ASEAN Economic Community (AEC)
by Magna Carta Law Office
The ongoing intensive regional economic integration leads to the establishment of ASEAN Economic Community (AEC), a single regional common market of ASEAN countries, by 2015.
The regional integration's objective is to create, by then, a competitive market of over 600 million people with an approximate GDP of over US$2 trillion in ASEAN countries: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
The AEC has the goal of transforming ASEAN into a stable, prosperous and highly competitive region with economic development, reduced poverty and socio-economic disparities.
Core Elements of the AEC
1. Free flow of goods
Free flow of goods is one of the principal means by which the aims of a single market and production base can be achieved. A single market for goods will also facilitate the development of production and networks in the region and enhance ASEAN’s capacity to serve as a global production centre or as a part of the global supply chain.
2. Free flow of services
Free flow of trade in services is one of the important elements in realising the AEC, where there will be substantially no restriction to ASEAN services suppliers in providing services and in establishing companies across national borders within the region.
3. Free flow of investment
A free and open investment regime is key to enhancing ASEAN’s competitiveness in attracting foreign direct investment (FDI) as well as intra-ASEAN investment. Sustained inflows of new investments and reinvestments will promote and ensure dynamic development of ASEAN economies. Therefore all industries will be opened up for investment, with exclusions to be phased out according to schedules. National treatment is granted immediately to ASEAN investors with only a few exclusions. Investment process and procedures will be streamlined.
4. Freer flow of capital
Freer flow of capital will not only strengthen ASEAN Capital Markets, but also Development and Integration. This facilitates the flows of payments and transfer of current account transactions.
5. Free flow of skilled labour
Free flow of skilled labour allows for managed mobility or facilitated entry for the movement of natural persons engaged in trade in goods, services and investments, according to the prevailing regulations of the receiving country, primarily in order to support the free flow of services.
Benefits of the AEC
The above described core elements will result in more regional cooperation and will improve the scale of efficiencies, dynamism and competitiveness of AEC-based companies.
AEC will enable easier movement of goods, services, investment, capital and people -- ultimately, it will offer new ways of accessing new markets.
In the near future, all parts of the economic system in ASEAN countries, including the service sectors, will be integrated into the ASEAN Economic Community.
The AEC, in the context of its single market and free-flow policies, will definitely be an opportunity to gain greater comparative advantages and to increase revenues by expanding markets and customer base inside ASEAN.
AEC-based companies will benefit greatly as various goods or services can be sold or provided without any additional tax in different countries, effectively creating a single market entity and production base for all ASEAN countries.