With the official launch of the long-awaited ASEAN Economic Community (AEC), ASEAN has integrated its 10 different nation members’ markets into a single trading bloc. This presents immense opportunities for investors.

The move is regarded by most as the beginning of a new era. However, the effects of establishing the AEC will still take time to materialize.

AEC is part of a bigger goal to establish more regional integration among the 10 member nations. Partly inspired by the European Union, ASEAN looks to integrate not only its economic activities, but also its political and cultural ones. This is aimed at handling regional challenges while increasing Southeast Asia’s bargaining power.

It’s been a long and difficult journey for ASEAN to get to where it is today. Since it was founded in 1967, it took close to 50 years to bring about real changes to the region. The establishment of the AEC is just one of many milestones.

Some say it’s been a highly inefficient process of integration. But considering the region’s great diversity and turbulent history of warfare, making it this far is a major achievement.


ASEAN Economic Community: A Catalyst for Liberalization

The community’s launch signals a region with free trade of goods and services, free movement of labor, and liberalization of investment. Movement of skilled labor is the most significant of these, as manpower is the root of all businesses. This alone aims to lift the region’s GDP by 5% by 2030.

That’s not to say that ASEAN isn’t a formidable region now. Home to over 600 million people, the region, if counted as a single nation, would be the third most populous and seventh largest economy in the world at a GDP of US$2.6 trillion.. Some experts argue that this makes the region the most attractive in the world spreading confidence into its long term prospects.

ASEAN will step up both its interregional and intraregional trade to promote itself as a more powerful trading bloc,


The AEC Will Boost Trade Immensely

Steps to ensure a free flow of trade are almost complete. Six ASEAN countries – Brunei, Indonesia, Malaysia, Philippines, Singapore, and Thailand – just implemented tariff free trading for 99.2% of all products. The rest of ASEAN – Cambodia, Laos, Myanmar, and Vietnam – are planning to catch up from their current 90.9%.

As for interregional trade, plans were laid out for more cooperation with China at a summit in Kuala Lumpur in 2015. The ASEAN-China Free Trade Agreement (ACFTA) outlines several key issues about the trading of goods and services.

Both sides promised to open up more sectors for investment including tourism, telecom, construction, and finance. ASEAN’s bilateral trade with China now stands at US$480 billion, ASEAN’s highest and China’s third highest number. With much more active cooperation from both sides, they plan to more than double the trade volume to US$1 trillion by 2020.

Also, China’s plans for a New Silk Road will benefit ASEAN more than any other region, compounding the effects of the community.


Effects Will Not be Immediate

Some critics remain skeptical about the ASEAN Economic Community. They think expectations are too high and will fuel disappointment when they are not met.

According to HSBC Global Research, most of the effects will be felt over the next decade as changes will be implemented.

2016 marks the start of something new with the launch of AEC, bringing ASEAN a step closer to the dream of becoming an integrated bloc economically, politically, and culturally. Rome wasn’t built in one day and neither will ASEAN.

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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