 Chapter 2
Progress and Challenges of Establishing the ASEAN
Economic Community― Steady progress on the elimination of tariffs, but slow
progress on non-tariff barriers
Koichi Ishikawa

Professor, Institute of Asian Studies, Asia University【Key Points】
 The ASEAN Economic Community (AEC), which is planned to be establishedby the end of 2015, has been implementing measures according to the AEC
Blueprint. Since 2013, the AEC Scorecard that evaluates the progress of thesemeasures has not been published. However, in August 2014, it was reported that
82.1% of the prioritized AEC deliverables had been implemented.
 The elimination of tariffs is proceeding smoothly and the intra-regional
liberalization rate among the ASEAN 6 has already exceeded 99%. CLMV
countries (Cambodia, Laos, Myanmar, and Vietnam) are also planning toeliminate tariffs by 2018. However, the elimination of non-tariff barriers hasbarely been implemented. The rules of origin are being improved, but tradefacilitation measures – such as mutual recognition of the standards and theimplementation of a single window – need effective measures.
 The liberalization of trade in services is behind schedule. Due to the 15%
Exclusion Rule, Member States are reporting they have liberalized a sector evenwhen all the sub-sectors are not liberalized. Therefore, in reality, there are anumber of sectors that have been excluded from liberalization measures andnegotiation will be needed even after 2015. Investment liberalization willdevelop considerably, but liberalization of the sectors on the negative list will bea challenge.
Progress on the implementation of the AEC Blueprint
Elimination of Tariffs◎

Free flow of investment◯

Elimination of Non-Tariff Barriers

×Free flow of skilled labor△

Improvement on Rules of Origin◯

Transport facilitation△

ASEAN Single Window△

Development of land△transportation infrastructure
Free flow of services◯

External FTAs◎

Notes: ◎ indicates that targets are being implemented according to the blueprint, ◯ indicates that
there is partial delay but targets are mostly being achieved, △ indicates that targets are partially being
implemented, but with delay, and × indicates that there has been a significant delay or that the targets
are not being achieved at all.

Japan Center for Economic Research, 2014 “Asia Research” Report 17

1. Foreword
This chapter will confirm the progress of the AEC Blueprint using ASEAN’s
official documents as a basis, as well as other sources. It will focus on the “single market
and production base,” which is the most important goal of the four goals laid out in the
AEC Blueprint. Other sections of this chapter will focus on transportation, which is closely
related to market integration.
2. Assessment of progress toward the ASEAN Economic Community and theBlueprint
2.1 What is the ASEAN Economic Community?
In 1997, on the 30th anniversary of the establishment of ASEAN, the ASEAN
Vision 2020 was announced. It included a vision of the future “of ASEAN as a concert ofSoutheast Asian nations, outward looking, living in peace, stability and prosperity, bonded
together in partnership in dynamic development and in a community of caring societies.”
The ASEAN Vision 2020 consists of three pillars: (1) security cooperation, (2) economic
cooperation, and (3) socio-cultural cooperation. These three pillars were concretized aspolicy objectives with the adoption of the Declaration of ASEAN Concord II in 2003,
which planned for the establishment of the ASEAN Community by 2020. The ASEAN
Community also consists of three pillars: the ASEAN Security Community, the ASEAN
Economic Community, and the ASEAN Socio-Cultural Community.1
The prime minister of Singapore at the time, Goh Chok Tong, proposed theASEAN Economic Community at the 2002 ASEAN Summit. Prime Minister Goh hadconcerns that the ASEAN Member States would lose its attractiveness as investment
destinations and be buried under the rising of China and India. He thought that investors
must understand that ASEAN is “taking serious measures toward economic integration andhave a clear goal and plan for integration.” Therefore, he proposed the Economic
Community. The AEC is the next step of regional integration following the ASEAN Free
Trade Area (AFTA), which for the most part realized its original goals of reducing tariffs to
0-5% in 2002, and establishing the AEC shows that attracting foreign investment is a major
goal for ASEAN.
2.2 Outline of the AEC Blueprint
In 2007, the establishment date of the AEC was pushed to 2015 and the AEC
1

The Security Community was changed to the Political-Security Community.

18 Japan Center for Economic Research “Asia Research” ReportBlueprint – the master plan for the AEC – was announced. The AEC Blueprint clearlyspecifies the strategic objectives of the action plans of each area up through 2015.
According to the AEC Blueprint, the four main strategic objectives are: (1) asingle market and production base (market integration), (2) a highly competitive economic
region (transportation, development of energy infrastructures, competitive policy, etc.), (3)a region of equitable economic development (reducing disparities and developing small andmedium enterprises), and (4) integration into the global economy (external free trade
agreements). The implementation schedule targets 2008 through 2015 and is divided into
four phases of two years.
The most important target is the establishment of a single market and production
base (in other words, market integration), through which the AEC aims to realize the freeflow of goods, services, investment, skilled labor, and freer flow of capital. This translates
to the liberalization of trade, trade in services, and investment. Economic integration thatliberalizes goods, services, capital, and labor is called a common market. Common markets
are rare around the world (with the exception of the European Union (EU)). However, what
the AEC aims to achieve is not a common market, but a restricted or limited free flow. For
example, the free flow of people is limited to skilled labor. Restrictions remain in the tradeof goods and services as well. The level and the extent of integration of the AEC is limited
compared to that of the EU and is similar to the Economic Partnership Agreements (EPAs)
that Japan holds with various countries (figure 1).
The AEC is fundamentally different from EU’s idea of integration. The EU
introduced the Euro, the common currency used in 18 countries. This was possible because
an important national sovereignty – the right to issue currencies such as the Deutsch Markand Franc – was handed over to the European Union. The EU member states transferred
their economic sovereignty to the European Commission; therefore, the European Union
law and rules supersede the laws of the member states regarding matters on market
integration.
Meanwhile, ASEAN’s basic principle is non-interference in internal affairs;
therefore, there has been no transfer of national sovereignty. This is one of the causes ofdelay in economic integration among the ASEAN countries.

Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community

19Figure 1: Comparison of Targets between ASEAN Economic Community (AEC) and
Other Regional Integration
EU
Elimination of tariffs○
Common external tariff (CET)○
Elimination of non-tariff barriers○
Liberalization of trade in services○
Harmonization of standards○
Free movement of persons○
Trade facilitation○
Flow of investment○
Flow of capital○
Liberalization of government procurement○
Protection of intellectual property rights○
Competition policy○
Cooperation○
Common currency
○

AEC
○
×
○ (*)
○ (*)
△
△
○
○
△
×
△
△
○
×

EPA
○
×
△
△
△
△
○
○
△
△
○
△
○
×

Note: ○ indicates a target that is likely to be achieved, △ indicates measures that are listed as targets, buthave not yet been addressed, and × indicates measures will not be achieved or have not been listed astargets. (*) indicates measures that are included as targets, but will be difficult to fully achieve. However,this is not a strict definition.
Source: Created by the author.

2.3 The Master Plan on ASEAN Connectivity (MPAC)
The AEC’s target areas cover more than that of the economic partnershipagreements and aim to reduce disparities, integrate and cooperate in transportation andenergy sectors, and conclude external FTAs. In particular, cooperation in transportation isextremely important. ASEAN can be divided into the ASEAN of the land and the ASEAN
of the sea. With the exception of Thailand, which serves as a hub in ASEAN’s land portion,
many countries such as Cambodia, Laos, and Myanmar are poorer and less industrialized.
These countries have been plagued by long-running wars and civil wars, and transportation
infrastructures such as roads and railroads remain underdeveloped. As for the ASEAN’s sea
portion, it is necessary to develop ports starting from island countries such as Indonesia andthe Philippines. Goods will not flow smoothly, even if tariffs are eliminated, unlesstransportation infrastructure is developed.
The Master Plan on ASEAN Connectivity (MPAC) announced in 2010 covers
topics on integration and cooperation in the field of transportation. MPAC sets forth threeareas of connectivity with 19 strategies: (1) physical connectivity, (2) institutional
connectivity, and (3) people-to-people connectivity.
Physical connectivity includes the construction and development of hard

20 Japan Center for Economic Research “Asia Research” Reportinfrastructure. With regard to land transportation, the completion of the ASEAN Highway
Network (AHN) and the Singapore Kunming Rail Link (SKRL) are two major projects.
Challenges for Laos, Myanmar, and Cambodia include the construction and repair ofincomplete road networks and missing railway links, which are planned to be completed by
2020. Institutional connectivity includes the development of soft infrastructure. The
objective of institutional connectivity is to facilitate smooth cross-border cargo transportthat requires crossing multiple borders, such as transporting cargo by land from Thailand toVietnam via Laos.
2.4 Implementation of 82.1% of prioritized key deliverables
In 2013, ASEAN published a scorecard that indicates the progress of the AEC
Blueprint. At the 46th ASEAN Economic Ministers Meeting (AEM) held in Nay Phi Taw,
Myanmar on August 25, 2014, it was reported that ASEAN has implemented 82.1% of 229
prioritized key deliverables targeted for completion by the end of 2013. It was also reported
that 52 key deliverables for the fourth phase (2014-2015) are being implemented.2
3. Free flow of goods
3.1 Elimination of tariffs
The elimination of tariffs is AEC’s biggest achievement. According to theblueprint, the ASEAN 6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand, andVietnam) eliminated tariffs in 2010 and the CLMV countries are expected to eliminate
tariffs on all goods by 2015 (with flexibility of 7% on tariff lines up to 2018).3 As of May
2012, 99.1% of tariff lines have been eliminated among the ASEAN 6 and 67.6% of tariff
lines have been eliminated among the CLMV countries. Cambodia’s tariff elimination has
been delayed; however, it has lowered 58.2% of tariff lines to a tariff rate of below 5%.
Among the CLMV countries, 28.9% of tariff lines have been lowered to a tariff rate of
below 5% (as of February 2013) and the elimination of tariffs is on schedule. The simple
average of common effective preferential tariff (CEPT) rates among the ASEAN 6 werereduced from around 4% in 2000 to 0.05% in 2012 (0.06% even excluding Singapore).
Similarly, the simple average of CEPT rates among the CLMV countries was also reduced
from 7.3% to 2.5% in the same time frame. By 2018, when tariffs will be eliminated in the2

The traditional scorecard and evaluation method has been changed and major prioritized deliverables are usedas the denominator.
3
According to Seiya Sukekawa, items that are postponed for liberalization until 2018 are 663 items (6.94%) in
Cambodia, 669 items (6.99%) in Laos, and 645 items (6.75%) in Myanmar. Vietnam has not announced its
figures.
Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community

21

entire ASEAN region, ASEAN will be able to achieve a free-trade zone with one of thehighest liberalization rates in the world.4
Figure 2: Status of the Elimination of Tariffs (May 2012, %)0% duty> 0% duty
Other
Brunei
99.07
0.00
0.93
Indonesia
98.72
0.18
1.10
Malaysia
98.69
0.54
0.78
The Philippines
98.63
1.06
0.31
Singapore
100.000.00
0.00
Thailand
99.84
0.16
0.00
ASEAN６
99.11
0.35
0.54
Cambodia
40.29
59.71
0.00
Laos
78.87
21.13
0.00
Myanmar
79.42
19.87
0.71
Vietnam
71.75
26.22
2.04
CLMV
67.58
31.73
0.69
ASEAN
87.24
12.17
0.60
Source: ASEAN Secretariat.

The simple average of most favored nation (MFN) tariff rates among the ASEAN
Member States are low in Singapore and Brunei, but Thailand, Cambodia, and Vietnam
have relatively high rates of around 10%. As a WTO member, Laos has bound its tariffs at
18.8%, which is an extremely high number. Tariff rates on agricultural products are highwith Thailand at the top at 21.8% (excluding Singapore and Brunei). Looking by item,
tariff rates on beverages and tobacco are commonly high, and clothing and transportation
have high tariff rates within industrial products. Therefore, the utility value of the AFTA
varies from country to country, but it still has a large impact overall.
3.2 Elimination of non-tariff barriers
Measures to eliminate non-tariff barriers have been implemented since the 1990s,
but there has been little progress. According to the blueprint, the ASEAN 5 (Indonesia,
Malaysia, the Philippines, Singapore, and Thailand) were scheduled to eliminate non-tariffbarriers in 2010, the Philippines was scheduled to eliminate non-tariff barriers in 2012, andthe CLMV countries are scheduled to eliminate them in 2015 (non-tariff barriers on
sensitive products will be eliminated by 2016). The ASEAN Trade in Goods Agreement(ATIGA) had similar provisions. However, since there had been no real progress on this4

Japan’s liberalization rate for FTA is around 85% to 89%. Therefore, a liberalization rate of 99% is extremelyhigh.

22 Japan Center for Economic Research “Asia Research” Reportmatter in 2010, the MPAC announced the following key actions: (1) use the most updated
international classification of non-tariff barriers, (2) develop a set of guidelines forquantitative restrictions by 2014, and (3) eliminate the non-tariff barriers components ofthese measures by 2014. Though the rules of the AEC Blueprint call upon countries not to
introduce new measures, some countries have introduced new non-tariff barriers (e.g.
Indonesia).5
3.3 Trade facilitation (ASEAN Single Window, etc.)(1) Improvement on the Rules of Origin
The Rules of Origin are based on a co-equal approach, where exporters are given a
choice between the Regional Value Content (RVC) rule and the Change in Tariff
Classification (CTC) rule that has been adopted since 2008. Since 2014, ASEAN Member
States agreed to remove the requirement to state the Free On Board (FOB) value in theCertificate of Origin (CO) Form (excluding RVC criterion6). These improvements to theRules of Origin are being made in compliance with the requests made by
Japanese-affiliated companies.
With regard to the Certificate of Origin, ASEAN introduced the self-certification
system in addition to the third party certification. Since 2010, Singapore, Malaysia, andBrunei have been piloting The First Self-Certification Pilot Project for Certified Exporters.
Thailand joined this pilot project in 2011, and at the AEM in August 2014, Cambodia and
Myanmar announced their intentions to join the program. In 2012, Indonesia, thePhilippines, and Laos started The Second Self-Certification Pilot Project for Certified
Exporters, which has more restrictions. At the AEM in August 2014, Thailand and Vietnam
announced their intentions to join the second program.7(2) Customs facilitation
Measures toward customs facilitation (pre-arrival clearance, ASEAN Customs
Declaration Document (ACDD), ASEAN Customs Transit Systems (ACTS), ASEAN
Harmonized Tariff Nomenclature (AHTN), etc.) are moving forward. However, there aremany cases that show that customs facilitation is developed as a system on the ASEAN
5

The ASEAN Blueprint calls for all Member States to abide by the commitment of a standstill (to not increase
barriers from the current state) and roll-back (to not recede from liberalization) on non-tariff barriers.
6
The FOB value does not have to be stated in the Certificate of Origin form in cases where Wholly Obtained(WO), Change in Tariff Classification (CTC), or Process Rule or Specific Processes is applied. The
ASEAN+1 FTAs with Japan (effective from October 2014), South Korea, and Australia-New Zealand, also
removed the requirement to state the FOB value in the Certificate of Origin form.
7
Additional requirements under the Second Self-Certification Pilot Project are (1) only manufacturers to beappointed as Certified Exporters (CEs), (2) back-to-back and third party invoicing not allowed, and (3) the HS
Code to be on the Invoice Declaration.
Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community

23

level, but not actually implemented on the ground. For example, (1) ACDD is not
introduced in Malaysia, (2) tariff codes differ from country to country, (3) advanced rulingsystem cannot be used practically, and (4) there have been insufficient efforts to go
paperless with the customs electronic data interchange (EDI) system.8 With regard to the
ASEAN Customs Transit Systems (ACTS) (which is one of the objectives of the AEC
Blueprint), at the AEM in August 2014, the ministers commended the progress of the
preparation for the pilot project that is being implemented among Malaysia, Thailand, andSingapore. They also urged ASEAN Customs to finalize the text of Protocol 2 (thedesignation of frontier posts) and the remaining ASEAN Member States to expedite theirdomestic clearance for the signing of Protocol 7 (customs transit system) of the ASEAN
Framework Agreement on the Facilitation of Goods in Transit (AFAGIT). These measures
aim to streamline and facilitate customs process by standardizing the paperwork whencrossing two customs offices to transit goods via a third country by land. How to handle therisk of remaining cargo-in-transit in the stopover country remains a challenge.
(3) The ASEAN Single Window (ASW)The ASEAN Single Window (ASW) is a system that streamlines and facilitates thecustoms process by: computerizing customs processes; actualizing the National Single
Windows (NSWs) of the Member States that make it possible to apply and submit customs
documents to the authorities concerned with a single entry; and sending, exchanging, andsharing data by interconnecting the NSWs. The Agreement to Establish and Implement theASEAN Single Window was entered into force in 2005. The blueprint scheduled theimplementation of NSWs in the ASEAN 6 for 2008 and the CLMV countries for 2012;
however, both have been delayed. Singapore was taking the lead in implementing the NSW
and other ASEAN 5 countries also have started to implement the NSWs since 2009.
Vietnam is scheduled to start the NSW system in 2014.9 Cambodia, Laos, and Myanmar
are at the initial stage of establishing their NSWs.
4. Trade in services
4.1 Cross-border trade in services(1) Liberalization objectives and schedule
Following the signing of the ASEAN Framework Agreement on Services (AFAS)
in 1995, ASEAN has adopted the “positive list” approach since the 1st Package in 1996
8
9

Sukekawa (2014).
Japan Association for Simplification of International Trade Procedures (JASTPRO), pp. 73, 2013.

24 Japan Center for Economic Research “Asia Research” Reportwhen beginning negotiations. The negotiation methods have changed a few times, but sincethe 7th Package, ASEAN Member States have been negotiating according to the AEC
Blueprint. The blueprint outlines liberalization of trade in services as follows (table 3).
An overall flexibility of 15% in services liberalization is approved. The subsectorsthat are excluded (1) promise to liberalize in the next round, (2) replace subsectors thathave agreed but not promised to liberalize with subsectors other than those that have been
agreed upon, and (3) liberalize using the ASEAN-X method.
Figure 3: Liberalization targets for trade in services
Mode 1 (Cross-border trade)

No restrictions (with exceptions due to bona fide
regulatory reasons)Mode 2 (Consumption abroad)No restrictions (with exceptions due to bona fide
regulatory reasons)Mode 4 (Commercial presence)

Allow for foreign (ASEAN) equity participationof not less than 70%, progressively remove
market access limitations.

Mode 4 (Movement of natural persons)

Schedule commitments according to agreed
parameters for national treatment limitations(Limited liberalization)

Note: Bona fide regulatory reasons (e.g. public safety) are subject to agreement by all member states on acase-by-case basis.

(2) Agreement to liberalize the 9th Package of Commitments
All the Member States of ASEAN agreed to implement the 8th Package ofCommitments by the end of 2012. At the 2014 AEM, it was reported that the ministers
welcomed the progress toward the finalization of the 9th Package; however, the report does
not say that an agreement was written or signed, and no schedule of commitments wereannounced. When the Japan External Trade Organization (JETRO) Bangkok Center madean inquiry about this to the Department of Trade Negotiations at Thailand’s Ministry ofCommerce, it was confirmed that nine countries excluding the Philippines agreed andsigned the completion of negotiations on August 25, 2014.10 A press release by Thailand’s
Ministry of Commerce also reported that the 9th Package was signed and that additional 25
sectors were opened up in addition to the 81 sectors that were opened up in 2012 for the 8th
Package.

10

See JETRO Daily published by the Japan External Trade Organization (JETRO) dated on September 2, 2014.
Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community25

4.2 Financial services
The liberalization of financial services is planned to be carried out in two stages in2015 and in 2020. Unlike other measures, it will not be completed by 2015. The
liberalization of financial services will be done using the ASEAN-X method. The sectors to
be liberalized by 2015 include insurance, banking, capital market and four other sectors,
which are specified by each country. The new ASEAN members are the only ones who
have promised to liberalize the banking services, while the ASEAN 5 have not promised toliberalize it by 2015. The goal for the other countries are set to be 2020.
5. Investment
The AEC Blueprint lays out that the ASEAN Comprehensive Investment
Agreement (ACIA) will be established by merging the ASEAN Investment Area (AIA) andthe ASEAN Investment Guarantee Agreement (AIGA). The ACIA was signed in 2009 andentered into force in March 2012. Investment will be liberalized in accordance with thenegative list in 2015 with minimum restrictions remaining. The ministers signed theProtocol to Amend the ASEAN Comprehensive Investment Agreement (ACIA) at the 2014
AEM. This protocol stipulated procedures for reducing the number of reservations on thenegative list and promoted the liberalization of investment. The ACIA affects industries
other than services and the ASEAN Framework Agreement on Services (AFAS) regulates
investment in services.11 However, services incidental to manufacturing are affected by the
ACIA. The ACIA also includes obligations on national treatment before investment, no
performance requirements, and the Investor-State Dispute Settlement mechanisms (ISDS).
ASEAN will liberalize investment using the negative list approach. Similar to the AFTA,
reciprocal treatment will be adopted.12
6. Free flow of skilled labor
The AEC Blueprint requires that a Mutual Recognition Agreement (MRA) of
qualified professionals be established by 2008. The MRA of certified professionals alreadyincludes eight sectors that have been signed. These are engineering services (2005), nursing
services (2006), architectural services (2007), surveying services (2007), accounting
services (2009), medical services (2009), dental practice services (2009), and tourism
11

Investment protection and investor-state dispute settlement mechanism are applied to Mode 3 of the AFAS.
Liberalization is applied under the AFAS.
12
See Ishikawa (2010) on the ACIA.

26 Japan Center for Economic Research “Asia Research” Reportservices (2012) (table 4). At the 2014 AEM, the ministers agreed on a new MRA on
Accountancy Services that would replace the current MRA.
Figure 4: Signing and effective dates of Mutual Recognition
Arrangements for Qualified Professionals
Date Signed
Date Effective
Engineering services
December 9, 2005
December 9, 2005
Nursing services
December 8, 2006
December 8, 2006
Architectural services
November 19, 2007
November 19, 2007
Surveying services
November 19, 2007
December 19, 2008
Medical services
February 26, 2009
August 26, 2009
Accounting services
February 26, 2009
August 26, 2009
Dental practice services
February 26, 2009
August 26, 2009
Tourism services
November 9, 2012
Not yet effective
Source: ASEAN Secretariat.

Among the eight sectors, MRAs in engineering and architecture are relatively
developed.13 For engineering, the ASEAN Chartered Professional Engineers Coordinating
Committee (ACPECC) has been established. The ACPECC is a system in which engineers
who passed exams in their countries and received a license as a Registered Foreign
Professional Engineer (RPFE) from the Professional Regulatory Authority (PRA) of a hostparticipating ASEAN country can apply to be registered as an ASEAN Chartered
Professional Engineer (ACPE) to be eligible to work in other ASEAN countries. As of 2012,
there are a total of 440 ACPEs; specifically, 149 ACPEs in Malaysia, 183 in Singapore, 99
in Indonesia, and 9 in Vietnam. Countries that are not on the list do not have a PRA.
However, the number of ACPEs is not the number of engineers who are working in othercountries. There is a similar system for architects as well. Architects who received adomestic license from a PRA are eligible to register for the ASEAN Architect Council as an
ASEAN Architect in the ASEAN Architect Register. However, having this registration does
not automatically allow architects to work in other ASEAN countries. This is because there
are requirements on nationality and residency. Many foreign architects can work on a
project basis only in cases where there are no qualified architects in the other country. As
for nurses, in order to work as a foreign nurse in Thailand, one must pass the national
qualification exam in Thai.
The ASEAN Agreement on the Movement of Natural Persons (MNP) was
concluded in 2012 but is not yet in effect. This agreement is limited to skilled workers
pursuant to trade and investment; therefore, it does not include unskilled laborers.
13

Deunden Nikomborirak and Supunnavadee Jitdumrong (2013).
Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community27

7. Transportation
7.1 The Transport Facilitation Agreement
The main goals are to conclude and enter into effect the ASEAN Framework
Agreement on Goods in Transit (AFAGIT), the ASEAN Framework Agreement on the
Facilitation of Inter-State Transport (AFAFIST), and the ASEAN Framework Agreement on
Multimodal Transport (AFAMT). Out of the nine protocols of the AFAGIT, three areoutstanding (designation of transit transport routes, railways border and interchange
stations, and dangerous goods). Two protocols (designation of frontier posts and customs
transit system) have not yet concluded nor taken into effect.
Only three countries (Thailand, Vietnam, and Laos) have ratified the AFAFIST.
Similarly, only four countries (Cambodia, the Philippines, Thailand, and Vietnam) have
ratified the AFAMT and the progress has been slow.
At the 2014 AEM, the ministers commended the progress of the preparation forthe pilot project of the ASEAN Customs Transit System (ACTS). They also urged ASEAN
Customs to finalize the text of Protocol 2 (designation of frontier posts) and the remaining
ASEAN members to expedite the signing of Protocol 7 (customs transit systems) of theASEAN Framework Agreement on the Facilitation of Goods in Transit (AFAGIT). These
measures aim to streamline and facilitate customs process by standardizing the paperwork
when crossing two customs offices to transit goods via a third country by land. The
challenge remains on how to handle risk of in-transit cargo that is left behind in the transit
country.14
7.2 Land transportation
In terms of land transportation, the ASEAN Highway Network (AHN) and theSingapore-Kunming Rail Link (SKRL) are the two major projects. The AHN is an
expansion of the Trans-Asian Highway network within the ASEAN region, comprising 23
routes and covering 34,800 km.15 The project consists of completing the AHN missing
links and upgrading roads that are below standard (“Below Class III”) roads.16 Missing
14

Enlightenment by Yoshifumi Fukunaga.
See Hisao Kasuga’s “ASEAN renketsu sei no kyoka to kotsu. unyu bunya no kaizen － ASEAN keizai
kyodo tai ni muke ta torikumi no hashira toshite －” (2013) edited by Ishikawa, Shimizu, and Sukekawa(2013).
16
The ASEAN Highways shall be classified as shown below.
15

Primary

4 lanes or more, design speed of 60-120 km/hr, access controlled highway

Class I

4 lanes or more, design speed of 50-100 km/hr

28 Japan Center for Economic Research “Asia Research” Reportlinks include 227 km of roads in Myanmar and 5,300 km of below class III roads
encompassing six Member States. The AHN has also designated transit transportationroutes (TTRs). Those include 21,200 km of total road length, in which 2,069 km are below
class III. The below class III roads are located in Myanmar, the Philippines, and Laos. Key
actions in the Master Plan on ASEAN Connectivity include (1) upgrading all “Below ClassIII” sections of AHN into at least “Class III,” (2) installing common road signs in all
designated routes by 2013, and (3) upgrading “Class II or III” sections with high traffic
volume to “Class I” by 2020. According to resource materials of 2013, 757 km of
Myanmar’s roads were below class III, but they are getting upgraded.17 The route thatJapanese companies have high expectations for– the route from Mae Sot to Yangon via
Myawaddy – has a section between Myawaddy and Hpa-An that is particularly in poor
condition that is only open in one direction each day.18
8. Conclusion
The following are suggestions for ASEAN policy makers.
(1)

ASEAN should publish a detailed progress report on the AEC Blueprint by sector
and by country. Companies have high expectations for the AEC and they areincorporating the AEC into their business strategies. ASEAN should announce not
only the overall statistics, but also on specific implementation status and challenges.

(2)

ASEAN should swiftly formulate and announce the AEC Post-2015 Vision and the
new blueprint. At the ASEAN Economic Ministers Meeting, the High Level Task
Force (HLTF) on ASEAN Economic Integration was ordered to develop the AEC
Vision for post-2015 targeting the next 10 years. It is necessary to incorporate
requests from the private sector and promptly formulate the vision. Japaneseindustries should also actively make suggestions.

(3)

In connection to (2), the new blueprint should place the elimination of non-tariffmeasures (including standard MRA) and the liberalization of trade in services(especially Mode 3) as priorities and announce an effective action plan.
Class II

2 lanes, design speed of 40-80 km/hr

Class III

2 lanes, design speed of 30-60 km/hr

17

The “Status Paper on Development of Asian Highways in Myanmar” by the Ministry of Construction Public
Works is a report on the Asian Highways. According to the United Nations Economic and Social Commission
for Asia and the Pacific (ESCAP), excluding two routes, it is the same as the ASEAN Highway Network(AHN) (Hisao Kasuga).
18
See pages 117-118 and 121-122 of JETRO (2013).
Chapter 2 | Progress and Challenges in Establishing the ASEAN Economic Community

29

(4)

According to the denial of benefits clause of the AFAS and the ACIA, ASEAN
companies are the only ones who can enjoy liberalization within the region in termsof trade in services and investment. However, “a juridical person engaged in
substantive business operations in the territory of member states” can enjoy thebenefits of liberalization. Japanese-affiliated companies are in this category.
However, the definition is ambiguous; therefore, ASEAN should lay out andannounce the definition in a prompt manner.

References
Ishikawa, K. (2008). ASEAN no hikanzei sochi. Kokusai boeki to toshi. No. 79. Institutefor International Trade and Investment.
Ishikawa, K. (2010). ASEAN hokatsuteki toshi kyotei no gaiyo to igi. Kokusai boeki to toshi.
No. 79. Institute for International Trade and Investment.
Japan Association for Simplification of International Trade Procedures. (2013). ASEAN
shinguru uindou (ASW) kochiku keikaku ni kansuru chousa houkokusho.
Japan External Trade Organization. (2013). ASEAN/Mekon chiiki no saishinbutsuryu/tsukan jijou.
Nikomborirak, D., & Jitdumrong, S. (2013). An Assessment of Services Sector
Liberalization in ASEAN. ASEAN Economic Community Scorecard Performanceand Perception (S. B. Das, Ed.). Institute of Southeast Asian Studies Singapore.
Sukekawa, S. (2014). Reports from the workshop on “Kigyo no FTA katsuyo hosaku”(Compay’s way of using the FTA). “Tai o hajime to shita shinshutsu kigyo no FTA
riyojokyo to kadai.” Institute for International Trade and Investment.

30 Japan Center for Economic Research “Asia Research” Report