AEC’s open market for an open world

In boardrooms and management schools around the world, the mention of Asia conjures of thoughts of the two most powerful emerging economies of the region: China and India.

Both have become buzzwords for their massive markets and proven potential as producers of the goods and services, whether electronic components or outsourced office work, on which the global economy has come to depend.

But generally missing from the limelight are the dynamic economies of the 10 nations of the Association of Southeast Asian Nations (Asean) which, if they were a single entity, would rank as the sixth largest economy in the world. And it is about to get a lot bigger.

After years of hard work and meticulous planning among its members, Asean will become an even more formidable economic and financial power with a true single economic market in 2015 as existing barriers to trade and investment fall.

Known as the Asean Economic Community, or AEC, it is designed to allow a free flow of goods, services and investments, as well as make the already almost borderless movement of capital and skills even freer.

In addition, AEC will give investors the opportunity to boost their market reach and grant Asean-based enterprises, large and small, access to capital, raw materials, services, labor and production inputs wherever they establish operations throughout the 10-member bloc.

“This will transform Asean into a single market and production base, a highly competitive economic region, a region of equitable economic development, and a region fully integrated into the global economy,” the association says.

Other observers are also full of praise for the initiative. According to outside economists, this new single market could mean the creation of an additional 14 million jobs and increase the region’s GDP by an extra 7.1% by 2025.

Investors, both foreign and domestic, are watching the implantation of the Asean Economic Community with interest, and support the aims on the free flow of investment as spelled out by the association:

“To strengthen, among others, the following provisions: investor-state dispute settlement mechanism; transfer and repatriation of capital, profits, dividends, etc.; transparent coverage on expropriation and compensation; full protection and security, and treatment of compensation for losses resulting in strife.”

Other features of the new economic community include the so-called Asean Single Window that will connect and integrate existing initiatives of the member states to expedite cargo clearance and ensure international communications standards for safe and secure data exchange.

These measures will, the association says, provide a single point for submitting clearance documentation and data, reduce costs, encourage trade and investment in and with Asean, and result in better transparency.

It is going to be quite an accomplishment and there have been doubts among some that it will all come together in time. But the member states are reporting that everything is on track with solid progress on everything from liberalizing trade to eliminating tariffs to removing investment hurdles.

By one account, the members have already been able to implement almost 80% of the required measures, while Malaysia alone has put in place almost 90% of the measures on the AEC checklist.

As the governments of the region up their game in preparation for the big event, those in the private sector are also getting ready to be sure that when the AEC is active, their enterprises will be well positioned to benefit from the new, open market.

Asean banks, financial institutions and telecoms are investing outside their borders in the association’s partner nations, while company managers are expanding sales networks across the region and integrating their operations to cut costs.

Southeast Asian nations frequently make the headlines when rattled by temblors and tsunamis. Next year another kind of seismic event is coming – the AEC open market – but this economic earthquake will benefit the region and the world.