The ASEAN Economic Community (AEC 2015) is set to arrive in less than a year. But the anticipation of creating a single market over 600 million people large has made businesses and investors both eager and concerned.

For those who are not up to date, the ASEAN Economic Community, will arrive in late December of 2015 and will enable a freer flow of trade, capital, and labor among the ten member nations of ASEAN.

The details of the bloc will be similar to that of the Eurozone’s, but without some of the arguably less successful measures, such as a shared currency and central bank.

Can AEC 2015 Manage its Problems?

The master plan of ASEAN’s high speed rail system, which will extend into China.

Progress has been made toward some goals more than others. Specifically, moving products and money has proven to be easier than moving workers and companies. This is shown by the types of laws that have been implemented, as well as the large focus on infrastructure projects throughout the region.

Laos, for example, has recently adopted “one-stop service” procedures in their customs department, which has cut the processing time for cross-border shipments by half.

At the same time, several high speed rail developments have been financed and are either in the planning or construction phases. These include a line from Singapore to the Malaysian capital of Kuala Lumpur, as well as one from Bangkok to Kunming in China, which will cut through Vietnam and Laos.

But many countries still need much improvement in their investment and immigration laws in order to meet the goals that the AEC has. While members have met about 80% of the community’s standards, the remaining 20% will be the most difficult.

One requirement for all members is that businesses in most sectors are able to be majority foreign owned – but only a handful of nations have met this criteria. Cambodia and Singapore are the least restrictive for foreign companies, while Thailand is the most, allowing foreign ownership of only 49% in all types of businesses.

 

The AEC’s Free Flow of Labor – Easier Said Than Done

Similarly, AEC 2015’s plans for a free flow of labor will be challenging to realize. Countries such as Thailand, Malaysia and Singapore have laws that demand that foreigners are able to work only if a suitable local cannot be found for the position.

There are also fears of unrest if foreigners are allowed to take too many jobs in some countries. Singapore had a rare demonstration in 2014 because of what protesters see as foreign talent taking desirable jobs away from locals.

Some countries, such as the Philippines, have a large pool of skilled laborers that speak English and are willing to work cheaply. Optimism about the AEC could quickly turn to anger in a nation whose workforce is overrun by people who are not only more talented and speak better English, but able to be paid less than the locals.

 

AEC 2015: Will it Even Come?

In summary, the AEC will probably not arrive on a single day and will instead be phased in over time. Some measures that sound good in theory may not be popular once implemented, and small steps will need to be taken to achieve full implementation.

Even if not immediately, the ASEAN Economic Community will completely transform the business, investment, labor, and trade environments of Southeast Asia forever.

EDITOR’S UPDATE FOR 2017: As predicted, the AEC did arrive in 2015 – but not in full force. There’s still much work to be done and ASEAN won’t fully integrate overnight. But steps are being made in the right direction.

 

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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