Home Insider 10 Frequently-Asked- Questions about ASEAN Economic Integration

10 Frequently-Asked- Questions about ASEAN Economic Integration

Very few people in Myanmar knew about ASEAN economic integra- tion and its effects on their lives despite the fact that it will be implemented starting next year. Very minimal efforts are done at informing the public, and it seemed the efforts have not found its mark, making the topic as vague as it was before. It may not be too late and it is important to gener- ate interest to make the people aware and not be surprised when the changes brought about by the economic integration started to appear. It is also the most opportune time to discuss the formation of the ASEAN Eco- nomic Community (AEC), with Myanmar as the chair of ASEAN. These frequent- ly-asked-questions came out during infor- mal talks among businessmen and profes- sionals and other individuals interested in regional issues. This article is not an answer to the FAQs but an attempt at contributing to the discussion of the topic, aimed at mak- ing more people aware of what is economic integration and its effect on the country.

What is the AEC?

It is an economic arrangement among the 10 member-countries of ASEAN with the following characteristics:

  • (a) a single market and production base;
  • (b) a highly competitive economic region;
  • (c) a region of equitable economic devel- opment; and
  • (d) a region fully integrated into the global economy.

What are required for the mem- ber-countries to do?

Member-countries agreed to open up their economies and liberalize trade, investment and services among each other. It is expect- ed to enhance economic development, al- though there will be catch-up activities for member-countries with wider development gaps specifically Cambodia, Laos, Myanmar and Vietnam (CLMV).

How will the formation of AEC sup- port the economic development of Myanmar?

The South-east Asian region is one of the most dynamic regions in the world. Inte- grating the region as a common market will further enhance trade and investment that will also redound to the benefit of the mem- ber-countries. Private companies can do business in any of the member-countries, providing employment, quality goods and services that will increase consumption and energize the economy. It means Myanmar companies can expand their markets be- yond the borders and companies from oth- er member-countries can also set up opera- tions in Myanmar.

Quality and low-priced goods will be avail- able as tariff and other trade barriers will be lifted.

What are the benefits for the people of Myanmar?

For the ordinary people, the free flow of goods would mean the availability of qual- ity goods with low price. Employment op- portunities will also be wider as Myanmar workers can work in other member-coun- tries.

What are the advantages of Myanmar as a country?

Three main advantages of the country are as follows: first, natural resources like minerals, oil and gas needed by mem- ber-countries, which will have immediate market. Second, abundant and cheap la- bor, although the skills in some technical industries are still to be honed and devel- oped to be at par with international stan- dards. Third, the strategic location as the connecting node between India and China. With China surpassing the US as the biggest economy, Myanmar becomes an important hub in the region with its China border.

How can Myanmar take advantage of its strategic location?

Connectivity is one of the main elements in the AEC. The capacity to deliver goods should be maintained which means the presence of well-maintained infrastructure such as roads, ports, airports, power gen- erating plants, industrial complexes, and so on. Continuous improvement of roads, ports and airports we are seeing now is part of the efforts at ensuring that the country is connected to the major trading and logistics hub of the region.

How is the government faring in its initiatives at policy making?

Integration is not an easy way as it requires structural adjustments. Despite the re- cent transition from a military regime to a democratic government, Myanmar has done major steps towards catching up with other member-countries. It has passed a new foreign investment law, liberalized the telecommunications industry, opened up the banking sector and other initiatives contributing to the gradual integration with the regional and global economy. Howev- er, there is still wariness over the possibility of slowing down of reforms to protect state- owned enterprises and the interest of some influential groups. This may be the reason for reluctant government efforts at further opening up the economy, or at least some industries.

What are the disadvantages of the AEC?

In any change in the economic environ- ment, there will always be gainers and los- ers. It has to be assumed that not all sec- tors will benefit from the integration. At the regional level, the more technologically and financially advanced countries like Singa- pore, Malaysia and Thailand will benefit the most. They can expand in areas and indus- tries they want with their technological and financial advantages.

On the one hand, products from Myanmar and other emerging countries, despite the opportunity, may find it hard to open mar- ket and compete with the more advanced countries. On the other hand, products from other developed countries may flood Myanmar and compete with local produc- ers. Those with limited resources may find themselves either closing out or selling out to stronger regional players. Considering that more than 90% of Myanmar enter- prises belong to micro, small and medium (mSME), it will be a tough for the local com- panies.

The same with the manpower market. Myanmar’s human resource may be rel- egated to lower level work with the more advanced taken up by workers from other member-countries with higher educational and technical training.

What are the safety nets for indus- tries that will be affected?

So far, there are no expressed safety net programs to industries that may be affected

negatively by the integration. There is also no comprehensive program aimed at pre- paring the country towards adaptation to the new economic environment.

How can we maximize the benefits from the AEC?

Local companies will have to do three main initiatives.

First is to leave the parochial mindset and have a strategic vision of looking at the re- gion as its market. Only if the company has the regional mindset will it prepare itself to compete with regional players. The earlier the local companies take on this mindset, the better prepared they will become.

Second, with a regional mindset, upgrade its systems and operations to be at par with the region and the world.

Third, start developing networks at the re- gional level maximizing the experience and resources of the partners.

A functional AEC will not be the end but the start of more advanced economic ar- rangements. Integration with global econ- omy as the main goal, other initiatives will be implemented. One clear example is the EU-ASEAN free trade agreement (FTA) that will commence once the AEC is installed. The European Union (EU) being one of the biggest trading partners of ASEAN mem- ber-countries will bring economic integra- tion to the next level. No to be left alone, China and India, the two biggest neighbours of Myanmar will be part of the action and will also require a different set of engage- ment protocol.

The government has to build up on the mo- mentum it has generated and work not only to integrate with the regional and global economic community but also ensure that the plight of its people especially those that will be negatively affected will also be ad- dressed.