The 4th World Social Science Forum in Fukuoka 9/25/2018 ASEAN Economic Integration in the World Economy -Its Significance and Issues- Kazushi Shimizu (Kyushu University) shimizu@econ.kyushu-u.ac.jp 1
Structure of This Report Long-term study conducted on ASEAN economic integration and the AEC within the world economy ASEAN economic integration and the automobile industry East Asian Economic Integration including RCEP The following are covered in this report: 1. Introduction 2. ASEAN Economic Integration and AEC in the world economy 3. Establishment of AEC in 2015 4. AEC2025 Looking toward 2025 5. Conclusion 2
1. Introduction ASEAN was established in 1967 Indonesia, Malaysia, Philippines, Singapore, Thailand:ASEAN5 ASEAN began intra-economic cooperation in 1976 Brunei joined ASEAN in 1984: ASEAN6 ASEAN agreed on the ASEAN Free Trade Area (AFTA) in 1992 CLMV joined ASEAN in the late 1990s: ASEAN10 ASEAN agreed on the ASEAN Economic Community (AEC) in 2003 ASEAN moved to Economic Integration and established AEC in 2015 Moving toward AEC2025 ASEAN is the oldest and most advanced Economic Integration in Asia. 3
AS おう r せ Source: ASEAN Secretariat HP
Source: ASEAN-Japan Centre, ASEAN Information MAP. 5
Source: ASEAN-Japan Centre, ASEAN Information MAP. 6
Source: ASEAN-Japan Centre, ASEAN Information MAP. 7
Source: ASEAN-Japan Centre, ASEAN Information MAP. 8
ASEAN is comprised of 10 Different countries ASEAN is comprised of 10 Different Countries Populations: Largest Indonesia (267million), Smallest Brunei (0.43million) in 2017 GDP: Largest Indonesia (1.016trillionUS$), Smallest Brunei (12billionUS$) in 2017 GDPPC: Largest Singapore (57,714US$), Smallest Myanmar (1,299US$) in 2017 ASEAN moved to Economic Integration with these Differences. 9
Source: ASEAN-Japan Centre, ASEAN Information MAP. 10
Source: ASEAN-Japan Centre, ASEAN Information MAP. 11
Source: ASEAN-Japan Centre, ASEAN Information MAP. 12
ASEAN s Trade Percentage to GDP is bigger than other Economies. Source: ASEAN-Japan Centre, ASEAN Information MAP. 13
2. ASEAN Economic Integration and AEC in the world economy: Summary 50years of ASEAN Integration and AEC Improved Economic Integration in the structural changes of the world economy the Changes: 1the Plaza Accord, 2the Cold War, 3the Asian Economic Crisis, 4the World Financial Crisis BBC(1988), AICO(1996), AFTA(1992), AEC(2003) Establishment of AEC in 2015 Establishment of AFTA: Free Flow of Goods Elimination of Tariffs 95.99% Tariff Lines at 0% Japan s EPA(FTA) s rate Movement towards Free Flow of Service, Investment and Skilled Labor. And Infrastructure Building and Narrowing the Gap, etc. 14
ASEAN Economic Integration: 1976-2003 Established in 1967 Economic cooperation began in 1976 ASEAN s Strategy for CISI (Collective Import Substituting Industrialization) : AIP, AIC and PTA Change to the Economic Cooperation Strategy in 1987 due to the changes after the Plaza Accord Change to ASEAN s Strategy for CFEI (Collective FDI-led and Export-oriented Industrialization) BBC (Brand-to-Brand Complementation) Scheme (1988) Agreed on AFTA (ASEAN Free Trade Area) in 1992 Membership has expanded to Indochina since 1995 due to the changes of the cold war Vietnam in 1995, Laos and Myanmar in 1997, Cambodia in 1999 Economic integration has been deepening due to changes since the Asian Economic crisis 15
Toward the ASEAN Economic Community (AEC) Oct 2003: ASEAN Concord Ⅱ and AEC AEC: structuring single market/production base by 2020 Inviting foreign investment Jan 2007: front-loading AEC up to 2015 Nov 2007: AEC Blueprint A. Single Market and Production Base Free flow of (1) goods, (2) services, (3) investment, (4) capital and (5) skilled labor B. Competitive Economic Region C. Equitable Economic Development D. Integration into the Global Economy Since 2008: AEC Scorecard and Monitoring Oct 2010: Master Plan on ASEAN Connectivity Steadily moved toward establishment of AEC in 2015 16
Results of ASEAN Economic Integration (1) Tariff Reductions through AFTA Steady results obtained thus far through ASEAN economic integration Tariff reductions since 1993 through AFTA In January 2010, tariffs were eliminated in 6 original member states, thus realizing AFTA Simultaneously, tariffs on almost all items (98.96 %) were reduced to 0-5% in CLMV as well Increase in AFTA utilization rate by individual states For example, 61.3% of exports from Thailand to Indonesia in 2010 used AFTA 17
Results of ASEAN Economic Integration (2) Support for Production Networks Japanese corporations have been expanding their production networks throughout ASEAN ASEAN policies support these production networks The automotive industry is a typical example. Japanese automotive manufacturers hold a large share in ASEAN: 85% currently Toyota: Supported by ASEAN policies (BBC, AICO, AFTA) since the 1990s, with major components mutually complemented in the ASEAN region Toyota IMV (since 2004) Parts procurement, production and export of 1-ton pickup trucks in various areas Multi-layered production network is being expanded to include primary parts makers such as Denso, secondary and tertiary makers as well as material suppliers AFTA provides support Matching of ASEAN integration policy and corporate production network structuring 18
Schematic of Main Car and Parts Complementation at Toyota IMV ASEAN World markets India Mini-vans SUVs Manual transmissions PU SUV Mini-van Diesel engines Gasoline engines Manual transmissions (Source) Shimizu (2010). (Note) Prepared by author based on interviews. Thailand PUs SUVs (Mother plants) Diesel engines Gasoline engines OHQ (procurement, logistics, QC, development) Indonesia Mini-vans (Mother plants) SUVs Gasoline engines ASEAN Member States ASEAN Member States Philippines Mini-vans Manual transmissions Malaysia PUs SUVs Mini-vans Viet Nam Mini-vans SUVs Singapore OHQ (Sales / marketing)
Results of ASEAN Economic Integration (3) ASEAN led East Asian Economic Integration East Asia regional cooperation: developed in the wake of the Asian financial crisis Key player is ASEAN ASEAN, ASEAN+3, EAS, etc. are deployed in multiple layers Structuring of FTA networks as ASEAN+1 FTAs ACFTA (ASEAN-China) AJCEP (ASEAN-Japan) AKFTA (ASEAN-Korea) AIFTA (ASEAN-India) ASEANCER (ASEAN-Australia / New Zealand) Completed in January 2010 However, FTAs for East Asia as a whole and CJK were not established ASEAN proposed the RCEP in 2011 20
Framework of East Asian Regional Cooperation Centering on ASEAN Brunei Malaysia Singapore Vietnam 3 Japan China Korea Australia New Zealand Canada Peru Mexico Chile TPP11 US Indonesia Philippines Thailand Russia Papua New Guinea Hong Kong Taiwan APEC (FTAAP) Cambodia Laos Myanmar ASEAN(AFTA) India ASEAN+3 RCEP EAS EU PMC East Timor Mongolia Pakistan North Korea Bangladesh Sri Lanka ARF Source) Prepared by author Notes) ( ) indicates free trade region (including conception) ASEAN: Association of Southeast Asian Nations, AFTA: ASEAN Free Trade Area, RCEP: East Asia Regional Comprehensive Economic Partnership, PMC: ASEAN Post Ministerial Conference, ARF: ASEAN Regional Forum, TPP11 (CPTPP): Comprehensive and Progressive Agreement for Trans-Pacific Partnership, APEC: Asia-Pacific Economic Cooperation, FTAAP: Free Trade Area of Asia-Pacific
Changes after Global Financial Crisis and East Asia (1) ASEAN and East Asia Becoming the most important growth area in the world economy Major production bases for the world economy Huge markets for the world economy United States Plan to double exports Participating in TPP, aiming to export to East Asia Realization of Mega-FTAs: TPP and RCEP TPP: Mega-FTA in Asia Pacific 12 states: Malaysia, Singapore, Brunei, Vietnam, Japan, Australia, New Zealand, US, Canada, Peru, Mexico and Chile RCEP: Mega-FTA in East Asia 16 states: 10 ASEAN states, Japan, China, Korea, Australia, New Zealand and India 22
Changes after Global Financial Crisis and East Asia (2): Realization of Mega-FTAs Realization of mega-ftas: TPP and RCEP Mar 2010: TPP negotiations began Nov 2011: ASEAN Summit ASEAN proposed East Asia Regional Comprehensive Economic Partnership (RCEP) August 2012: First Economic Ministers Plus ASEAN FTA Partners Consultations Nov 2012: Agreement on beginning RCEP negotiations in early 2013 Agreement on beginning CJK FTA negotiations May 2013: First Meeting of Trade Negotiating Committee (RCEP) July 2013: Japan joined TPP negotiations TPP and Japan s participation in TPP accelerated RCEP and CJK FTA negotiations TPP and RCEP negotiations accelerated the realization of AEC 23
3.Establishment of AEC in 2015 (1) A. Single Market and Production Base 1. Free Flow of Goods Elimination of Tariffs (A): 10 ASEAN member states: 96% Tariff Lines at 0% Japan s EPA s rate But CLMV extended duties with flexibility of 7% of tariff lines up to Jan 2018 Improved Rules of Origin, ASEAN Single Window Elimination of NTBs (D) 2. Free Flow of Services (B) 3. Free Flow of Investment (B) 4. Free Flow of Capital (B) 5. Free Flow of Skilled Labor (C) 24
Establishment of AEC in 2015 (2) B. Competitive Economic Region (B) Competition Policy, IPR, Infrastructure C. Equitable Economic Development (B) Narrowing the Gap D. Integration into the Global Economy (A) RCEP, ASEAN+1 FTAs Next AEC Goal is 2025 Nov 2015: AEC Blueprint 2025 Dec 31, 2015: the Great Milestone 25
4. AEC2025 Looking toward 2025 The New Goal of AEC: AEC Blueprint 2025 in Nov 2015 A. A Highly Integrated and Cohesive Economy 1.Trade in Goods, 2.Trade in Services, 3.Investment Environment, 4.Financial Integration, Financial Inclusion, and Financial Stability, 5.Facilitating Movement of Skilled Labor and Business Visitors, 6.Enahancing Participation in Global Value Chains B. A Competitive, Innovative and Dynamic ASEAN C. An Enhanced Connectivity and Sectoral Cooperation D. Resilient, Inclusive and People-Oriented, People-Centered ASEAN E. Global ASEAN Highly Integrated Economy, Infra-structure Building, Narrowing the Gap and New Objectives for 2025, in the extension of AEC2015 26
Progress of AEC2025 AEC2025 Consolidated Strategic Action Plan (CSAP) in Feb.2017 (updated in Aug. 2018) Action Plan of AEC2025 from 2016 to 2025 Master Plan on ASEAN Connectivity (MPAC) 2025 Initiative for ASEAN Integration (IAI) Work Plan Ⅲ CLMV removed the extended tariffs for 7% of tariff lines in Jan 2018: Final Establishment of AFTA Vietnam removed Car Tariffs (But Vietnam adopted NTMs) Progress of the ASEAN Single Window (ASW) To Further Economic Integration for 2025 in the Protectionism of the World Economy 27
5. Conclusion Steadily moved to Economic Integration and Established AEC in 2015 Great results of Economic Integration and AEC 1Solid results obtained: tariff reduction and others 2Support for production networks 3Key player in East Asian Economic Integration:RCEP ASEAN is one of the most important cases of Economic Integration in the world Establishment of AEC in the structural changing of the world economy Leading the Economic Integration in the Growth Center of the World 28
Challenges Facing ASEAN Economic Integration ASEAN must improve and deepen AEC to develop in the World Economy ASEAN must maintain the Initiative in East Asian Economic Integration ASEAN and Japan must cooperate against the Protectionism after the Trump Administration in today s World 29
Thank you very much for your attention! References Shimizu, K. (2016), ASEAN Economic Integration in the World Economy, in Ishikawa, K., Shimizu, K. and Sukegawa, S. (eds.) (2016) The Establishment of AEC and Japan, Bunshindo, Tokyo. Shimizu, K. (2017a) The Trump Shock and ASEAN Economic Integration, World Economic Review, Vol.61 No.5. Shimizu, K. (2017b), ASEAN Economic Integration and the ASEAN Centrality, International Affairs, 665, JIIA, Tokyo. 30
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