ASEAN Economic Community (AEC) 2015
and Economic Integration in East Asia
Ikumo Isono
Institute of Developing Economies, JETRO
Contents of this presentation
1.
2.
3.
4.
5.
6.
Production Networks
ASEAN and ASEAN Economic Community
Three myths of AEC
Key missing areas (1) RCEP
Key missing areas (2) Key infrastructure
Conclusion
2
1. Production Networks
USA
•Disk
•Head
•Suspension
Thailand
•Spindle Motor
•Base
•Carriage
•Flex Cable
•Pivot
•Seal
•VCM
•Top Cover
•PCBA
•HGA
•HAS
Malaysia
•Base
•Pivot
•Spacer
•VCM
•Card
•Top Clamp
•Disk
China
•PCBA
•Carriage
•HGA
•Base
•Head
•Suspension
Taiwan
•Top Clamp
Mexico
•Head
Global Purchasing by a HDD Manufacturer
Japan
•Cover
•Disk
•Screw
•Seal
•Ramp
•Top Cover
•Latch
•Plate Case
•Label
•Filter
•PCBA
•Suspension
Hong Kong
•Filter
Philippines
•D. Plate
•Coil Support
•PCBA
Singapore
•Cover
•Screw
•Pivot
•PC ADP
•Disk
Indonesia
•W. Suspension
•VCM
•PCBA
Source: Compiled from Hiratsuka (2006)
3
LPI 2012
Logistics Performance Index and GDP per capita
4.5
Singapore
Hong Kong
4.0
Korea
China
3.5
India
3.0
Malaysia
Thailand
Philippines
Indonesia
Viet Nam
Cambodia
2.5
Myanmar
Lao PDR
2.0
Source: Modified from
ERIA (2010)
1.5
300
30,000 GDP per capita
3,000
LPI 2012
ASEAN 2012
(2012, Nominal USD)
CLMV 2007
Fitted line (LPI 2012)
LPIs in forerunner ASEAN and East Asia are relatively higher.
= higher LPI compared with GDP per capita
= better access between primary cities to primary ports
= high competitiveness in the global market
4
Production networks and distribution of the
industries: A few clusters in ASEAN
Electric and Electronics (E&E), 2005
Malaysia succeeded in dispersing the
electronics industry to the states along
the Strait of Malacca, but for Thailand,
Indonesia, the Philippines and Vietnam,
agglomerations in production can be
seen in limited areas.
How do we strengthen ASEAN with the
production networks?
Source: Kumagai et al. (2013).
5
Policies for enhancing production networks: examples
Reduction in network
set-up cost
•
High-level FTAs
•
•
•
Reduction in service link
cost
Reduction in production
cost per se
Investment
liberalization
IPR protection
Competition policy
•
•
•
Tariff removal
Trade facilitation
Enhancing
institutional
connectivity
•
Investment
facilitation/promotio
n
•
Enhancing physical
connectivity
(including hard and
soft logistics
infrastructure
development)
Reducing transaction
cost in economic
activities
•
Development agenda
•
•
•
•
Liberalization of
productionsupporting services
Investment
liberalization
Upgrading
infrastructure
services such as
electricity supply and
EPZs
Enhancing
agglomeration effects
through SME
development
Strengthening
innovation
Source: Kimura (2010)
6
2. ASEAN and ASEAN Economic
Community
• ASEAN was established on 8 August 1967.
• Fundamental change occurred after Manila Declaration
in 1976 to a new strategy “ASEAN’s strategy for Collective
FDI-dependent and Exported-oriented Industrialization.
(Shimizu 2003)
• AFTA was signed in 1992.
• Establishment of ASEAN Economic Community in 2020
was agreed in 2003.
• The target year was accelerated to 2015 in January 2007.
• ASEAN Economic Community Blueprint was adopted in
November 2007
• ASEAN Economic Community was officially established
on 31 December 2015.
ASEAN in the World
(a) Share in 2014
Import
World
NAFTA
EU
Japan
ASEAN+6
USA
ASEAN+3
China
Export
World
100.0%
ASEAN
16.4%
12.0%
32.7%
4.0%
26.0%
22.5%
8.7%
7.1%
13.6%
6.8%
3.7%
1.8%
0.4%
2.3%
2.0%
0.8%
0.5%
8.8%
3.0%
－
1.5%
0.4%
2.0%
1.7%
0.7%
0.4%
32.2%
2.2%
1.9%
0.3%
2.6%
2.1%
1.0%
0.5%
3.8%
0.8%
0.7%
0.4%
－
1.7%
1.5%
0.7%
0.6%
29.9%
4.9%
4.2%
3.8%
1.9%
12.2%
10.7%
2.9%
4.6%
ASEAN+3
26.7%
4.5%
3.9%
3.4%
1.6%
10.7%
9.4%
2.4%
4.3%
China
12.7%
2.5%
2.2%
2.0%
0.8%
3.4%
2.8%
－
1.5%
7.1%
0.7%
0.7%
0.7%
0.7%
4.1%
3.6%
0.9%
1.8%
NAFTA
USA
EU
Japan
ASEAN+6
ASEAN
Source: Provided by So Umezaki
21.1%
(b) Change from 2008 to 2014
Import
World
NAFTA
EU
Japan
ASEAN+6
USA
ASEAN+3
China
Export
ASEAN
11.6%
10.8%
7.3%
-2.3%
3.4%
30.9%
28.2%
38.0%
36.1%
21.6%
26.6%
23.4%
1.5%
-1.5%
28.9%
30.5%
74.6%
16.0%
22.6%
33.9%
－
0.9%
0.6%
28.9%
30.5%
73.6%
15.9%
-0.2%
-5.7%
-6.7%
-2.3%
-2.4%
22.3%
30.4%
58.7%
16.1%
-16.3%
-6.6%
-6.1%
-35.1%
-2.7%
-2.0%
1.0%
0.9%
30.0%
27.9%
28.4%
7.2%
16.2%
34.8%
35.1%
37.8%
49.3%
ASEAN+3
28.4%
26.7%
27.0%
7.5%
18.2%
33.9%
33.1%
27.8%
48.7%
China
54.9%
46.6%
45.4%
22.8%
24.0%
67.2%
67.5%
－
134.9%
ASEAN
23.3%
10.7%
11.4%
11.6%
11.3%
28.4%
28.2%
49.9%
24.9%
World
NAFTA
USA
EU
Japan
ASEAN+6
Source: Provided by So Umezaki
（
－
ASEAN Economic Community
ASEAN Community
ASEAN Economic Community
(AEC)
ASEAN Political-Security Community
(APSC)
ASEAN Socio-Cultural Community
(ASCC)
Single market and
production base
•Free flow if goods, services , investment and capital. Freer flow
of skilled labor
Competitive economic
region
•Competition policy, consumer protection, IPR, Infrastructure
Region of equitable
economic development
Region fully integrated into
the global economy
development, Taxation and e-commerce
• SME Development and initiative for ASEAN Integration
• Coherent approach towards external economic relations
and enhanced participation in global supply networks
Source: Provided by So Umezaki
10
3. Three myths of AEC
1. AEC is comparable to European Union or former
European Economic Community.
2. Significant change in ASEAN occurred on 31
December 2015 as AEC was established.
3. The level of AEC is too low and it does not help
companies.
Myth 1: AEC is comparable to European Union or
former European Economic Community.
• AEC is closer to EPA
Elimination of tariffs
Common ecternal tariff
Elimination of non-tariff barriers
Liberalization of trade in services
Harmonization of standars
Free movement of persons
Trade facilitation
Flow of investment
Flow of capital
Liberalization of government procurement
Protection of intellectual property rights
Competition policy
Cooperation
Common currency
Source: Modified from Ishikawa (2008)
EU














AEC

Limited
Limited
Limited
Limited


Limited
Limited
Limited

-
EPA

Limited
Limited
Limited
Limited


Limited
Limited

Limited

-
Myth 2: Significant change in ASEAN occurred on 31
December 2015 as AEC was established.
• AEC is a cummulation of measures since AEC
Blueprint was issued.
• As of August 2015, ASEAN had implemented 463
(91.5%) out of 506 prioritized measures in AEC
Blueprint.
 Moreover, most measures of AEC Blueprint are
compilation of existing sectoral cooperation
programs.
• Some measures will be implemented by 2018.
• ASEAN issued new Blueprint toward AEC 2025.
Change in average tariff rate
Source: ASEAN Secretariat, “ASEAN Community in Figures: Special Edition 2014”.
14
National Single Window
Source: Ponciano Intal Jr.(2015). AEC Blueprint Implementation Performance and
Challenges: Trade Facilitation, ERIA Discussion Paper 2015-41.
15
Services Liberalization
Hoekman Index:
Hoekman (1995) proposes an indexation method for measuring the GATS-style degree of commitment in the
service sector. This method assigns values to each of 8 fields (4 modes times 2 categories--market access (MA)
and National Treatment (NT)--), as follows: N=1, L=0.5, and U=0.
0.6
0.5
0.4
0.3
AFAS 5th
0.2
AFAS 7th
0.1
0
Source: Ishido and Fukunaga (2012)
16
Myth 3:The level of AEC is too low and it does not help
companies.
• Change in production networks in automotive sector.
• Air Asia and LCCs.
Source: HS-ABD (CC Share Alike 2.0)
Key missing areas
1. Regional Comprehensive Economic Partnership
(RCEP)
2. Key infrastructure
4. RCEP
8 principles of RCEP
Negotiation starts in 2013.
1.
WTO consistency
2.
Significant improvements over the existing ASEAN+1 FTAs
3.
Facilitation of trade and investment and transparency
enhancement
4.
Consideration of the different levels of development
(e.g., special and differential treatment)
5.
Continued existence of the ASEAN+1 FTAs
6.
Open accession
7.
Technical assistance and capacity building
8.
Comprehensiveness (parallel negotiation of trade in goods, trade
in services, investment and other areas)
19
RCEP guiding principles and objective
“The objective of launching RCEP negotiations is to achieve
a modern, comprehensive, high-quality and mutually
beneficial economic partnership agreement among the
ASEAN Member States and ASEAN’s FTA Partners.”
Principle 2:
“Significant improvements over the existing ASEAN+1
FTAs”
20
Why we want RCEP?
RCEP can…
Economic Reasons
1.
Deepen the liberalization commitments (goods, services and ROO);
2.
Ease the “noodle-bowl” situation (not only in ROO but huge number of tariff
schedules, and different rules) and thus enhance the utilization of FTA;
3.
Further ease the use of FTAs via “accumulation”;
4.
Deepen economic cooperation for facilitation measures; and,
5.
Prevent the potential loss from competing initiatives (e.g., CJK FTA).
+ Political Reason for ASEAN
1.
Maintain and strengthen the “ASEAN Centrality” (politically) under the
pressure from TPP and CJK.
21
Tariff elimination
 All the ASEAN+1 FTAs (except AIFTA) provide higher than 90% tariff elimination.
 Yet, there are room for improvement when it comes to country-specific.
BRN
CAM
IDN
LAO
MLS
MYA
PHI
SGP
THA
VTN
AUS
CHN
IND
JPN
KOR
NZ
Average
AANZFTA
99.2%
89.1%
93.7%
91.9%
97.4%
88.1%
95.1%
100.0%
98.9%
94.8%
ACFTA
98.3%
89.9%
92.3%
97.6%
93.4%
94.5%
93.0%
100.0%
93.5%
n.a.
AIFTA
85.3%
88.4%
48.7%
80.1%
79.8%
76.6%
80.9%
100.0%
78.1%
79.5%
AJCEP
97.7%
85.7%
91.2%
86.9%
94.1%
85.2%
97.4%
100.0%
96.8%
94.4%
AKFTA
99.2%
97.1%
91.2%
90.0%
95.5%
92.2%
99.0%
100.0%
95.6%
89.4%
Average
95.9%
90.0%
83.4%
89.3%
92.0%
87.3%
93.1%
100.0%
92.6%
89.5%
100.0%
94.1%
78.8%
91.9%
90.5%
100.0%
95.7%
94.7%
79.6%
92.8%
94.5%
Notes: HS2007 version, HS 6-digit base. Data on Viet Nam under the ASEAN-China are missing. Data on
Myanmar under the ASEAN-China FTA are also missing for HS01-HS08.
Source:
ERIA FTA Mapping Study
22
ROO
 Differences exist in ROO which may create “noodle-bowl” effects.
 Most common ROO is “RVC40 or CTH”.
HS
HS
ATIGA
ATIGA
AANZFTA
AANZFTA
ACFTA
ACFTA
AIFTA
AIFTA
AJCEP
AJCEP
AKFTA
AKFTA
1-5
6-14
16-24
25-27
“RVC(40) or CTH”
or more flexible
RVC40
28-38
Others
39-40
41-43
47-49
50-63
68-70
Note: “co-equal” rules give
more options for business.
Source: ERIA FTA Mapping
Study
72-83
84-85
86-89
90-92
95-96
23
Services Liberalization
 Some ASEAN+1 FTAs provide only minimal “WTO plus” contents.
AFAS(7)
Total
WTO+
Brunei
Cambodia
Indonesia
Laos
Malaysia
Myanmar
Philippines
Singapore
Thailand
Vietnam
ASEAN
Average
Australia
New Zealand
AANZFTA
Total
WTO+
ACFTA (2)
Total
WTO+
AKFTA
Total
WTO+
0.23
0.41
0.36
0.34
0.34
0.36
0.33
0.39
0.50
0.38
0.20
0.04
0.30
NA
0.24
0.33
0.23
0.28
0.26
0.11
0.18
0.51
0.29
0.24
0.31
0.26
0.26
0.44
0.36
0.46
0.15
0.14
0.22
NA
0.21
0.23
0.17
0.33
0.12
0.19
0.06
0.38
0.08
0.04
0.19
0.07
0.18
0.37
0.29
0.34
0.03
0.01
0.03
NA
0.05
0.04
0.09
0.26
0.06
0.06
0.08
0.38
0.18
0.07
0.20
0.06
0.17
0.33
NA
0.32
0.06
0.01
0.11
NA
0.10
0.03
0.08
0.22
NA
0.05
0.36
0.22
0.33
0.20
0.20
0.07
0.20
0.08
0.52
0.51
0.18
0.26
0.32
0.07
0.31
0.09
China
Korea
Notes: The higher the figure, the more liberal commitments are (min. 0; max. 1). AFAS is based on the 7th
package. ACFTA is based on the 2nd Package.
Source:
ERIA FTA Mapping Study
24
One comparison study with TPP
80,000
80,000
GDP per capita
GDP per capita
(USD, 2011)
(USD, 2011)
Australia
Australia
60,000
60,000
USA
Singapore
Japan
Singapore
Japan
40,000
40,000
Brunei
Brunei
New Zealand
New Zealand
ROK
20,000
20,000
20,000
Vietnam
Vietnam
0
China
Malaysia
Malaysia
0
TPP
RCEP
(Average: USD 33,849)
(Average: USD 5,919)
GDP per capita and populations of TPP and
RCEP countries
TPP
RCEP
(Average: USD 33,849)
(Average: USD 5,919)
20,000
GDP per capita and GDP of TPP and RCEP
countries
5. Key infrastructure
Myanmar’s reform and Dawei,
How Do We Benefit from Connectivity Enhancement?
[Scenario 1]
Reforming Myanmar and
the Yangon Development
[Scenario 2]
Two-Polar Development +
Domestic Connectivity Enhancement
(excluding Dawei)
(Impact Density, USD per square kilometer, 2030)
Need to achieve high economic growth and inclusive development.
26
[Scenario 3]
Scenario 2 + Dawei Development
Dawei project has a huge
economic impact on the Mekong
region and India.
(Impact Density, USD per square kilometer, 2030)
Note: NA for Bhutan, Nepal, North Korea, Sri Lanka, Timor-Leste, and Jammu and Kashmir due to the data
availability.
Source: IDE/ERIA-GSM 6.
27
6. Conclusion
• ASEAN Economic Community was officially
established on 31 December 2015.
• AEC is not a sudden change, but an ongoing process
and it is continued toward AEC2025.
• Economic Integration in Asia can be driven by ASEAN
integration through AEC, RCEP, development of key
infrastructures, and firms.
28
Thank You for Your Kind Attention!
Ikumo_Isono@ide-gsm.org