ASEAN COMMON MARKET - Second largest economy in emerging Asia, behind China
A NEW COMMON MARKET - ASEAN
The Association of Southeast Asian Nations consists of 10 members:
- Lao PDR,
The integration of Asean, due next year, may take longer than planned. Even if more protracted, the journey to a common market will provide incremental benefits along the way — not just at the destination.
Though the poorest members have the highest hurdles to clear, this is where the payoff of regional integration may be the greatest. Asean has set 2015 as the target date for regional economic integration, including a single market and production base allowing for the free movement of goods, services, investment, skilled labor and the freer flow of capital.
In February, Asean senior officials signaled that development gaps — especially in Cambodia, Myanmar, Lao PDR and Vietnam — may hinder plans for the creation of an Asean Economic Community. A formal mid-term review of the integration progress, due in May, has not been made public. Together, the members of Asean now have the second largest economy in emerging Asia, behind China.
The bloc’s average per capita income surpasses China’s and economic growth in many Asean members already rivals that of their northern neighbor.
Integration will further boost incomes and growth potential in an area of 625 million inhabitants. More streamlined rules and regulations will reduce costs and increase the competitiveness of firms doing business across the region. More transparent and harmonized investment standards and procedures will attract both foreign and intra-Asean investment. Fewer impediments to cross-border investment will, in turn, support the funding of regional infrastructure projects, including an integrated transport network.
All of this stacks up to higher profit margins, tax revenues and growth in the broader economy. Europe’s experience with economic integration provides a benchmark on what Asean members might expect.
- Real GDP growth in the three years after joining the EU was 1.7 percentage points higher on average than in the three years prior to membership for those countries joining the EU since 1995.
- Over the same period, investment as a share of GDP rose 3.2 percentage points and
- GDP per capita, an indicator of wealth, rose 32.5 percent on average.
- The increase in average income after inflation ranged from a low of 9.4 percent in Malta to a high of 79.9 percent in Latvia.
With Asean’s economic union in an earlier stage of development compared to Europe’s, gains from integration as the difficult work of integration takes place are more piecemeal, more difficult to measure and harder to appreciate. Nevertheless, the benefits are accumulating.