Greetings from Singapore, where the talk in this city-state is centered squarely on the ASEAN Economic Community (AEC). The AEC came into being, officially, on December 31, 2015, and businesses are abuzz about the AEC's potential for growing the economies of the 10 member states.
Although the AEC aims to create a common market of sorts, the AEC will not function in the same way as the EU's economic community. To be clear, if I've heard it once, I've heard it dozen times, "the AEC is being done the Southeast Asian way." For the most part, this means allowing countries to commit to its components at their own pace.
Still, there is no question that the AEC will ease the movement of goods throughout the region; at this early stage of the game, Indonesia and Vietnam are projected to derive the greatest benefits from the AEC. Singapore itself expects to benefit from eventual visa-free travel throughout the region, from its position as a financial services hub, and through the freer movement of goods through its port - already the second busiest in the world.
The AEC will also give the ASEAN nations greater leverage in negotiating bilateral FTAs and makes it a more attractive destination for FDI. The Chinese-backed Kunming railway, which will allow for the direct movement of goods from Singapore up the Malay peninsula and to a terminus in Kunming, China, is one obvious example.
That said, the excitement and high expectations are tempered with a bit of skepticism. Will the AEC be fully and truly implemented as it was conceived? Will the benefits materialize? These are the questions business leaders here are asking themselves. They acknowledge that hurdles remain. The region's uneven development and high levels of corruption in certain member countries are causes for concern. There is no question, though, that once it is implemented, the AEC has the potential to utterly change the face of business in Southeast Asia.
By: Sarah Singer
Assistant Director of Michigan State University's International Business Center