AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies
IIPSRIPSInstitute for International

The Japan Institute ofResearch Institute for

Policy Studies

International Affairs

Peace and Security

Editorial Advisory Board:

No. 181

Akio Watanabe (Chair)
Masashi Nishihara
Yoshiji Nogami
Taizo Yakushiji

14 August 2013

Editorial Committee:
Taizo Yakushiji
Hisayoshi Ina
Tsutomu Kikuchi
Shujiro Urata andToshiro Iijima
Editor & Online Publisher:
Yoshji Nogami
President, JIIA

MOVING ASEAN AND AEC FORWARD
BEYOND 2015
Hidetoshi Nishimura

The ASEAN Economic Community (AEC) is to berealized by the end of 2015. Now is the time for
ASEAN to evaluate and consider what has to bedone to realize the AEC and how to implement this.
At the same time, there is a need to prepare for theera beyond 2015 to realize a better performing
single production base and single market in
ASEAN and East Asia.
Something might be expected to occur by theend of 2015, but not an event such as theestablishment of ASEAN on August 8, 1967.
During the past two decades, ASEAN has madeconsiderable progress toward economic integration.
The AEC is the fruit of its persevering, persistent,and perpetual struggle with the "ASEAN Way."The views expressed in this piece are the author’s own and should
not be attributed to The Association of Japanese Institutes ofStrategic Studies.

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

Here, I would like to underline that AEC 2015, a landmark achievement andhistoric milestone, is a signature success of the "ASEAN Way" of regionalism
and integration based on shared aspirations, interests and values; mutual trust
and accepted procedures; frequent interaction and consensus building; flexibility
and pragmatism, and strong commitments by leaders to deeper regional
integration.
ASEAN should be proud of the empirical wisdom found in the "ASEAN
Way." This spirit shall be the basis of taking AEC beyond 2015. In other words,
the “ASEAN Way” will be the vehicle for taking the “big dream beyond 2015."
Throughout its long and continued efforts toward economic integration, ASEAN
has shown its strength in many aspects. Since these are obvious and well known,
I will not present them in detail here. The successful aspects are as follows:- ASEANhasachieved

steadyeconomic

growthwithrobustindustrialization and trade expansion;- ASEAN has achieved substantial poverty reduction and the formation ofa middle-income population;- Its "2nd unbundling" (i.e., the international division of labor in terms of
production processes or tasks) of manufacturing and related services
in ASEAN and East Asia is the most advanced in the world;- The development of production networks in ASEAN is going beyond
simple fragmentation of production to start forming industrial
agglomerations;- ASEAN has successfully developed fairly good connectivity, both
institutional and physical; and- ASEAN and East Asia are presenting a novel development strategy inwhich the mechanisms of production networks and industrial
agglomerations are aggressively exploited.
However, at the same time, ASEAN is facing the following issues andchallenges:- How to move up from middle-income to fully-developed economies- How to achieve three-dimensional inclusiveness, namely geographical,industrial, and societal

http://www.jiia.or.jp/en/commentary2

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies- How to enhance resiliency and maintain sustainability, and- How to engage in ASEAN centrality in a global setting
What are the dreams of ASEAN citizens beyond 2015? To take fulladvantage of ASEAN’s strengths and overcome the issues and challenges
confronting it, there are four critical and interdependent pathways for ASEAN in
the economic arena:(i) Competitive and dynamic pathway
The fundamental strategy for ASEAN to become a developed region
relies on deepening and expanding the network of industrial clusters locally andregionally facilitated by regional connectivity and on ASEAN becoming a major
cog of East Asia and global production networks of goods and services.
Ensuring a dynamic and competitive ASEAN involves pushing the frontier ofproduction networks both forward and outward through increased linkages
globally as well as inward through the development of industrial clusters andsmall and medium-sized enterprises (SMEs).
(ii) Inclusive pathway
One defining characteristic of the ASEAN pathway to becoming adeveloped region is inclusiveness. There are three aspects of inclusiveness for
ASEAN, namely geographic, industrial and societal. There remain significant
development gaps in these three aspects of inclusiveness in many ASEAN
Member States (AMSs). The more important geographic development gaps
involve those between the richer AMSs and poorer AMSs as well as the richer
regions and poorer regions in most AMSs. Industrial inclusiveness concerns
involvemultinationals

versuslocal

firms,

large

firms

versusSMEs,

manufacturing versus agriculture, etc. Societal gaps pertain mainly to rich versus
poor households as well as differential treatments by age, gender, ethnicity, etc.
(iii) Sustainable pathway
Sustainability for ASEAN involves two elements: resiliency and green
development. ASEAN and East Asia experienced various crises and disasters
during the past two decades, and those shocks were utilized to improve
resiliency in the region. By promoting development utilizing the new technologies

http://www.jiia.or.jp/en/commentary3

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

coming into place, ASEAN countries can enjoy a more environmentally-friendly
growth path by avoiding an environmentally-destructive growth path.
(iv) Dynamic equilibrium with ASEAN centrality
In the economic arena, it is important for ASEAN to utilize its strategic
location at the geographic heart of fast-growing and developing Asia. By
maintaining open and equal relations with various partners, ASEAN can bring invarious resources and solidify its position as a leading growth center of the world.
Based on its issue-oriented approach, especially in the promotion ofwider-region FTAs and EPAs, ASEAN can become a central building block forother cooperation schemes and establish balanced relations with other parts ofthe world.
Trans Pacific Partnership (TPP) negotiations and China-Japan-Korea(CJK) FTA negotiations are progressing. The TPP is moving at a pace ahead ofthe AEC and not all the ASEAN countries are part of TPP. It is in the interest ofASEAN to pursue economic integration (or community building) to the extent that
it is the driving force behind the RCEP and an influential negotiator in TPP. While
ASEAN can contribute competitively to RCEP and TPP in tariff and ROO issues,
it may have to overcome challenges in terms of services liberalization andinvestment facilitation in order to maximize its strengths in both negotiations. Ourregion, ASEAN and East Asia, should not stop seeking to achieve deep andwide regional economic integration. If we do stop, we shall lose our momentum,competitiveness, attractiveness, resiliency, and prosperity. There will be some
implementation of AEC that will continue after 2015 and, as a significant part ofeconomic integration, AEC will surely continue to evolve and develop in lateryears. This evolution should be managed both internally and externally.
Japan is expected to play an important role in such regional economic
integration initiatives. One of the objectives of the ASEAN Economic Community
is a “Single Market and Production Base.” Japanese companies have invested
heavily in this region for more than 40 years. The friendship between ASEAN
and Japan over these forty years has been nurtured based on this economicactivity. Throughout this time, Japanese companies have established anddeveloped advanced and incomparable production networks in this region.

http://www.jiia.or.jp/en/commentary4

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

These production networks make this region a more integrated, competitive,
equitable and resilient community. If the “Single Production Base” is realized inthis region, Japan will undoubtedly be the country that can benefit most. Now is
the right time for Japan to provide the best support to enhance regional
economic integration in this region in order to overcome an unsettled world
economic environment.

Hidetoshi Nishimura is the Executive Director and founder of the Economic
Research Institute for ASEAN & East Asia (ERIA).

http://www.jiia.or.jp/en/commentary5