Leaders of ASEAN countries take group photos hand in hand after signing the 2015 Kuala Lumpur Declaration on the Establishment of the ASEAN Economic Community at the 27th ASEAN Summit in Kuala Lumpur on November 22, 2015 (XINHUA)

With the arrival of 2016, the world will see the Association of Southeast Asian Nations (ASEAN) put its community vision into action--creating a stronger community with economic, security and cultural cooperation at its core.

At the 27th ASEAN Summit held in Kuala Lumpur, the capital of Malaysia on November 21-22 last year, the regional bloc announced the establishment of the landmark ASEAN Economic Community (AEC) and developed a vision for its growth over the next decade.

The AEC is the first step to develop the ASEAN Community in a comprehensive manner with other two pillars to be built: the Political and Security Community and the Socio-Cultural Community.

Following the summit attendees' adoption of two proposals--the 2015 Kuala Lumpur Declaration on the Establishment of the AEC and the Kuala Lumpur Declaration on ASEAN 2025--Malaysian Prime Minister Datuk Seri Najib Razak, whose country served as the ASEAN rotating chair in 2015, said in his speech that, "We have proved to the world that this bloc of nations can be the Asia-Pacific's most competitive regional grouping and a coming force on the international stage."

As one of the most promising growth regions, the new-born AEC currently ranks seventh place in the world economy, with a population of 625 million and a total GDP of $2.6 trillion.

So, what implications will the establishment of AEC have on Asia and the global economy? What difficulties does ASEAN have to overcome to fulfill its ambitious integration objectives?

Integration milestone 

"Undoubtedly, the establishment of the AEC will push ASEAN's regional integration to new heights," Tang Qifang, a research fellow on East Asia studies at the China Institute of International Studies told Beijing Review . The two outcome documents would serve as a guide for the next 10 years and also marks a milestone in the integration process of the bloc, she said.

With concerted efforts, ASEAN has almost eliminated all tariff barriers among member states. Now, its task is to ensure the establishment of a single market and further facilitate free flow of commodities, services, capitals and people in the bloc, stated Tang. She also said that if the job is done in near future, the AEC would benefit not only ASEAN countries but also the Asia-Pacific region at large.

Xu Ningning, Executive Director of the China-ASEAN Business Council, recently said in an interview with Global Times  that "ASEAN attaches particular importance to the establishment of the AEC." They hope to build a highly integrated and strongly cohesive, and competitive economic community; and they want to ensure all member states could enjoy equitable development and inclusive growth, he continued. As a whole, the AEC is expected to help ASEAN adopt more coordinated policies in terms of economic and trade ties with the rest of the world, Xu speculated.

According to Xu, with such high expectations, the AEC will greatly contribute to the cohesion and unity of ASEAN. In 2015, against the backdrop of a global economic slowdown, the growth rate of ASEAN maintained above the level of 4.4 percent, he said. And in recent years, a remarkable achievement is that in building the AEC, the free trade of commodities has been expanded: among six member states--Singapore, Malaysia, Thailand, Indonesia, the Philippines and Brunei--99 percent commodities have enjoyed zero tariffs. Another four countries--Viet Nam, Cambodia, Laos and Myanmar--also plan to remove tariffs before 2018, Xu added.

Liu Ying, a researcher at the Chongyang Institute for Financial Studies under the Renmin University of China, believes that the establishment of the ASEAN Community will be helpful to promote the economic integration of the whole Asia-Pacific region.

In 2012, ASEAN launched talks with six other countries--China, Japan, South Korea, Australia, New Zealand and India--on the Regional Comprehensive Economic Partnership (RCEP). At the Kuala Lumpur summit in 2015, ASEAN leaders had urged all participants to accelerate the negotiation process of RCEP in the following year. Therefore, in 2016, ASEAN will not only implement the AEC but also make efforts to reach a deal on RCEP, the most important free trade agreement in Asia-Pacific region, Liu told the Paper.cn, an online Chinese news site. If it is reached, RCEP will become the largest ever free trade zone in the Asia-Pacific region, which has half of the world's population and accounts for one third of global GDP and trading volume.

Opportunities for China 

"The establishment of the AEC will further enhance ASEAN cooperation with China, the largest trading partner of Southeast Asia," Liu said.

Since China and ASEAN began dialogue in 1991, the two sides have experienced a trade boom: the annual trade volume between China and the ASEAN reached $480 billion in 2014, growing over 70 times from that of 1991, according to the Ministry of Commerce. After the China-ASEAN free trade zone (CAFTA) was established in 2010, the two sides have built a comprehensive cooperation framework, including 12 ministerial negotiation mechanisms and various cooperation channels in politics, economy and culture.

At the China-ASEAN Summit in Kuala Lumpur, China and ASEAN had agreed to upgrade the CAFTA. "The establishment of AEC will facilitate the upgrade process of CAFTA," Liu said. "With the AEC, the Southeast Asian countries could establish a unified market which will create more cooperation opportunities for China and ASEAN in trade, investment and finance."

In addition to trade, "the ASEAN countries have been increasingly interested in expanding cooperation to a wider range, including the China-proposed Belt and Road initiative," Tang told Beijing Review .

In 2013, Chinese President Xi Jinping proposed to build the 21st-Century Maritime Silk Road with countries along the route during his state visit to several ASEAN countries. The Belt and Road initiative aims at building connectivity and promoting common development in Asia, but is not limited to Asia. Economic and social development in most Asian countries has been largely restricted by the insufficiency of infrastructure conditions.

China has accumulated rich experience in developing infrastructure and industries after three decades of reform and opening-up. Tang believes China's experience and industrial capacity could help ASEAN realize their own modernization and that in order to build a comprehensive community, ASEAN must put improving connectivity first, which is the focus of the Belt and Road initiative.

Tang pointed to the fact that ASEAN countries have actively participated in the Asian Infrastructure Investment Bank (AIIB), with all ASEAN countries joining as founding members. The AIIB is not only a financing mechanism to support infrastructure construction in developing countries, but also an innovation bank in the global financial system, she explained.

Currently, China and ASEAN countries have made initial achievements in infrastructure construction and investment. Chinese companies contracted the construction of the Ampang metro line in Kuala Lumpur in 2013. Last October, China and Indonesia inked the deal of a high-speed railway route linking Jakarta and Bandung, which will be built by Chinese companies and with Chinese technologies. Additionally, cooperation on railway construction between China and Laos--as well as between China and Thailand--was initiated last November and December, respectively.

Challenges ahead  

"The objective of the AEC looks ambitious, but to realize it, ASEAN needs more concerted efforts to overcome difficulties in many aspects," Tang said.

ASEAN countries are vastly different in regards to levels of national, economic and social development, as well as following many religions. These structural characteristics are likely to last, and because of this, it is hard for all member states to reach integration objectives at the same time. So in spite of having a history of 49 years, the understanding of community in Southeast Asia is not as deep as in Europe.

Yet ASEAN has found a unique way to manage the bloc. Unanimity should be the prerequisite for the bloc to make any substantial collective decision in the integration process, and the member states must make sure their sovereignty will not be abused in the process, Tang explained.

The establishment of the ASEAN Community ushers the bloc into a new era on its path to integration, but how to best put the vision into action will be a vital task for ASEAN countries over the next decade.

Copyedited by Mara Lee Durrell

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