ASEAN economic integration is a plan for growth through economic integration. With the help of outside investment and the signing of free trade agreements with other countries, the goal of joining the global supply chain was achieved.
In order to boost the region’s attractiveness as a place for foreign investment, ASEAN created an integrated market and supported economic cooperation with states outside the region through FTAs.
ASEAN is an example of economic integration working well in a developing country. ASEAN’s achievements can serve as a model for other emerging countries.
Internal diversity, rapid economic expansion, and a refusal to establish an effective supranational framework characterize ASEAN.
The first steps were taken toward economic unification and cooperation in 1976 by ASEAN, where the exchange of goods served as its primary objective.
With the addition of the “Plus 3” countries (the People’s Republic of China, Japan, and the Republic of Korea), ASEAN has increased its cooperation on macroeconomic and financial issues.
ASEAN’s favorable conditions for economic integration
In August of 1967, the founding members of the Association of Southeast Asian Nations (ASEAN) convened for the first time. As far as regional organizations go, it’s the strongest and most productive in the world.
Singapore is the wealthiest country in ASEAN, but the rest of the countries in the region are among the poorest in the world.
The richest people have an average annual income that is almost eighty times greater than the average annual income of the poorest people on the planet.
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam, and Brunei Darussalam, a tiny oil sultanate, make up the region. The world’s two largest island groups are Indonesia and the Philippines.
Secondly, in some cases even longer, most countries have experienced strong economic development. In 1993, the World Bank categorized Indonesia, Malaysia, Singapore, and Thailand as “miracle” economies.
Similarly, ASEAN’s strong economy and rising cooperation created a virtuous circle, with more peace and harmony in the ASEAN region leading to a better business climate.
Lastly, restraint, pragmatism, and consensus-based decision-making have been hallmarks of ASEAN diplomacy and cooperation. This implies not interfering in other countries’ internal matters and making decisions based on consensus.
ASEAN towards Economic Integration
Southeast Asian nations, known as ASEAN, are leading efforts to unite East Asian economies and work toward regional cooperation.
The 1976 Declaration of ASEAN Concord was signed at the inaugural ASEAN meeting in 1976 and economic cooperation commenced.
Through this initiative, Southeast Asian economies are encouraged to work together more closely through the ASEAN Industrial Project AIP, ASEAN Industrial Complementation AIC, and ASEAN Preferential Trade Agreement APTA.
ASEAN’s Trade Liberalization
To facilitate intra-firm trade-in car parts, the ASEAN Economic Community (AEC) implemented Brand to Brand Complementation (BBC) in 1988, reducing tariffs on auto parts by 50%.
The new term for BBC is ASEAN Industrial Cooperation (AICO), which includes a broader range of products than merely automobile components and imposes a 0–5% tax on trade between enterprises.
Later on ASEAN Free Trade Agreement AFTA’s creation in 1993, the ASEAN economies began to integrate. When the AFTA met its goal of cutting tariffs to 0–5% in 2002, the then ASEAN 6 countries achieved their goal of removing tariffs in 2010.
AFTA has attained a trade liberalization rate of 98.6 percent. – (the proportion of tariff lines that have been eliminated).
ASEAN Economic Community
Declaration of ASEAN Concord II was accepted during the 9th Summit in October 2003, and it was decided that the ASEAN Community would be constructed on three main foundations.
The three pillars that underpin the ASEAN Community are the ASEAN Security Community (later renamed the Political-Security Community), the ASEAN Economic Community (AEC), and the ASEAN Socio-Cultural Community (ASCC).
On schedule, the AEC was formally established at the end of 2015 with the purpose of free movement of goods, services, investment, skilled workers, and money.
There are similarities between the Economic Partnership Agreement and the AEC in terms of their economic integration goals and the amount of market integration.
As a result of the ASEAN Free Trade Area (AFTA) being established, the ASEAN Economic Community (AEC) has become more integrated. With tariff reduction, the AEC achieved a free trade area with a high degree of market liberalization.
ASEAN Economic Community Vision 2025
Vision 2025 envisions an ASEAN Economic Community 2025 (AEC2025) that is highly integrated, cohesive, and dynamic with improved connectivity and sectoral cooperation.
Moreover, it is a more resilient, inclusive, and people-centered community that is connected to the global economy; and a more competitive, innovative, and dynamic ASEAN.
It was adopted in ‘Kuala Lumpur Declaration on ASEAN 2025’ by ASEAN leaders at the 27th ASEAN Summit in November 2015.
ASEAN Connectivity 2025 and the Third Work Plan of the Initiative for ASEAN Integration (IAI) are the components of the ASEAN Community Vision for 2025.
After the AEC2025 Blueprint was adopted by the AEC Council in February 2017, the AEC2025 Consolidated Strategic Action Plan (CSAP) was revised in August of 2018.
Action plans, timelines, and sectoral work plans are all included in the CSAP. 556 key action lines are included among the 153 strategic measures.
ASEAN Trade In Goods Agreement (ATIGA)
An open and interconnected regional trade system was reaffirmed in 2009 by ASEAN as it signed the ASEAN Trade in Goods Agreement ATIGA, despite the worst economic crisis since the Great Depression.
The ASEAN Trade and Investment Facilitation Agreement (ATIGA), will improve ASEAN’s global supply chains, and cut trade prices.
It will also remove regulatory barriers, alleviate logistics bottlenecks, and place ASEAN on a more inclusive and sustainable economic growth path.
Inter-ASEAN tariffs on virtually all imports have been eliminated as a result of ATIGA. As of right now, nearly all tariff lines are completely free. Trade regulations can be difficult to navigate, and the ATIGA has taken several initiatives to help businesses with this task.
For example, trade documents like Certificates of Origin and Custom Declarations can now be electronically exchanged between the customs offices of all 10 ASEAN member states thanks to the ASEAN Single Window.
As a result of these measures, trade between the ASEAN countries has grown. A good case in point is the rise in intra-ASEAN trade, which accounted for about 21.3% of the region’s total trade in 2021, from USD 502.9 billion in 2010.
By 2021, ASEAN’s global trade share is expected to rise to 7.5% from its 2010 level of 6.5 percent. Compared to other regions, this one has grown at a quicker rate, demonstrating that the ASEAN integration process is expanding.
At the same time, ASEAN is still the third most popular destination for FDI, after the United States and China.
ASEAN Economic Community beyond 2025
Since reaching its 2025 goals, ASEAN has begun establishing the foundation for its priorities and agenda beyond that year.
The 37th ASEAN Summit in November 2020 passed the Hanoi Declaration on the ASEAN Community’s Post-2025 Vision. The ASEAN Post-2025 Vision was launched as a result of this initiative.
Declaration states that “development of a Post-2025 Vision shall be pursued in a comprehensive and pragmatic manner; taking a whole-of-community approach to synergize efforts across the ASEAN Community Pillars and among its sectoral bodies to address the growing complexity of opportunities and challenges facing ASEAN”
A bold economic union, the ASEAN Economic Community is also concentrating on other important concerns such as productivity-driven growth, connectivity, the digital economy, and regulatory reforms.
As the AEC 2025 blueprint is implemented, the current state of AEC 2025 activities will improve. Things like gradual and flexible deregulation over time and the setting of high goals have helped make integration happen.
International commerce and foreign direct investment (FDI) also have had a key impact. The region’s inequalities have been addressed, and a transit system has been established.
