Sina
Edition: CHINAASIAUSAEUROPEAFRICA
Home > Asia Weekly
Friday, January 30, 2015, 10:20

What’s the score?

By JENNIFER LO in Hong Kong
What’s the score?
Malaysia is the only country that has reported on the progress it has made on ASEAN integration. It ranks sixth on the ASEAN Economic Community Scorecard, with areas such as health, transport and agriculture needing more work. (AFP)

If you want a detailed report card on the progress of the upcoming ASEAN Economic Community (AEC), the reality is it’s not easy to find.

The official line, announced by leaders of the Association of Southeast Asian Nations in November, is that the 10-member bloc has implemented 82.1 percent of all the prioritized AEC measures. It is unclear how this was measured.

But with the single market and production base of free flow of goods, services, labor and investments due to come online at the end of the year, questions remain as to how the individual countries are performing and which particular AEC measures are left outstanding. Such information is not available for public scrutiny.

The only official compliance tool to monitor the progress of individual member states is the so-called AEC Scorecard, developed by the ASEAN Secretariat. Two official scorecards were published, one in 2010 and the other in 2012. The latter reports an overall score of 67.5.

In a written reply to China Daily Asia Weekly, the ASEAN Secretariat said that the full AEC Scorecard is “an internal document not meant for public consumption” and declined to provide further information on countries’ ranking.

The private sector only has access to the public version of the 32-page AEC Scorecard 2012, which is largely a report on region-wide implementation.

“The implementation details (of each) country is not public. It depends on how individual countries use the data,” observes Celia Zheng of the China-ASEAN Business Association (CABA) secretariat, based in Singapore.

Others believe it is more than a transparency issue. The design of the AEC Scorecard is far from impeccable as it fails to reflect real progress, they argue.

“I think we should not pay too much attention to the scorecard,” says Jayant Menon, lead economist at the Asian Development Bank’s (ADB) office for regional economic integration. “It is useful, but it does not tell the full story.”

The AEC Scorecard is a “yes or no” checklist of whether ASEAN members have achieved a broad category of the AEC goals, such as free flow of goods. Yet information on the progress and degree of implementation is omitted.

Another deficiency is that the AEC Scorecard is a self-reporting mechanism by individual countries. “There is no cross-checking among member states and it is driven by the goodwill of countries,” says Menon.

A solution would mean going beyond quantitative to qualitative analysis — by monitoring domestic legal enactments.

“The ASEAN secretariat should be better staffed and mandated to undertake in-country economic surveillance to track the implementation of AEC commitments,” says Pushpanathan Sundram, chairman of CABA and former deputy secretary-general of ASEAN for the AEC.

“Impact assessments should also be done periodically in different sectors to gauge the benefits and challenges of integration,” says Sundram.

Despite the absence of an official ranking, the prevailing wisdom is that those with most progress would be the more developed nations known as ASEAN-6: Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand.

“Singapore, of course, is already a duty-free port, so by default it is almost ready and (has) little to prepare for,” says Menon, adding that Thailand is also very well prepared despite its recent political turmoil.

“Thailand sees the AEC as an opportunity to further expand and integrate with the Mekong region and the CLMV (Cambodia, Laos, Myanmar and Vietnam) countries,” he says.

AEC measures will be close to completion for developed economies like Singapore, says Michael Yeoh, CEO of the Asian Strategy and Leadership Institute (ASLI), a think-tank based in Malaysia.

Yet achieving 100 percent compliance would be technically difficult for Singapore. As Yeoh points out, the city-state is reluctant to open the floodgates to labor from its less developed neighbors.

Nearly all ASEAN members have signed mutual recognition arrangements in relation to free movement of skilled labor under the AEC, although enabling legislation is yet to be enacted domestically.

One hurdle is the mutual recognition of educational qualifications. “One simple example is how you compare a degree, say, from a Laos university with (that from) a top university in Singapore,” Yeoh says.

The least prepared members are likely to be Cambodia, Laos and Myanmar. “These countries pose a significant threat to realizing the AEC by the deadline of end-2015,” says Menon.

A 2013 joint report by the ASEAN Secretariat and World Bank shows that some CLMV countries lag behind in the Doing Business Index, a measure of business regulations. Singapore is ranked first worldwide, whereas Myanmar is ranked 177 out of 189 countries.

Malaysia is the only country that has unveiled its progress on the AEC Scorecard. The country, which will assume the chairmanship of ASEAN this year, is ranked sixth on the scorecard, with a fairly impressive implementation rate of 83.9 percent.

According to state-run news agency Bernama, Malaysia has 70 out of 436 measures outstanding — in trade facilitation, health, transport and agriculture.

Mustapa Mohamed, the Malaysian international trade and industry minister, was quoted as saying at least half of the outstanding measures will be completed by mid-2015.

Part of the reason for Malaysia’s remaining outstanding areas can be attributed to the country’s bumiputera, or affirmative action policies toward indigenous people. Protectionist policies toward certain industries such as automobiles and steel are also to blame.

“Malaysia’s ranking is pulled down because of one or two subsectors. We are yet to allow free entry of imported cars,” says Yeoh.

Overall, tariff reduction is one success story. The average intra-ASEAN tariffs are virtually zero for ASEAN-6, except for sensitive agricultural products such as rice. The CLMV countries are allowed flexibility to enact zero tariff rates by 2018.

Nevertheless, a demanding set of challenges remains. These include improving regional connectivity, standards harmonization and the removal of nontariff measures (NTMs).

NTMs aimed at restricting imports range from import quotas to the use of safety and technological requirements.

“Member countries should expedite the reduction or abolishment of remaining NTMs — as many as possible,” says Syetarn Hansakul, a senior economist at Deutsche Bank Asia Pacific. “(NTMs) are harmful to efficient function of a true single market.”

A pessimistic view is that ASEAN will see a minimal trade boost from the AEC as the surge of NTMs will offset the impact of steep tariff reductions.

Between 2009 and 2013, a total of 186 NTMs were applied, according to ADB research, citing the Global Trade Alert database. Most of them have been implemented by larger economies. For instance, 75 were by Indonesia and 27 by Thailand.

“If (NTMs) are born because of the removal of trade barriers, that’s counterproductive. That’s when we need to pay attention,” says the ADB’s Menon.

Looking ahead, is it plausible that the AEC will come into being as scheduled?

Opinion is mixed in the business community, although a consensus is that the upcoming AEC in December is unlikely to be a fully realized one. But this will not spell the end of the road for ASEAN economic integration.

“It looks reasonable to assume that around 90 percent of the targets could be met by end-2015, but this may not necessarily delay the launch,” says Deutsche Bank’s Hansakul. “To reach 100 percent of targets may take one to two more years if the same intensity of concerted effort continues.”

More optimistic is ASLI’s Yeoh, who says: “I think if eight out of 10 countries have achieved it, it is already a sign of good progress. You can say the AEC is there.”

The proverbial glass of water is either half-empty or half-full, depending on perspective.

“My view is we should not be too obsessed about this deadline,” says Menon. “As it is said, ASEAN is a long-term goal. All that is needed is to keep the momentum and reforms in progress.”

jennifer@chinadailyhk.com

 

 
 
 
Latest News