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ASEAN Economic Community: the implications for Australia

By Nattavud Pimpa - posted Friday, 10 February 2012

The Association of South East Asian Nations (ASEAN) has a long history of the promotion of active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative aspects in the region. The ten members of ASEAN are diverse in political, economic and racial backgrounds but are common in historical and cultural links. With over 600 millions in population, ASEAN is clearly a key trade partner for Australia. In terms of political and historical links, ASEAN and Australia have long been established bilateral (Australia and a single country within ASEAN) and multi-lateral relationships.

ASEAN is an important trading partner for Australia with two-way trade in goods and services. For instance, the value of trade among ASEAN nations and Australia in 2010-11 valued at A$60 billion or around 15 per cent of Australia's total trade. In contrast, Australia's investment links with ASEAN are relatively small.

At the 12th ASEAN Summit in January 2007, the leaders of South East Asian affirmed their strong commitment to accelerate the establishment of an ASEAN Economic Community (AEC) by 2015 and signed the Cebu Declaration on the Acceleration of the Establishment of an ASEAN Community by 2015.


From the geo-politic perspective, we understand that the geographical value of Southeast Asia seems to have increased in the eyes of the global community. ASEAN's geographical and buffer value between super-power China and industrial nations such as Japan and Korea has attracted many offers for Free Trade Agreements (FTAs). Such offers for ASEAN have come from the Common Economic Relations (CER with Australia and New Zealand as a free trade area), Japan, India and America.

The key characteristics of AEC include (a) a single market and production base in ASEAN, (b) ASEAN will become a highly competitive economic region, (c) ASEAN as a region of equitable economic development, and (d) a region fully integrated into the global economy. The ultimate goal for AEC is to transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital. So, what are the implications to Australia?

ASEAN and Australia have a long history of trade, political and cultural collaborations. Australia, however, seems to have little understanding about our neighbor. For instance, a number of studies in language education in Australia confirm that most Australian students are interested in European languages. The decline in numbers of students studying languages from South East Asia in Australia may be under the influence of strong linguistic and cultural links with Europe, governmental budget on Asian studies and limited interests in South East Asia among Australian students and teachers.

This requires careful attention from key business, governmental and educational organizations promoting South East Asian in Australia. If Australia need to play a role in the region, the promotional links through language and cultural education to our younger generation is clearly important. Our schools and universities need to offer more educational program in South East Asian languages (i.e. Thai, Indonesian, Malayu, Vietnamese, Laotian, Cambodian or Tagalog) as well as cultural and regional studies.

A study by the Institute of Southeast Asian Studies (ISEAS) in Singapore predicted that the AEC may become old wine in a new bottle as the packaging is still to operationalize the single market for goods and services in ASEAN. Capital has long been globalised as well as technology and ideas. We can predict that the free movement of labours in ASEAN can pose some potential challenges among ASEAN members.

The labour and educational standard among ASEAN nations contribute significantly to this challenge. For instance, Singapore has led other ASEAN members in this aspect, due to its on-going investment and strong public policy on education and training since 1960s. Malaysia, Indonesia, Philippines and Thailand are competing with any other developing nations in the world to accelerate their human resources development policies.


Australia should play a pivotal role in supporting and promoting quality of education and training among ASEAN members. Australia has done a number of projects through the mechanism of AUSAID and other Government agencies. Australian business and educational organizations need to take active roles in promoting education and training of Australia in the South East Asian context. Some of our key industries in the region such as mining, education, finance and manufacturing should promote collaborative education and training with partners from South East Asia. Contributions in the form of education, training or human resource development will strengthen our bonds with ASEAN members and will subsequently benefit the region.

Finally, AEC focuses on some areas of co-operation such as human resources development and capacity building; consultation on macroeconomic and financial policies; trade financing measures; enhanced infrastructure and communications connectivity. Australia, as one of the world leaders in technology and infrastructure as well as information communication technology, should contribute to the development of some of these issues in South East Asia. ASEAN members understand that the time-frame for building the Economic Community is short enough to meet the competitive challenge of China, Korea and India, which are currently growing rapidly and integrating globally. ASEAN nations clearly need partners to facilitate the transformation from FTA to the full economic community and Australia should actively play this role.

A cohesive ASEAN Economic Community should be a potent force for regional stability and economic vitality in the Asia-Pacific region. More importantly, the expected boost to ASEAN's economic and political growth should lead to greater opportunities for Australian exports and foreign direct investment. We, hence, need to be aware of the future of Australia and ASEAN social, political and economic relationship.

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About the Author

Dr Nattavud Pimoa is an Associate Professor in international business at the School of Management, RMIT University.

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