Ten member states of the Association of Southeast Asian Nations (Asean) will launch an ambitious trade pact Thursday to integrate their markets and allow unrestricted flow of labor, services and capital across the region.
The U.S.-backed Asean Economic Community (AEC) — Asean’s business council — formally adopted a game plan for the next decade, which plans to boost economic ties between the countries in hopes of building an open cross-border market and production base.
“It’s a big milestone for us,” Le Luong Minh, secretary-general of the bloc, reportedly said Wednesday. “We’ve made a lot of progress,” he added, pointing out that less than a half century ago, some Southeast Asian countries were still at war.
The trade bloc also aims to consolidate to better face competition from China and Japan, and expects its $2.6 trillion combined economy to almost double by 2030.
Minh, however, cautioned that the community still had a long road ahead, as establishing a single market and production base would require strong political commitment and support from all Asean heads of state.
The pact, which ties emerging nations like Myanmar, Brunei, Cambodia and Indonesia to richer states like Singapore, hopes to garner more attention from the global investor community. Four countries from the AEC are also part of a bigger proposed trade bloc, the Trans-Pacific Partnership (TPP), a 12-nation accord spearheaded by U.S. President Barack Obama. The TPP pact was completed in October but is yet to gain clearance from governments of various countries, including the U.S.
Meanwhile, some businesses in member states have been less than enthusiastic in their response to the pact, notably those involved in the sugar industry in Indonesia and the Philippines, according to a Wall Street Journal report. The two countries had slashed their import tariffs on sugar to meet Asean demands and later expressed concerns about cheaper subsidized sugar from Thailand. Thailand has denied subsidizing its sugar industry.
Tri Widodo, head of Economic Sciences at the Gadjah Mada University in Indonesia, predicted that unemployment will rise as the AEC comes into effect by Dec. 31. Due to free flow of skilled labor, competition in the labor market will continue to intensify, he said Tuesday, according to Temp.Co, an Indonesian news portal.
In addition to increasing unemployment, Tri said that another effect of the AEC will be an increase in smuggled goods, such as electronics and textile products.