAN, and the ASEAN Blueprint for SME Development which is intended to promote the development of small and medium enterprises ("SMEs") in ASEAN countries with a view to increasing economic growth.

The AEC 2015 will impact how business is conducted in many areas.  For example, companies will face the challenges and opportunities of the free flow of skilled labour among AEC members under the ASEAN Mutual Recognition Arrangement on Services ("MRAS").  It provides that eight service professions (doctors, dentists, nurses, engineers, architects, accountants, surveyors and tourism professionals) may move freely across the 10 ASEAN member states.  Issues that companies will need to consider will include how to properly manage and treat such foreign talent, and how some of these issues can be addressed in employment contracts. 

The ASEAN Economic Ministers are overall in charge of implementing the Blueprint, with the various relevant sectorial ministers responsible for the commitments under their respective purview. The ASEAN Secretariat monitors the compliance of implementing the Blueprint.

It is now 2014. The ASEAN countries have about a year left to reach the AEC 2015 deadline.  Much progress has been made by the 10 countries, such as elimination of tariffs, liberalisation of trade in services and removal of many restrictions on investments, although there is much left to be done.  One possible suggestion is to concentrate on implementing the “core” elements of the Blueprint by 2015. Once that is done, the rest of the detailed elements can be followed up with later. 

While it remains to be seen if the ASEAN countries can meet the 2015 deadline, companies doing business or based in ASEAN should equip themselves with a general knowledge of AEC 2015, as it will likely have an impact on ASEAN based businesses both at the macro as well as the micro level.  

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