Lim Hong Hin
Deputy Secretary-General of ASEAN
for ASEAN Economic Community
Mr. Iman Pambagyo
Director General of International Trade Cooperation, Ministry of Trade, Indonesia
Permanent Representatives and Heads of Diplomatic Missions to ASEAN
Ladies and Gentlemen
On behalf of the ASEAN Secretary-General, it is my pleasure to welcome you to the ASEAN Secretariat for this 1st ASEAN Economic Community (AEC) Symposium. I would also like to thank our sponsor, ASEAN Australia Development Cooperation Program, all our participants, especially the speakers and moderators from abroad, for taking time to be in Jakarta for this important event.
As you may know, this Symposium is a first of a series of symposiums that are being planned to be organized annually starting this year, in the run-up to the establishment of the AEC by 2015. As the 2015 timeline draws near, we recognize that more efforts are still needed to ensure that our common goal of building the AEC is realized. We are also aware that there are issues and challenges about the AEC that we need to address now. Thus, through this Symposium, we hope to be able to exchange views, understand key issues and offer some solutions toward achieving AEC 2015.
Today we have set out an ambitious agenda assessing the progress of ASEAN economic integration. The topics for discussion – ASEAN Open Skies, ASEAN Single Window, ASEAN Investment Area, and Finance Integration – are key areas we think are important for the AEC. Thus, I would encourage you to be bold in your discussions and come up with realistic and candid assessments of the AEC agenda. Such thinking will help ensure that the measures under the AEC Blueprint will be timely implemented and our integration targets will remain on track.
Before we go down to the specific details of our discussions today, I would like to address three key aspects of the AEC:
- Where are we now in terms of our integration efforts?
- How successful our regional initiatives have been in recent years, and what are the key challenges remaining?
- What role can the private sector play in ensuring the success of the AEC?
So what has the AEC achieved so far? To be fair, I think we have made steady progress since the Leaders first envisioned the establishment of the AEC in 2003.
As of end-August, ASEAN has implemented 72 percent of measures due for the period 2008-2011. This implies that all the relevant measures that countries agreed to implement for the last three years have already been put in place.
In terms of facilitating free flow of goods, a new ASEAN Trade in Goods Agreement (ATIGA) has been in place since 2010, and efforts are actively being pursued to strengthen trade facilitation through customs integration and implementation of the ASEAN Single Window. Services liberalization is also going smoothly, with the full implementation and entry into force of the 8th services packages expected by end of this year. I’m pleased to inform you that ASEAN is ready to sign the ASEAN Agreement on Movement on Natural Persons (MPN) this November – the first landmark agreement for the region to facilitate movement of skilled labor across countries. Countries are also in the process of progressively reviewing their reservation lists to fully implement the ASEAN Comprehensive Investment Agreement (ACIA), while in the area of finance work is underway to facilitate the integration of capital markets and banking sector.
In relation to the other AEC pillars, renewed efforts are made in ratification of the various transport agreements, promotion of competition policy, consumer protection and intellectual property rights to enhance the region’s competitiveness. Last month the first consultation meeting between the SME Advisory Board and Economic Ministers was held, where key strategies were discussed to promote small- and medium-sized industries in the region. Initiatives to implement the ASEAN Framework for Equitable Economic Development are also currently being explored. Finally, in support of greater integration with the global economy, countries are actively working to launch the start of negotiations for the Regional Comprehensive Economic Partnership (RCEP) by end of this year.
While these are important gains, we should not delude ourselves into a false sense of security. Realizing the AEC is still a challenge, particularly with the uncertain global environment. The intensification of global risks puts into question the credibility of globalization and casts some doubts on the region’s ability to manage its own integration. Of particular concern are the potential pullbacks in trade and capital flows into the region as global conditions deteriorate, and the possibility that some ASEAN countries may revert to protectionist measures and inward-looking policies to protect their own domestic economies.
Thus, holding this Symposium today is quite appropriate, as concerns over globalization have started to surface again. But in our view, AEC is the region’s best strategic response to external uncertainties. The region is best served by harnessing our collective competitive strengths, while ensuring at the same time that integration leads to greater economies of scale, increased economic efficiency, and higher productive capacity. Of course, we are also aware that to achieve these outcomes, we have to make AEC work.
What are these challenges? Here I see the implementation of the AEC as paramount.
Despite progress in a number of areas, many AEC measures are still pending as at end-August 2012. These include measures on trade facilitation (customs modernization and standard and conformance), services liberalization, investment, agriculture, consumer protection, and ratification of transport agreements. Such delays may undermine the success of the AEC.
While countries have made progress, they still have to ensure that regional commitments are implemented in a way that is consistent across countries. We now need effective implementation, in a coordinated manner, of what has been agreed and more agreement on outstanding areas. For example, countries should incorporate regional initiatives within their national development plans, strategies, and budgetary allocations to enhance its contribution to the regional integration process.
We also need to ensure that AEC priorities are set right, by focusing on those measures that will have the most immediate impact to the creation of an integrated market. As highlighted by the Economic Ministers at their meeting last month, we have to prioritize. Such approach involves focusing on a few priority areas for integration and advancing those areas where significant progress can be achieved. It also takes into account the countries’ capacity to implement the AEC.
The reform momentum must be maintained, particularly reforms that support the markets. This means better, and more coordinated, regulations across countries. Regulatory reforms will not only allow countries to become efficient through improved economic policies but will also help address market failures and international spillovers with inevitable consequences for trade flows and investment. As regional economic integration intensifies interdependency among our countries, and as externalities magnify as a result of opening up our economies, we have to ensure that our individual competitiveness is preserved. I’m pleased to inform you that we have now instituted since this year the holding of “ASEAN Regulatory Dialogue”. This Dialogue will help promote the development of regulatory framework as basis for implementing critical structural and regulatory reforms in ASEAN, particularly those that will facilitate market integration.
In implementing the AEC, we also need to look beyond demand-driven measures. Equally important are the institutions that support the markets, including a well-functioning dispute and settlement mechanism, effective compliance system, and comprehensive monitoring system. These institutions have to be strengthened. With strong institutions, the responsibility of implementing and enforcing community decisions will become clear, thus preventing countries to circumvent their obligations and undermine integration initiatives.
Let me conclude by turning to one important question of direct interest to our Symposium today, which is: what is the role of the private sector in ASEAN economic integration? Here I see such role of critical importance.
To the extent that implementation of AEC agreements requires the understanding and confidence of the private sector, an active involvement of this sector is crucial. This aspect of the AEC should be further strengthened. Formal consultations with the private sector and regional authorities may still be used, but there is a need to develop new and innovative strategies to maximize the dynamic contribution of private sector to integration.
The ASEAN Secretariat and ASEAN Member States fully support such kind of engagement. And this is primarily the reason why we are meeting you here today. Since the AEC is a market-driven process, we have to make sure that the markets are well informed and consulted of our initiatives. In the same manner that we should continue to involve other stakeholders in the integration process more. This requires more efforts, particularly at the country level, to communicate how the AEC works, which will also help to offer greater transparency of the process and secure greater buy-in from the population.
Over the years ASEAN has engaged, and will continue to engage the private sector. Private sector engagement is critical to building an inclusive AEC and will ensure the success of trade and financial integration. In fact, as ASEAN builds the “right market”, we have to ensure that product and regulatory standards, financing systems, logistics and transport facilitation, and a wide range of business procedures have been constantly improved. These would have a large beneficial effect on productivity that would elicit more production and investment – both from domestic and foreign sources.
In closing, let me reflect on one important lesson that we’ve learned from the current situation today, and that is the importance of coordination and shared responsibility.
Now that we are being challenged again by the adverse developments in world economy, I think coordination will continue to be as relevant as before as we continue to embrace globalization and integration, and as a result of the increasing interdependence of our economies. Under the AEC, we are moving toward the creation of a collective wealth that will benefit all of us. But there is no free lunch. As we journey to the 2015, there is a need for each and every one of us to be responsible and committed.
We sincerely hope that this Symposium will provide a useful platform for understanding AEC. We also hope that your insights will help us to refine our strategies in successful implementation of the AEC by 2015 and beyond.
Thank you very much and I look forward to the discussions in the Symposium.