A critical look at the ASEAN Economic Community Scorecard

Author: Sanchita Basu Das, ISEAS

The official ASEAN Economic Community (AEC) Scorecard, published by the ASEAN Secretariat in March 2012, stipulated that ASEAN had achieved 67.5 per cent of its targets for the 2008–11 period.

While the fourth pillar of the blueprint, ‘integration into the global economy’, was the best performer at 85.7 per cent, the first pillar on ‘single market and production base’ was the worst performer, with 65.9 per cent over the same period.

The scores are not surprising. In the last few years, ASEAN has signed and implemented five FTAs and has driven the expanded East Asia Summit and the ASEAN Regional Forum to help tackle key security challenges affecting the region. In addition to the leaders’ meeting, the organisation held summits with China, Japan, South Korea, Australia, New Zealand, Russia and India. This raised the international profile of ASEAN, especially in an era of East Asia-led global economic recovery. But ASEAN faces several internal challenges related to non-tariff barriers, sticky labour laws, lack of infrastructure and a development gap among members.

A regional economic scorecard is expected to serve as an unbiased assessment tool to measure the extent of integration among its members and the economic health of the region. It is expected to provide relevant information about regional priorities and in this way foster productive, inclusive and sustainable growth. Moreover, scores create incentives for improvement by highlighting what is working and what is not.

The AEC Scorecard is also a compliance tool that makes it possible to monitor the implementation of ASEAN agreements and the achievement of milestones indicated in the AEC Strategic Schedule. The Scorecard outlines specific actions that must be undertaken by ASEAN collectively and by its member states individually to establish an AEC by 2015. But how effective is this scorecard? Does it provide incentives for improvement?

The AEC Scorecard says the shortfall is mainly caused by delays in ratification of signed ASEAN-wide agreements and their integration into national laws, as well as delays in the implementation of specific initiatives. Yet the aggregate scores fail to reveal the true rates of implementation for individual countries because it does not give a country-specific break-down, and is too general to be useful to the general public. This may hinder ASEAN in trying to obtain the necessary resources at the appropriate time. If the public is to take an interest in ASEAN matters, it is also important for ASEAN to share quality information with them.

The AEC Scorecard also lacks a degree of usefulness because it does not explain the reasons for such delays. For example, ASEAN took more than two years to ratify the ASEAN Comprehensive Investment Agreement, which is viewed as one of the seeds for integration and is expected to enhance investment flows in the region. The link between trade and investment, particularly through FDI, has been extensively discussed in the literature. So even if ASEAN is lowering its tariffs to increase intra-ASEAN trade, it will not obtain the potential benefits of trade liberalisation with greater investment unless supported by a broader enabling environment. Hence, delays in ratifying important agreements contribute to a loss of momentum in integration, and these delays need to be addressed.

In many developing countries the existence of a policy does not necessarily imply it has been fully implemented or that it is in use. Yet policy implementation and use are both critical factors for a nation or a region to achieve its strategic goals. It is important for ASEAN to convince all its stakeholders that policy formulation and implementation are not necessarily consecutive processes, but are in many cases parallel processes where policy design and revision can take place even during the formal implementation stages of the policy initiative. This may raise the confidence of concerned parties in ASEAN matters.

It is often said that ASEAN suffers because domestic laws are not properly aligned with regional initiatives. But if the political will exists, then what could be the challenges for aligning these policies? Given ASEAN’s hope to continue to be central to the evolving regional architecture, the association must deliver on its promises. In order to do so, it needs to pay greater attention to member countries’ domestic politics and needs to understand the interplay of government agencies, business groups and labour unions in specific countries.

The AEC Scorecard has demonstrated its importance as an instrument to support the implementation of the AEC Blueprint; however, it is not entirely satisfactory on its own. Instead, the scorecard needs to be complemented by other measures that can trace the state, performance, and impact of trade and investment liberalisation across the region.

The AEC Scorecard needs to be transparent, detailed and readily available for private sector use. It should be able to clearly translate an agreement’s benefits, such as those relating to reduced costs and prices in the region. These issues need more awareness and require the active participation of all those concerned in the process, including the region’s business community.

Sanchita Basu Das is Lead Researcher for Economic Affairs at the ASEAN Studies Centre, Institute of South East Asian Studies.