ASEAN leaders have repeatedly conveyed their political will and commitment to building an ASEAN Economic Community (AEC) by 2015. They signed the ASEAN Charter in 2007, which puts in place the institutions and mechanism to build up an ASEAN Community. The AEC Blueprint adopted the same year gave a master plan for building an economic community characterized by a single market and production base; a competitive economic region with equitable development and a region that is engaged with the global economy. During the ASEAN ministers’ meetings in 2010, the leaders agreed that ASEAN would focus efforts on ensuring financial stability, fostering regional infrastructure development and connectivity, promoting sustainable development, and narrowing the development gap. They adopted the Master Plan on ASEAN Connectivity at the 17th ASEAN Summit, which is expected to be implemented in the next four years.

These progressive developments show the leaders’ increased confidence in the process of economic integration. It also shows their greater willingness to move faster, especially after the financial crisis, and to enhance the competitiveness of the region to face increased competition from China and India.

ASEAN Economies

But what is the state of readiness (or lack thereof) of member countries? With regard to the first feature of the AEC Blueprint — a single market and production base — ASEAN secured a major landmark when, on 1 January 2010, the ASEAN-6 countries applied zero tariffs on 99 per cent of goods. The CLMV (Cambodia, Lao PDR, Myanmar and Vietnam) countries are also not far behind as they traded 98.6 per cent of goods at 0–5 per cent of tariff rate. However, there exist many non-tariff barriers (NTBs), which lower the potential benefits under the ASEAN Free Trade Area (AFTA). For example, in Malaysia and Indonesia, there exist protectionist measures in the form of subsidies and import restrictions to sensitive industries. In the past decade, the Philippines observed higher technical barriers to trade, as businesses believed that with the reduction in tariff, NTBs could provide some protection to local industries and manage the competition from imports. Trade in Laos and Cambodia is also challenged by effective coordination on the borders (customs, different agencies, various standards and procedures).