Recently, the world has experienced financial crisis, those countries that have been powerful and have strong economies such as the members of European Union (EU) such as the United Kingdom, France and Greece, are facing a big financial collapse. So now a new economic community is arising with intense competition because new markets are developing and financial opportunities are sought. Association of South East Asian Nations (ASEAN) is one of significant players in the world’s economy for centuries. It has emerged strongly from the financial crisis offering the new opportunities for investors and businesspeople. The interest and attention of investment are moving to the ASEAN area more and more each year because of the available untapped market in the ASEAN and the potential of being the production base that eases and facilitates those new incoming traders and investors. Many investors have kept their eyes on the region’s performance and its transition into the ASEAN Economic Community (AEC) which is the newest area of economic integration in the world. To study this economic bloc is significant in order to capture the great opportunities and prepare to be ready in taking the supreme advantages from the AEC. In the transforming processes, some practices will be applied to the members and that can make the difference between failure and success of the AEC project apparent. This could lead to a modification of the plan for AEC integration in the future, from the beginning of origin point to the change of community which takes place in four phases, its visions and four pillars. They should be taken into consideration to learn how it works to move forward because this economic community will possibly be the new engine of the world economy. This essay consists of an introduction, explanation and clarification on the ASEAN and the AEC. In order to critically examine the AEC; most of its dimensions will be discussed. There are three areas included in the paper which are, firstly; identify and describe both communities’ purposes of existing as well as the characteristics of the community, these explanations can be used to explain and clarify what the AEC represents in the past, present, and future. The detail of each four-pillar, the core targets of the AEC, will be carefully interpreted. Secondly; the benefits of the AEC will be briefly examined. And lastly, the challenges that the AEC may face in the progression of it transformation from ASEAN will be analysed. Some suggestion will be offered in the conclusion.
What are ASEAN and AEC?
Association of Southeast Asian Nations (ASEAN) was established on 8 August 1967 in Bangkok, Thailand. The founding members are Indonesia, Malaysia, Philippines, Singapore, and Thailand. After that Brunei Darussalam, Viet Nam, Lao PDR and Myanmar, and Cambodia joined in 1984, 1995, 1997, and 1999, respectively. At the beginning, “it was for political purposes and was declared a preferential trade area in 1977.” (Frankel and Wei, 1997, p.312) that is the point where the ASEAN started moving towards the economic community and move further in 1992 when the ASEAN Free Trade Area (AFTA) was established.
Source: International Monetary Fund, 1994, World Economic Outlook, October 1994: A Survey by the Staff (Washington) Its performances have been outstanding. Apparently from many measurements, for example, the increasing of ASEAN’s Gross Domestic Product (GDP), the indicator that used to calculate health of the areas’ economy, compares to other countries’ is remarkable. In figure 1, from 1960-70, its Real GDP was 5.6. It has gradually increased and in 1990-2000, the real GDP was 7.6 which comparable with Republic of Korea, slightly lower than China and even higher than Japan that was at 2.5 (Larsen F., & Aziz J., 1997, p.309). The Real GDP Growth of the ASEAN-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) is forecasted to reach 6.0% on average from...