ABSTRACT
In 2003, the Association of Southeast Asian Nations (ASEAN) embarked on an ambitious plan to create a single, integrated regional market and production space in Southeast Asia through the ASEAN Economic Community (AEC) project. The AEC is one of the three pillars of the ASEAN Community, the other two being the ASEAN Security Community and the ASEAN Socio-Cultural Community. The AEC aims for the free flow of goods, services, investments, capital and skilled labour in the Southeast Asian region by 2015, a deadline that had been brought forward from the original 2020 completion date (ASEAN 2003). The AEC builds on previous ASEAN projects on regional liberalization, notably the ASEAN Free Trade Area (AFTA), the ASEAN Investment Area (AIA) and the ASEAN Framework Agreement on Services (AFAS). Of these, only AFTA has achieved its target of reducing intra-ASEAN tariffs, with 98.3 per cent of all traded products in 2008 placed in the ‘inclusion list’ of items subject to AFTA discipline. Some 88.5 per cent of these items had tariffs within the 0–5 per cent AFTA target band and 63.4 per cent of them had a zero tariff rate. The average intraregional tariff rate was 1.95 per cent, down from 2.58 per cent in 2007 (AEM 2008). In designing the AEC as a comprehensive economic integration project, ASEAN policy-makers recognized that, while AFTA had registered tangible achievements in lowering tariff barriers within Southeast Asia, tariff reductions alone would not deliver the single regional market and production space that ASEAN leaders and officials believed was necessary for ASEAN's international competitiveness, particularly vis-a-vis China and India, the emerging economic giants.
