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AEC 2015: A point of no return for all member states

  • The Jakarta Post

    The Jakarta Post

| Thu, January 14, 2016 | 04:35 pm
AEC 2015: A point of no return for all member states

The ASEAN Economic Community (AEC), essentially the economic integration of the 10 members of the Association of Southeast Asian Nations, officially commenced on the final day of 2015. All the necessary agreements and supporting legal umbrellas for its implementation are already in place, and the process for economic cooperation and integration in the region is underway. Yet, the majority of its member countries, including Indonesia, are still looking for the best approaches to perfectly match the agreed-upon system. The Jakarta Post'€™s Imanuddin Razak and Margareth S. Aritonang take a close look at the new regional arrangement.

The ASEAN Economic Community (AEC) '€” one of the three pillars of ASEAN alongside the ASEAN Political-Security Community (APSC) and the ASEAN Socio-Cultural Community (ASCC) '€” has its roots in the ASEAN member countries'€™ commitment to creating a single market across the ASEAN nations. The initial blueprint for its establishment (2008-2015) was adopted on Nov. 20, 2007, during the 13th ASEAN Summit in Singapore. It was meant as a master plan to guide the establishment of the AEC 2015, the official reference for the regional economic cooperation after its original implementation date was brought forward from 2020 to Dec. 31, 2015.

The AEC Blueprint 2025, which succeeded the 2007 blueprint and is the current official reference for the implementation of the regional economic cooperation, was adopted by ASEAN leaders at the 27th ASEAN Summit on Nov. 22, 2015 in Kuala Lumpur. It provides extensive directions through strategic measures for the AEC from 2016 to 2025.

 The AEC has four key characteristics: (1) It is a single market and production base, (2) It is a highly competitive economic region, (3) It is a region of fair economic development and (4) It is a region fully integrated into the global economy. Cooperation activities among member countries include human resources development; recognition of professional qualifications; closer consultation on macroeconomic and financial policies; trade financing measures; enhanced infrastructure and communications connectivity; development of electronic transactions through e-ASEAN; integrating industries across the region to promote regional sourcing; and enhancing private sector involvement.

 The AEC recognizes the free movement of skilled labor, goods, services and investment within the grouping'€™s member countries. By doing so, ASEAN is expected to rise globally as one market with each member gaining from each other'€™s strengths, thus increasing its competitiveness and opportunities for development. If ASEAN were a single entity, it would rank as the 7th largest economy in the world, behind the US, China, Japan, Germany, France and the UK.

The launch of the AEC is apparently part of a strategic move by ASEAN leaders to get Southeast Asian countries to stay on a collective path of peaceful and sustainable development and make the regional grouping attractive as a viable political and economic partner for external powers. Pundits and analysts have even associated the establishment of the AEC with the European Union, which came into action in 1993.

However, a new beginning is never a smooth and easy process. A majority of countries in the region still have doubts, particularly regarding their own people'€™s capacity to compete in such a common regional market.

 That doubt, if not dismay, felt by ASEAN member countries in response to the common market establishment was aired by Indonesian President Joko '€œJokowi'€ Widodo himself.

'€œI have met with leaders of ASEAN [on several occasions]. They expressed their anxiety over the [potential] inflow of Indonesian products and skilled manpower to their countries,'€ the President said while addressing the opening of the national congress of the Indonesian Democratic Party of Struggle (PDI-P) in Jakarta on Sunday.

He called on nation members, particularly the business community and the Indonesian labor force, not to get trapped in pessimistic semantics but instead get prepared for the ASEAN common market system.

'€œThey are afraid of our products and skilled manpower. Why should we be equally afraid of them?'€ Jokowi said. '€œIt is an era of globalization, regionalism ['€¦] We must not avoid, but face it.'€

Earlier, the President asked the country'€™s business community and labor force not to attempt to deal with all sectors, but to focus on the sectors that the Indonesian business sector and labor force were good at.

Analysts and experts have indicated a number of sectors in which Indonesian companies and workers have a competitive advantage in compared with other ASEAN member countries. They include the tourist industry, including hotel services, and the creative industry, including engineering and IT technologies.

The President'€™s optimistic stance has apparently also been shared by many other government officials. Indonesian Ambassador to Thailand Lutfi Rauf, for instance, said last October that according to the AEC Plan of Action scorecard, Indonesia'€™s readiness stood at 94 percent, higher than the ASEAN average of 92 percent.

 '€œVarious sectors in Indonesia have been made aware of and are ready for the AEC,'€ he said after a discussion at the ASEAN Business Forum 2015 organized by the Thailand Management Association (TMA) and the Thailand Board of Trade, in Bangkok.

 The AEC scorecard is a monitoring mechanism established by ASEAN to ensure a timely implementation of AEC initiatives. The scorecard reports progress in implementing various AEC measures and identifies gaps and challenges faced by each member country.

 Lutfi expressed optimism about the potential of Southeast Asia'€™s largest economy, thanks in particular to its developed human resources, strategic geographical location between two oceans, which makes the country an international hub, and relatively stable political situation.

 In response to the common market implementation, Tourism Minister Arief Yahya said that his ministry had prepared to welcome the advent of the AEC this year. He said he was optimistic that in the AEC era, business players in Indonesia'€™s tourism sector could compete with their competitors from other countries, and could derive great advantage from the new community.

 '€œOne of the measures taken has been the establishment of 28 tourist-business standards; seven were established through a ministerial decree, while the remaining 21 standards are still being drafted,'€ the minister said earlier this month.

 '€œWe have also prepared 1,500 auditors to monitor tourism-business standards,'€ he added.

In an attempt to improve the country'€™s tourism workers'€™ skills and capacity, the Tourism Ministry is currently facilitating a competency certification process for them and aiding the establishment of 12 professional certification institutions for the sector.

 The regional common market has begun. It depends entirely on all of us '€” the government, the Indonesian business community and the labor force '€” to collectively respond to and succeed in the new mechanism.