Jurisdiction - Singapore
Reports and Analysis
Asia Pacific – 101 on AEC 2015

27 February, 2015

 

Legal News & Analysis – Asia Pacific 

 

As we approach 31 December 2015, international investors can be expected to turn their attention towards Southeast Asia as the Association of Southeast Asian Nations (“ASEAN”) consolidates its capabilities as a region, aiming to create an attractive economic bloc. If ASEAN were to be seen as one country, its combined GDP of USD 2.4tn would make it the 7th largest economy in the world today, and ASEAN has been projected by some to be the 4th largest economy by 2050. We take a look at the progress of the ASEAN Economic Community (“AEC”) so far, and analyse how your organisation can gear up for AEC 2015 and the opportunities that lie beyond.

 

What Is AEC 2015?

 

The AEC envisages economic integration and strategic regional cooperation among ASEAN member countries. ASEAN aims to be more competitive and more connected with other regions for trade and investment. The AEC Blueprint is the master plan to guide ASEAN countries towards the AEC 2015 milestone, by identifying priority actions which ASEAN countries should aim to implement between 2008 and 2015.

 

By the end of 2015, ASEAN targets to establish a harmonised (but not homogenised) economic region characterised by 4 key elements:

 

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How Have We Progressed?

 

To the uninitiated, AEC 2015 may appear to be an end goal. However, to those who truly understand the AEC, 2015 is only a milestone in ASEAN’s journey to establish a comprehensive and well-integrated economic region. The importance of the AEC will extend beyond this year.

 

Based on the scorecard compiled by the ASEAN Secretariat, we present below a summary progress report on what has been accomplished thus far:

 

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What Can You Expect?


For businesses, investors, and consumers, the potential benefits from the AEC are expected to be tremendous. According to the International Monetary Fund, from 2000 t0 2013, ASEAN has had a real GDP growth of 5.1%, surpassing developed economies such as the United States (1.8%) and the United Kingdom (1.5%), and coming in third behind India (7.0%) and China (10.0%). For 2015, the Economist Intelligence Unit projected that the rise in ASEAN’s output is likely to match India’s growth rate forecast for the year and to outperform those of established Asian markets such as Japan and South Korea. Further, the abundance of resources and large untapped potential of frontier economies like Myanmar and Cambodia are likely to draw increased foreign investments after AEC initiatives are effectively implemented and domestically adopted by those countries.


Although statistics may indicate a gradual slowdown in the implementation rates for AEC 2015, investors should not be unduly concerned. This could be explained by the fact that the easier foundation measures are typically undertaken within the earlier phases, with the more challenging (but numerically fewer) measures being left for the later phases. Within the last seven years, ASEAN has made significant progress towards its targets for AEC 2015.


AEC 2015 should be regarded as a significant milestone, rather than as an end-point. It is a matter of when, rather than if, the AEC will be implemented. The true test of the success of the AEC lies beyond the 2015 deadline. It remains to be seen whether the AEC can function effectively as an integrated economic market against other burgeoning economies in the region such as China and India.


How Do You Gear Up For The Road Beyond AEC 2015?


ASEAN is not the same as it was when the AEC Blueprint was launched in 2008, and it will not be the same after 2015 and beyond. A comprehensive grasp of the mechanics of ASEAN is crucial when investing in ASEAN pre- and post-AEC 2015. An understanding of ASEAN extends beyond knowing the economic environment. A keen sense of the social, political, and legal environment, as well as their nuances, is equally important.


As a first step, one should seek out qualified and experienced professional advisors who are well-versed in the laws, regulations, and practicalities of each member country as well as within the wider ASEAN context. This will help your organisation assess the opportunities as well as navigate through any potential pitfalls when investing in ASEAN. While fortune favours the brave, there will be little sympathy for the ignorant in today’s information age. In order to fully take advantage of the opportunities presented by the AEC, investors are well advised to take stock, seek advice and gear up for AEC 2015.

 

Rajah & Tann

 

For further information, please contact:

 

Chester Toh, Partner, Rajah & Tann 

[email protected]

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