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It has been big news in the world economy that The Association of Southeast Asian Nations (ASEAN) is trying to implement a single economic community called the ASEAN Economic Community (AEC). What does this mean for ASEAN and the entire world economy? The AEC is expected to lead to a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy.
The overarching goal of the AEC is to convert ASEAN into a region with “free movement of goods, services, investment, skilled labor, and freer flow of capital” (ASEAN.org). Accomplishing this is a huge draw for businesses to locate within the region, as there are many opportunities that come along with the integration. The initial plan, as of 2007, was to have the AEC implemented by January 2015. This has recently been moved back to the end of 2015, but there are still multiple skeptics that think even this extended deadline will not be met.
Even if the AEC is not completely integrated by the year-end 2015 deadline, there are positive outcomes of a slower assimilation. ASEAN will not be at risk of experiencing hasty economic liberalization, or unrestrained capital inflows due to forced restructuring, if the integration process is slowed. The integration, whether AEC is completed yet or not, will have positive outcomes on the region. From 2013 to 2023, key indicators of the region’s growth will increase. It is estimated that GDP will increase by $3 trillion, share of global GDP will increase by 1.5%, and the share of world trade will increase by approximately 1%.
The integration has been slowed down due to the vast difference between the region’s rich and poor countries. Singapore and Brunei had GDP per capita greater than $35,000 in 2013, while Indonesia, Malaysia, the Philippines, and Thailand had GDP per capita between $2,700 and $10,400. This is also the reason why it has recently become public news that the AEC will not include a common currency. Due to this vast difference in the countries' economic levels, it is infeasible for there to be a single monetary policy within the AEC.
The development of the AEC is news to everyone in every industry around the world. It will provide for a bigger, freer market for global business and could one day rival the European Union and possibly even the United States.
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