A New Lens on Economic Freedom in ASEAN
Prosperity around the Southeast Asia region has risen fast in the last 50 years. More and more countries have moved away from communist and socialist economic policies, and instead opted for market-driven policies.
Myanmar, long one of the most isolated economies, has opened up. Vietnam, Cambodia and Laos have moved decisively away from communist systems and especially Vietnam is now a hot destination for investment. The Association of Southeast Asian Nations (ASEAN) played a key role in this.
The ASEAN Prosperity Initiative (API) released two reports in December 2018 reviewing the development of ASEAN and its role in supporting the prosperity of its Member States and their citizens.
1 ) ASEAN Integration Report, providing an external assessment of implementation of AEC Blueprint 2025; and
2) EU-ASEAN FTA Report, examining the economic relationship between ASEAN and the European Union (EU)
API is designed to highlight issues and raise questions relating to prosperity in ASEAN. It offers a new lens for looking at the value of economic freedom, applying its concepts to real, tangible issues.
Forging ahead with economic integration
The development in ASEAN has been slow, but steady. It has seen an expansion of trade and a deepening of economic cooperation, culminating with the formal start of the ASEAN Economic Community (AEC) at the end of 2015. A successor blueprint called the AEC Blueprint 2025 was adopted that lays out the work for ASEAN in the next 10 years. It demonstrates ASEAN’s commitment to forge ahead with economic integration.
The AEC Blueprint 2025, which aims to address these more complex areas, has delivered significant achievements but remains behind schedule in many areas. There are a number of challenges with progressing implementation.
API identifies three linked sets of issues which contribute to slow progress in achieving ASEAN integration: institutional, economic and political. The consensus-based decision-making contributes to slow progress with the weakest member setting the pace, and drawn-out decision-making. In addition, the different levels of economic level in the region present challenges. This economic diversity can motivate protectionist tendencies. Finally, ASEAN economic integration are not high-priority political issues domestically.
Highlighting the real-world benefits of ASEAN economic integration in terms that are accessible to the general public can help to build momentum for progress and ASEAN should therefore continue with a spirit of openness and transparency.
ASEAN and EU’s economic and political relationship
ASEAN and the European Union share a long standing and important economic and political relationship. The two regions share important trade and investment links and as the world’s two largest economic blocs, they have much to gain from ongoing cooperation.
API recommends a region-to-region, EU-ASEAN Free Trade Agreement (FTA) to further strengthen this relationship. Other than delivering significant economic bene ts on both sides as a result of increased trade and stronger competition domestically, a region-to-region deal would send a positive signal about the strength of a rules-based international trading system.
The report also lists a number of challenges to securing an EU-ASEAN FTA that will need to be addressed for progress to be made, including addressing concerns over industrial development, public policy freedom, and the negative adjustment associated with increased competition.
In the short term, the challenges with agreeing a region-to-region agreement mean that the EU should continue to pursue bilateral agreements with ASEAN Member States. The hurdles are signi cant, and agreeing bilateral deals remains a sensible strategy to ensure that progress is accelerated where possible. API is intended to engage a broader set of stakeholders in the debate on the future of ASEAN, including business, academia and the general public.
The reports were published by the Institute for Democracy and Economic Affairs (IDEAS), an independent research institute based in Malaysia, with the support of FNF.