ECONOMIC POLICY ANALYSIS

POLICY IMPLICATION OF
ASEAN ECONOMIC
COMMUNITY (AEC) FOR
MALAYSIA

PRESENTER:
ZAITUN ABD MALEK (2015261372)
NOR AZRI SHARIZAL ABU BAKAR (2015465358)

25th May 2016

PRESENTED FOR: DR. ARLINAH ABD RASHID

1.0 WHO IS ASEAN?

ASEAN was established in 8 August 1967

2.0 UNDERSTAND ASEAN:

7 THINGS THAT YOU NEED TO
KNOW
1. ASEANs ten member states form an economic powerhouse
2. ASEAN is not a monolithic market
3. Macroeconomic stability has provided a platform for growth
4. ASEAN is a growing hub of consumer demand
5. ASEAN is well positioned in global trade flows.
6. Intraregional trade could significantly deepen with implementation of the
ASEAN Economic Community, but there are hurdles
7. ASEAN is home to many globally competitive companies.
By McKinsey & Co
10/13/16

3.0 WHAT IS AEC?

AEC Blueprint was adopted on 20/11/2007 at the 13th ASEAN Summit in
Singapore to serve as the a coherent master plan guiding the establishment of
the ASEAN Economic Community 2015.
AEC Enhancing Competitiveness for economic growth and development
through closer economic integration

10/13/16

3.0 WHAT IS AEC?

AEC envisages the following key characteristics:
A single market and production base
A highly competitive economic region
A region of equitable economic development
A region fully integrated into the global economy

AEC 4 Pillars

10/13/16

3.0 WHAT IS AEC?

10/13/16

3.0 WHAT IS AEC?

QUESTION

AEC
2015?

10/13/16

5 Targets of the AEC Single Market

4.0 POLICY IMPLICATION FOR

MALAYSIA - BENEFITS

4.1: 5 Targets
the AEC
AEC Single
MarketMarket
5 Targets
of ofthe
Single

Free flow
of
investme
nt

Free flow
of skilled
labor

4.2 Economic Integration

Integration of ASEAN
Economic
of ASEAN

need to
provide
flexibility to
newer
members
after 1994

time for
industry
adjustments
Varies level
of economic
integration
Implement
ed
progressiv
ely
10

Elimination
ofImport
Import
Duties
4.3 Elimination of
Duties
ASEAN-6
99.2% duties eliminated
(1 January 2010)
Elimination of Duties
CLMV
93% duties to be eliminated by
1 January 2015 (balance 7% - 669
tariff lines by 2018)
Non-Tariff Barriers (NTBs) A Frequent Complaint
ASEAN Economic Ministers have made reducing NTBs as priority towards
AEC 2015. A systematic approach taken to address NTBs 6 pilot cases
identified; 2 have been resolved. More cases will be identified through a
compliance review mechanism.
11

Example:
flowof of
Goods
4.4 Example:Free
Free flow
Goods

EXPORT/
IMPORT

Import Duty

Import Duty

Normal MFN
Duty

30 %
Eg; Car parts exported to
Thailand: RM200 x 30% =
RM60

20 %
Eg; Food stuffs imported
into Malaysia: RM200 x
20% = RM40

Duty under

0%

0%

12

4.5 Liberalization of Services Sector

12 Broad Sectors

128 Sub-Sectors

13

Liberalization
Services
Sector
4.5 Liberalization of
of Services
Sector
10th
9th

7
Package
2009
th

1st
Package
1997

2nd
Package
1998

3rd
Package
2001

4th
Package
2004

5th
Package
2006

6th
Package
2007

8th
Package
2010

Package
2014

Mode 1: Cross Border Supply

: No Limitation, except where not

feasible

Mode 2: Consumption Abroad

: No Limitation, except where not

feasible

Mode 3: Commercial Presence

: ASEAN Equity >70%

Mode 4: Presence of a Natural Person : MNP Agreement; 7 MRAs

14

Package
2015

4.6 Examplesof
of Liberalization
Examples
Liberalization
Sub-Sectors

Healthcar
e

Logistics

AEC

AFAS 7

Targets

Year

THA
MYS
SIN
PHI
IND
BRN
18/5/09 16/10/09 01/10/09 17/08/09 09/05/09 23/10/09

Hospital
Services

51%
70%

2008
2010

49%

51%

51%

40%

49%

100%

Medical &
Dental
Services

51%
70%

2008
2010

49%

51%

100%

49%

100%

Dental
Services

51%
70%

2008
2010

49%

51%

100%

49%

Maritime
Freight
Forwarding

49%
51%
70%

2008
2010
2013

49%

49%

100%

40%

49%

49%

Storage &
Warehouse
Services for
Maritime
Transport

49%
51%
70%

2008
2010
2013

49%

49%

100%

100%

49%

49%

15

4.7 Tapping
ASEANs Talent
PoolPool
Tapping
ononASEANs
Talent
ASEAN Movement of Natural Persons Agreement (MNP)
Business Visitors
Intra-Corporate Transferees
Contractual Service Suppliers
Mutual Recognition Agreements (MRAs)
Engineering Services
Nursing Services
Architecture Services
Accountancy Services
Medical Practitioners
Dental Practitioners
Surveyors
16

Engineeri
ng

ASEAN MRA on Engineering Services, 9 December

2005, Kuala Lumpur
National Focal Point: Board of Engineers, Malaysia
The approval to become an ASEAN Chartered
Professional Engineer (ACPE) is determined by the
ASEAN
Chartered
Professional
Engineer
Coordinating Committee (ACPECC)

Architectu
re

ASEAN MRA on Architectural Services, 19

November 2007, Singapore
National Focal Point: Board of Architects, Malaysia
The approval to become an ASEAN Architect (AA)
is determined by the ASEAN Architect Council
(AAC)

Key Point

17

Permission to work in another ASEAN Member

State is subject to destination Member States
domestic rules and regulations.

4.8 Mutual Recognition Agreements (MRAs)

4.8 Mutual Recognition Agreements (MRAs)

Medical

ASEAN MRA on Medical Practitioners, 26

February 2009,Cha-am, Thailand
National Focal Point: Malaysian Medical Council

Dental

ASEAN MRA on Dental Practitioners, 26

February 2009,Cha-am, Thailand
National Focal Point: Malaysian Dental Council

Nursing

ASEAN MRA on Nursing Services, 18 December

2006, Cebu, the Philippines.
National Focal Point: Ministry of Health,
Malaysia

Key
Points

For MRAs on medical and dental practitioners,

operationalization is based on
bilateral
registration processes.
For the MRA on nursing, the focus is on
professional capacity-building through exchange
of expertise, experience and best practices.
18

19

Permission to work in another ASEAN Member

State is subject to destination Member States
domestic rules and regulations.
ASEAN MRA Framework on Accountancy Services,
26 February 2009, Cha-am, Thailand
National Focal Point: Malaysian Institute of
Accountants
The full MRA is expected to be signed during the
47th ASEAN Economic Ministers Meeting, August
2014, Singapore
Framework
Arrangement
for
the
Mutual
Recognition on Surveying Qualifcations, 19
November 2007, Singapore
National Focal Point: Board of Surveyors, Ministry
of Works
Negotiations are under way to upgrade it into a
MRA

Key Point
Accountan
cy
Surveying

Mutual Recognition Agreements (MRAs)

4.9 Registration of ASEAN Engineers and

Architect
According to the MRAs
ASEAN-certified
Engineer /
Architect

Regional
National

License from
home country

License from
host country
20

Collaboration
Other
Sectors
4.10
Collaboration ininOther
Sectors
Transport
Services

ASEAN Framework Agreement on the

Facilitation of Goods in Transit (AFAFGIT)
ASEAN Framework Agreement on the
Facilitation of Inter-State Transport
(AFAFIST)

ASEAN Open Skies Agreement

ASEAN Framework on Multimodal

Transport (AFAMT)

ASEAN Single Aviation Market

ASEAN RORO Shipping Network and

Short Sea Shipping

Created opportunities for low-cost carriers and logistics service providers.

21

Collaboration
Other
Sectors
4.10
Collaboration ininOther
Sectors

ICT

Energy

Minerals

ASEAN Broadband Corridor

Lower Intra-ASEAN Mobile Roaming Charges
ASEAN Network Security Action Council
ASEAN Power Grid
Trans-ASEAN Gas Pipeline
ASEAN Petroleum Security Agreement

ASEAN Minerals Database and Information System

ASEAN Minerals Cooperation Action Plan 2011-2015

22

5.0 POLICY IMPLICATION FOR

MALAYSIA - DRAWBACKS

10/13/16

5.1 WEAK INFRASTRUCTURE

LINKS AMONG ASEAN NATIONS
-Most Southeast Asian countries are
archipelago. (Borneo, Philippines,
Indonesia)
-High Speed Rail Singapore-Kunming is
in progress and expected to complete by
2021.
-Project delayed :
i)due to mountain terrain
ii)unexploded bomb in VietNam during
war.
iii) too expensive for small countries such
as Laos.
iv)Funding issues in many countries

10/13/16

5.2 TARIFF AND NON TARIFF

BARRIERS & LOCAL
PROTECTIONISM
Nontariff Protectionist Measures Implemented in ASEAN, 20092013

1.
2.
3.
4.

Reported increasing protectionism, especially in Indonesia.

Recently Indonesia's Manpower Ministry imposed restrictions on the use of foreign
professionals.
Among the measures are requirements for a higher percentage of local content in
exports and the raising of import tariffs on a raft of products.
Philippines also employs trade protectionist measures such as tariffs and quotas on
rice imported from Thailand.

10/13/16

Source: Global Trade Alert database

(http://www.globaltradealert.org/)

5.2 TARIFF AND NON TARIFF

BARRIERS & LOCAL
PROTECTIONISM
ASEAN Services Trade Restrictiveness

Source: Services Trade

Restrictions Database
(http://iresearch.worldba
nk.org/servicetrade/abo
utData.htm).

Mode 1 = financial services,

Mode 3 = all subsectors,
Mode 4 = professional services.
0 = completely open,
25 = virtually open with minor restrictions,
50 = major restrictions,
75 = virtually closed with limited opportunities to enter and operate,
100 = completely closed
10/13/16

5.3 INCONSISTENT REGULATIONS

& POLICIES ACROSS ASEAN
Country

Legal
system

Gov.
system

Common
Law

Democracy

Indonesia

Civil Law

Democracy

Thailand

Civil Law

Democracy

Singapore

Common
Law

Hybrid
regimes

VietNam

Civil Law

Authoritarian
regimes

Malaysia

Philippines

Codification
Law

Democracy

Brunei

Sharia Law

Sultanate

Cambodia

Civil Law

Hybrid
regimes

Myanmar
10/13/16

Laos

Common
Law

Authoritarian
regimes

Civil Law

Authoritarian

-Different Legal system between ASEAN

countries.
-In the case of Thailand, the Nation
Reform Council has recently identified a
total of 106 Thai laws that needed to be
amended in order to implement fully the
action plans outlined in
the Asean Economic Community.
-In fact, many of the AEC members are
not even full democracies or
democracies at all, including trade
heavyweights like Malaysia and Thailand

Source: The Economist

Intelligence unit Limited 2013
(https://partyforumseasia.org/
tag/timor-leste-democracy/)

5.4 CULTURAL DIVERSITY ACROSS

ASEAN
There is a high degree of political and
socio-cultural diversity among ASEAN
countries which makes economic
integration challenging. Different
Languages, Religions and Races.

10/13/16

5.5 HIGH INFLATION RATES

Some ASEAN countries have high inflation rates. This could result in dissimilar
price levels and unequal purchasing power across ASEAN member countries,
giving some countries the ability to purchase more goods of another member
country. Also, different levels of inflation could result in different levels of
investment.

10/13/16

5.6 LACK OF ASEAN COUNTRY

COMMITMENT
Indonesia, is the one least likely to benefit from the AEC and the one where economic
nationalism and protectionism has become a potent force.

Cabinet ministers talk openly about resisting the implementation of Asean Economic
Community (AEC).
Indonesia market is huge, far more better than other ASEAN countries.

10/13/16

5.7 SHORTAGES OF THE RIGHT

TYPES OF WORKERS
High
unemployment
in ASEAN
countries.
Imbalanced
skilled and
unskilled labour

10/13/16

END

10/13/16