Asean Integration

ASEAN Economic Integration: Opportunities and Challenges that Lie Ahead

The Association of Southeast Asian (ASEAN) leaders adopted the ASEAN Vision 2020 hoping to strengthen the foundation for a prosperous and peaceful community of Southeast Asian nations while creating a community that lived in shared stability and prosperity. The purpose of establishing an integrated economic community is to accelerate economic growth, enhance trade development in the region, and allow the freer movement of goods, services, skilled labor, and capital.

There are approximately 600 million people across the ten ASEAN member countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) that will be affected by this regional partnership. Thus, it is critical to highlight some high level opportunities as well as challenges surrounding the impending economic integration.

Background

The 1997 Asian financial crisis generated substantial macroeconomic fundamental effects, including a collapse of Asian stock markets, devaluations of domestic currencies, and a reduction in asset prices throughout Asian countries. Many businesses collapsed which in turn condensed per capita income for millions of people in the region.

Some experts argue that the Asian financial crisis exposed many issues such as banks’ structural inefficiencies, weak financial infrastructures, lack of transparency and weak governance and regulation involving the banking sector.

Others argue that moral hazard, asymmetric information, short-sighted government policies, weak institutions, and ineffective regulation also made the region vulnerable to the crisis.

In the years that followed the Asian Financial crisis, ASEAN leaders discussed creating economic policies that would both support economic growth and protect the region from any potential future economic shocks. Consequently, the ASEAN Economic Community emerged as an apparatus for meeting these needs....