The AEC and its economic effects

Abstract

ASEAN Community Building comprises the ASEAN Economic Community (AEC), complemented by the ASEAN Political-Security Community (APSC) and the ASEAN Socio- Cultural Community (ASCC). Rationale and process towards the AEC At the November 2002 ASEAN Summit it was decided to move on to the next stage of regional economic integration. According to Severino the term AEC was coined by then Singapore Prime Minister Goh Chok Tong to evoke the idea of the EEC, as he and a few other ASEAN leaders were deeply concerned over the weakened ability of ASEAN countries to attract FDI in the aftermath of the AFC as well as the rise of China and India as competing destinations for investment. For ASEAN to meet these challenges it had to deepen economic integration to persuade investors that ASEAN was serious about regional economic integration and clear about its objective. Specifically, investors had to be persuaded that ASEAN, when integrated, would have a prospective domestic market that could compete with China. The AEC would have almost half of China's population and would equal China's GDP size. The Bali Summit in 2003 issued the Declaration of ASEAN Concord II to create the AEC. The AEC is based on the 1997 ASEAN Vision 2020, calling for a stable, prosperous and highly competitive ASEAN economic region in which there is free flow of goods, services, investment and a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities in the year 2020. This was to be achieved by transforming ASEAN into a single market and production base, as a more dynamic and stronger segment of the global supply chain. For this ASEAN would set up new mechanisms and measures to strengthen the implementation of its existing economic initiatives (including AFTA, negotiations on AFAS, and AIA); facilitate movement of business persons, skilled labour and talents; and ensure expeditious and legally binding resolution of any economic disputes.