South-east Asia creates economic community
Published 22/11/2015 | 04:36
South-east Asian leaders have formally created a unified economic community in a diverse region far larger than the European Union or North America, with hopes of competing with China and India.
The 10 leaders in the Association of South-east Asian Nations (Asean) signed a declaration during their summit in Kuala Lumpur, Malaysia, establishing the Asean Economic Community, originally envisaged in 2002.
The community, known by its acronym AEC, is already a reality and many of its fundamentals have been applied in the region such as removal of tariff barriers and visa restrictions among others. It has also led to greater political and cultural co-operation.
But there is a long way to go before the AEC becomes fully functional after becoming a legal entity on December 31. It falls short in more politically sensitive areas such as opening up agriculture, steel, car production and other protected sectors.
Intra-regional trade has remained at around 24% of Asean's total global trade for the last decade, far lower than 60% in the EU.
AEC "is not the finished article. Neither is it officially claimed to be. There is much work to be done", said Mohamad Munir Abdul Majid, chairman of a council that advises Asean on business matters.
"There is a disparity between what is officially recorded as having been achieved ... and what the private sector reports as their experience."
There are also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping.
A wide economic gulf divides south-east Asia's rich and middle income economies - Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines - and its four less developed members, Communist Vietnam and Laos, Burma and Cambodia.
The AEC was envisaged in 2002 and a blueprint created in 2007 to face competition from China and India for market share and investments.
While China's economic growth is expected to slow to an average of 6% annually over the next five years, India's expansion is likely to pick up to 7.3% in the same period, according to the Organisation of Economic Co-operation and Development.