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15 January 2016
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Plugging the public information gap on the AEC

Boonwara Sumano

Over the past few years, the Asean Economic Community (AEC) has been one of the most discussed topics in Thailand, as both the private and public sectors enthusiastically anticipate the AEC’s kickoff at the end of this year. But do we actually know what the AEC is all about?

The Thailand Development Research Institute, with funding from the Thailand Research Fund (TRF), has completed a study which synthesises all accessible research projects relating to the AEC. The compiled research is categorised into four areas: single market and production base; competitive economic region; equitable economic development; and integration into the global economy. These are known as components of the AEC under the AEC Blueprint.
While the AEC means more than being a single market and production base that involves the free flow of goods, services, capital and skilled workers, this is the component that is highlighted most by government officials and businesses. Unsurprisingly, most research projects about the AEC have focused on this area, followed by the fourth component, integration into the global economy.

Many studies estimate the impacts of the free flow of factors of production once the AEC is completed, while others assess the possibility of member countries realising such a goal. Some of these widen the scope of analysis to include external partners such as Asean+3, Asean+6, and the European Union, which then fall into the fourth category.
Although the results vary according to the research approach, they indicate that the other two components of AEC – competitive economic region and equitable development – have been generally ignored and forgotten.

The elusive competitive economic region includes such important topics as competition law, consumer protection, intellectual property rights, and cooperation on double tax avoidance; while equitable economic development covers issues like small and medium enterprises (SMEs), and the development gap among member countries. These topics have still not been addressed properly under the AEC context, and this suggests at least two important implications.
To start with, while the single market and production base, and also integration into the global economy, present the possible mutual benefits which member countries could gain from the AEC, the other two components, the competitive economic region and equitable economic development, portray potential problems of integrating highly distinct countries. After the borderlines stand domestic rules and regulations on key matters like income and corporate taxes and intellectual property rights that goods, services, capital and skilled workers must be subject to.

These vary across member countries due to individual political, economic, and social conditions, and there has been no serious official talk about bridging these gaps yet. Although many research projects recognise the differences among Asean countries as one of the crucial limitations of the AEC, few studies explore this issue thoroughly.
The second implication is that the AEC-related studies might produce some misunderstanding about regional economic integration. While the single market and production base are undoubtedly important features of economic cooperation, much still needs to be done to achieve true regional integration.
Before the start of the AEC, intraregional flows of factors of production had in fact already taken place under existing free trade arrangements like AFTA and AFAS, as well as technology and transport development.

In other words, the AEC is being talked about mostly for the component where it has little to contribute. What the AEC should provide is behind-borders cooperation, something like a regional standard or a stronger regional institution. By focusing on the single market and production base, these studies may lead to misperceptions about the AEC.
The reason behind such a bias in academia is probably due to the availability of data. As mentioned earlier, the single market and production base was set in train by previous trade liberalisation efforts and so rather advanced and numerous databases are available in these areas. Information about laws and SMEs in each member country is relatively limited. It requires greater efforts from governments and related organisations in member countries to ensure the database gap in other components of the AEC is properly addressed.

In conclusion, we still know very little about the AEC, which is one of the pillars of the Asean Community. Apart from being a single market and production base, there are important components that member countries should explore to achieve sustainable regional integration.
By focusing on one component, the AEC is like a house with only one pillar, which surely cannot support the whole structure. As the Asean Community starts life at the end of this year, the public should be informed there will be much more to expect under Asean if the member countries actually aim for an effective regional economic community.

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“Boonwara Sumano is a research fellow with the Thailand Development Research Institute (TDRI). Policy analyses from the TDRI appear in the Bangkok Post on alternate Wednesdays.”

First published: Bangkok Post, December 09, 2015

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