By James Wallar
Malaysia will assume the chair of ASEAN in 2015, the year the grouping has pledged to achieve the ASEAN Economic Community (AEC). Observers should not expect a “big bang” in November 2015 when ASEAN heads of state declare that their AEC goals have been achieved. Many of the agreed elements of the AEC are already in place. Much, however, remains to be done for ASEAN to achieve a resilient, competitive economy with equitable economic growth.
Malaysia is in a strong position to push through several important features of the AEC and set the stage for the next phase of ASEAN community building to 2025. Under its theme of “Our People, Our Community, Our Vision,” Malaysia could take measures to reduce trading costs, harmonize investment policies, provide new opportunities for low and medium-skilled workers, and set a pathway for regional economic integration beyond ASEAN.
The vision that Malaysia articulates for ASEAN 2025 should be bold, building on the “Consolidated Central Elements of an AEC Post-2015 Vision” fashioned under Myanmar’s chairmanship, and driving ASEAN to deeper integration.
Following is a “wish list” of measures at the ASEAN level that is within reach by the end of next year. Malaysia holds the key not only because of its position as chair, but also because it has provided policy and technical leadership on these issues for many years.
- Reduce trade costs within ASEAN by launching the ASEAN Single Window (ASW), trade repositories, and self-certification of rules of origin. The ASW is composed of national single widows that collect and electronically disseminate information required for customs declarations. A successful pilot exchange of information involving seven ASEAN states took place two years ago. Rather than continuing with a pilot, ASEAN needs to “go live,” at least for a few sectors, to make the ASW operational, and then gradually expand its coverage.Trade repositories contain information and documentation about imports, such as tariff rates and licensing requirements. The information can be publicly assessed through websites. Laos already has gone live and Indonesia’s website is well developed. The link between information in trade repositories and the customs declaration process in the ASW is key to reducing trade costs. Similarly, ASEAN has operated two pilot projects to allow importers to self-certify that relevant goods meet ASEAN rules of origin. This cuts out bureaucrats and middlemen, allowing small importers to save time and costs. By the end of 2015, ASEAN should agree on a unified regime and a clear timetable to roll it out.
- Harmonize key policies on investment by declaring that any legal entity established in ASEAN can benefit from the provisions of the ASEAN Comprehensive Investment Agreement (ACIA) and by providing investors in services the same protections as the ACIA. Questions have arisen whether foreign-owned firms could benefit from the national treatment provisions of the ACIA. If the firm is a legal entity in an ASEAN country, the answer should be a clear yes. This will allow direct investors in ASEAN to pursue regional strategies.The ACIA has solid protections for investors, including dispute settlement and prompt, adequate compensation in the event of expropriation. Unfortunately, the ACIA does not apply to investment in services. This should be remedied in the new ASEAN Trade In Services Agreement under negotiation.
- Spread the benefits of the AEC to migrant workers by agreeing to implement the ASEAN Declaration on the Protection and Rights of Migrant Labor. The declaration dates from 2007, and negotiations for its implementation have stalled. The number of migrant workers across ASEAN has swelled to 6.5 million and will continue to grow as low and moderate skilled workers seek new opportunities that arise in the AEC. Securing agreement would provide a safe, more transparent, and predictable channel for these workers and would be a major accomplishment.
- Set a pathway for regional integration beyond ASEAN by setting clear minimum objectives for the Regional Comprehensive Economic Partnership (RCEP), a trade arrangement currently under negotiation between ASEAN and six of its free trade agreement partners (Australia, China, India, Japan, Korea, and New Zealand) Negotiations have been lagging, and transparency of the process and targets has been non-existent. Importantly, leaders of the 21-country Asia-Pacific Economic Cooperation grouping, agreed in November to develop a roadmap for the Free Trade Area of the Asia Pacific (FTAAP). A clearly defined, ambitious goal for RCEP could offer an important stepping-stone to the FTAAP.
In setting the tone for 2025, Malaysia would set an ambitious target by declaring an ASEAN customs union as a goal and placing sustainable, equitable economic growth as a central ASEAN objective. A customs union would require a common external tariff and harmonized customs procedures, key to further reducing the cost of trading within ASEAN.
At their November summit in Myanmar, ASEAN leaders noted downside risks to growth due to the economic slowdown in China, the European Union, and the United States. They agreed these risks could be mitigated through deeper economic integration. Finance ministers should be given a stronger role within ASEAN to drive the integration agenda. This would be natural given their responsibilities for customs, investment, financial services, and budget issues.
A study by the International Labor Organization and the Asian Development Bank released in August suggests that ASEAN integration could raise the region’s gross domestic product 7.1 percent above baseline by 2025 and generate 14 million new jobs. Achieving deeper integration would benefit the people of ASEAN by creating a meaningful economic community aligned to a clear, ambitious vision. That sounds right in line with Malaysia’s theme for the year. Now it is up to Malaysia to deliver.