ASEAN ECONOMIC COMMUNITY…

TENTATIVE WAY FORWARD!

Presented by:

Amirul Haji Mohamad (IMSME)

Maarhafizah Maaroff (IMAS)

Mohd Zikry Kholil (IMRI)

OUTLINE

Introduction 1. Significance and Importance 2. Thesis Statement

Body 1. Moving up the Value Chain 2. Managing Major Issues

Conclusion

Significance and ImportancePincer Threat from

China (present) and India (future)

Significance and Importance

ASEAN having being established earlier than Mercosur and NAFTA, is now falling behind in terms of economic integration.

Closer to home, the threat posed by China (present) and India (future) in replicating Japanese Regional Production Network

Thesis Statement

ASEAN needs to upgrade to a competitive global production base

due to rapid globalization. Hence, ASEAN needs to hasten the formation of

the AEC by managing major issues.

Moving up the Value Chain

Developmental State

Term used by international political economy scholars to refer to the phenomenon of state led macroeconomic planning

Characterized as by having a strong state intervention as well as extensive regulation and planning.

The term was first coined for Japan and the “Japanese Miracle”.

It has also been referred to Malaysia, Thailand, Taiwan and Singapore.

Japan FDI in ASEANYears Percentage Country/Trade Bloc

1995 – 2001* 21.6% Japan

(USD $229.5 billion)

1993** 23.6% Japan

16.7% EU

13.2% USA

Source*: Alfredo C. Robles, Jr. Article in ASEAN Journal of Political Science. December 2004Source**: Alfredo C. Robles, Jr. Book Titled Interregional Cooperation, Regional Integration and European Union Foreign Direct Investment in ASEAN , 2001

Japanese Regional Production Networks

ASEAN Regional

Specialization

VERTICAL INTEGRATION – Produce lower end components of finished goods; used to produce in Japan for Exports (E.g. TEC)

HORIZONTAL INTEGRATION – Intermediate goods and components are produced by affiliates of a firm in different countries and then exchanged among affiliates (E.g. Toyota - Japanese Car Industry)

Being Replicated in China

Regional to Global Aspirations

Japanese Regional Production Networks

Competitive Global Production Base

(Plaza Accord 1985)

(Bali Concord II - 2003)

Managing Major Issues

Two Major Issues

Present status of ASEAN transformation towards AEC

Whether the self imposed deadline of the AEC is achievable

Present Scenario

Two Major Issues

1. ASEAN interest VS National Interests e.g. SINGAPORE! (ASEAN against bilateral Trade Agreement)

ASEAN as opposed to Bilateral Trade Approach

Comparison of MFN and AFTA’s Preferential Tariff Rates Amongst ASEAN MS

ASEAN MS MFN CEPT

Brunei 3.1 1.0

Indonesia 7.3 2.2

Malaysia 9.2 2.0

Philippines 7.8 3.8

Singapore 0 0

Thailand 18.6 4.6

Source: Complied from data in Dennis and Yusof (2003: 4-5)

ASEAN as opposed to Bilateral Trade Approach

Two Major Issues

ASEAN

Indonesia Malaysia Philippines Singapore

USA

ASEAN as opposed to Bilateral Trade Approach

Two Major Issues

2. Weak institutional foundation for ASEAN integration

A. Give more authority to the ASEAN Secretariat

and/or

B. Dispute Settlement Mechanism (DSM’s)

ASEAN is a weak institution

Conclusion

In view of the potential threat posed by China (present) and India (future), ASEAN needs to hasten the transformation to AEC.

This transformation can be expedited if the major issues can be managed.

THE END

FAQ: Timeline

Formed in Bangkok in Aug. 1967

First ASEAN Summit

convenes in Bali in Feb.

1976

First ASEAN-European Economic

Community meeting held in Brussels

in Sept. 1978

ASEAN establishes the ASEAN Regional Forum (ARF) in 1994

Vietnam joins ASEAN

in July 1995; Laos

and Myanmar

join ASEANJuly 1997

December 1997 - First meeting of

ASEAN Plus Three and

First ASEAN-China Summit

Cambodia Joins in

April 1999

First meeting of the ASEAN Plus Six Dec.

2005

ASEAN signs charter Nov.

20th, 2007

Towards ASEAN 2020