Updated: November 24, 2015 12:57:11 am
Eight long years in the making, the Association of South-East Asian Nations’ (Asean’s) economic community is finally a reality: A free-trade zone, larger in geographical area than the European Union and, with a combined GDP of $2.57 trillion, the world’s largest single market. Experts estimate the economic community could lift aggregate output by 7 per cent by 2025, and create 14 million new jobs. The 10 members of the grouping have already eliminated most tariff barriers, but the agreements commit them to harmonising economic strategies, recognising each other’s professional qualifications and consulting closely on macroeconomic and financial policies. The agreement, member states hope, will kickstart intra-Asean trade, which has remained stuck at some 24 per cent of combined GDP for several years now, though tariff barriers have, in practice, been eliminated. For the economic community to succeed, Asean will need to remove non-tariff barriers, and ensure enhanced transport connectivity across the region. The most important tests of the economic community’s success will be freer movement of skilled workers, trade and capital for the region’s more than 600 million people. Asean leaders have committed to accepting each others’ professional qualifications, but problems remain. Though agreements have been signed for engineering, medicine, nursing, dentistry, architecture and nursing, local laws have snarled other sectors.
The economic community is good for Asia. Though the importance of regional groupings has long been recognised, this is the first real step forward. Asean leaders had declared that their 2009-15 roadmap consisted of three key elements — economic, now realised, political-security and socio-cultural. Translating the trade deal into a foundation for a regional strategic initiative, though, will be tough. Asean, unlike the EU, is politically diverse. Its members range from one-party communist-ruled Vietnam to quasi-military ruled Myanmar, the increasingly Islamist-leaning kingdom of Brunei and the raucously democratic The Philippines. Though several of its members share concerns over the rising power of China, with which they have locked horns over its controversial policies on the South China Sea, consensus has eluded them.
For India, the rise of a unified Southeast Asian market represents special opportunities — and challenges. The grouping is India’s fourth largest trading partner. India, in turn, is the sixth largest trading partner for Asean. Trade between the two amounted to $76.52 billion in 2014-15, with India’s exports worth $31.8 billion and imports $44.7 billion. Though the agreement will benefit Indian competitors like the Philippines and Vietnam, India is negotiating a trade agreement with the Asean states and their partners, scheduled for completion by 2016. New Delhi, whose negotiations with trade blocks like the EU are stalled, needs to make sure its Asean deadline is met.
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