ASEAN 2025: Now for Something Different

By James Wallar —

Customer service window in West Java for Indonesia's state-owned rail service. Source: Ikhlasul Amal's flickr photostream, used under a creative commons license.

Customer service window in West Java for Indonesia’s state-owned rail service. Source: Ikhlasul Amal’s flickr photostream, used under a creative commons license.

ASEAN in November 2015 launched a new strategic plan: “ASEAN 2025: Forging Ahead Together.” What was largely lost in the typical ASEAN low-key roll out was the significant new business challenges the grouping agreed to tackle. These included agreements to introduce domestic policies to make their economies more dynamic, including stronger competition policy and strong regulatory practices, which would dramatically overhaul the culture of doing business in the region.  And, instead of member states self-grading as they have for decades, they agreed to authorize the ASEAN Secretariat to monitor their implementation of these policies.

A first reaction might be: Here they go again. Another ASEAN plan: great rhetoric but no follow through. After all, the ASEAN Economic Community (AEC) touted for the end 2015 (AEC’15) was high on ambition but fell well short of business expectations.

For all its shortcomings, ASEAN did realize excellent progress in reducing tariffs and advancing trade facilitation measures. The average tariff among ASEAN member countries is 0.54 percent. The ASEAN-6 (Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand) report 99.2 percent of their tariff lines at zero duty. And even the less advanced member states (Cambodia, Laos, Myanmar, Vietnam) are not far behind at 90.5 percent.

Six member states have functional single windows to ease border clearance and, in early 2016, two more began exchanging “live” information via the ASEAN Single Window. Four member states have established national trade repositories that list import requirements on-line. Self-certification of rules of origin that would benefit small firms is being piloted by all member states.  Most the states have signed on to liberalization of air freight, passenger, and air services, and an ASEAN Customs Transit System pilot this year will help operationalize ASEAN’s land transport facilitation agreements on goods in transit, inter-state transport, and multimodal transport.

The blueprint for the ASEAN Economic Community for 2025 (AEC’25) calls for concerted action on non-tariff barriers, where ASEAN has not done much, and trade facilitation. The latter should get a push from the newly reconstituted ASEAN Trade Facilitation Joint Consultative Committee, which now is mandated to consult with the business community. Finishing up these outstanding AEC ’15 issues would contribute to lowering cross-border trading costs for ASEAN member countries and its trading partners.

A more intriguing feature of the blueprint for AEC’25 is required action on domestic measures to help make ASEAN “more competitive, innovative, and dynamic.” This is new territory. Since its foundation, ASEAN had strictly adhered to the rule of non-interference in domestic matters. This was most evident on political issues, as ASEAN would studiously avoid condemning domestic actions of member states. On the economic side, ASEAN concentrated its work on cross-border measures and integration of the region with its major trading partners.

AEC’25 has set goals of effective competition policy, good governance, and good regulatory practice. All require heavy internal lifting in each member state. While competition policy was on the AEC’15 agenda, it focused on having members adopt a competition law and developing regional guidelines. In contrast, AEC’25 seeks greater harmonization of competition policy and law by developing a regional strategy for convergence.  Thus, competition policy within each ASEAN state should begin to look similar. In addition, the AEC’25 calls for strengthening capacities of competition agencies, fostering “competition-awareness” to support fair competition, and establishing cooperation agreements to address cross-border issues.

Good governance and good regulatory practices are new to the AEC agenda. Member states are to provide for greater transparency and engage with the private sector to strengthen economic governance. Good regulatory practice obliges member states to ensure regulations are pro-competitive and non-discriminatory and institutionalize good regulatory practice consultations with stakeholders, including the private sector, and submit to regular regional reviews.

Taken together, these domestic-focused measures to increase transparency and competition would contribute to changing the culture of doing business and governance, generating a more dynamic market place and higher productivity. To a large extent, these measures reflect work in the Asia Pacific Economic Cooperation Forum championed by the U.S. government.

Also new is the framework for a more robust monitoring and evaluation regime. ASEAN is to develop a strategic action plan with key actions to implement AEC’25. An “ASEAN minus X” approach can be invoked if no consensus can be reached on implementation details. Member states are to translate milestones and targets into national milestones and targets, and the ASEAN Secretariat is authorized to monitor implementation and assess impacts.

Thus, there is a prospect that these ambitious goals on domestic measures will achieve traction and be translated into plans whose progress can be tracked. Now this would be something different for ASEAN.

Mr. James Wallar is a former Senior Vice President of Nathan Associates, worked in the ASEAN Secretariat where he conducted economic seminars and conferences in all ASEAN member countries, and was with the U.S. Treasury Department as the Director of International Trade and as overseas representative in the EU, Russia, OECD, Germany, Switzerland, Afghanistan, and Iraq. 


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