What is The ASEAN Economic Community (AEC)?
Contrary to common belief, the goal of The ASEAN Economic Community is not just to form a free-trade area, but to create a highly integrated economic community by 2015, that focuses on four pillars, majority of which will impact multinational companies. See the graphic below for a simple analogy explaining the relationship of the ASEAN to the ASEAN Economic Community:
What is FSG’s View on the ASEAN Economic Community?
- Multinationals across the board stand to gain from the AEC, either by directly participating in the growth story through their industry specific strategies or indirectly through the spillover effects of increased economic activity
- The AEC is more than just a free-trade agreement; MNCs should soon begin to experience other benefits as the region begins to improve its infrastructure, have better intellectual property rights protection regulation and harmonized investment laws, and allow for easier movement of capital and skilled labor
- Foreign direct investment should witness a surge as both inter-ASEAN and external foreign investments pour into the region to benefit from the access to the larger market, lower trade barriers, and increasing ease of doing business
- It is unlikely that ASEAN can achieve its target of completely building the AEC by 2015. However, the deadline of December 31, 2015 does not indicate a magical date when the economic community suddenly ‘turns on’; it is already happening and therefore companies can benefit from the changes taking place right now