The start of 2016 marked a milestone for the ASEAN region with leaders coming together to implement the ASEAN Economic Community, or AEC.

The community aims to unite Southeast Asia, turning the region into a single trading bloc. It will be similar to the European Union, but without drawbacks such as a single currency and deeper political integration.

Despite the generous amount of publicity generated, the AEC hasn’t shown much progress in the 3 months. Don’t despair though. This sort of delay is normal, especially in an attempt to unite 10 diverse nations into one single trading bloc.

Asia consists of countries with a large gap between them in terms of economic development. Singapore is among the richest countries in the world. However, the economies of nearby Indonesia, Vietnam, and Malaysia are still dominated by light industry and even, in the case of Vietnam, low-skill agricultural work.

 

Much More to Come for the AEC

The aim is building an integrated economy with a combined market of US$2.6 trillion and over 600 million people. Yet it’s been almost two years since the agreement was signed.

Progress toward the AEC’s goals are disappointing to anyone with reasonable expectations. But saying that there’s been zero progress would be untrue. Many companies both inside and outside of Southeast Asia have shown their interest toward investing in ASEAN.

A chief executive from Singapore Business Federation revealed that a lot of companies are looking to invest in ASEAN as opposed to China where the labor cost is rising.

Despite tons of interest, there’s been little action toward actually investing in ASEAN though. Main reasons include the lack of transparency and clarity of benefits and opportunities.

Investors who have never stepped into ASEAN simply do not know the benefits of investing in Southeast Asia or the different opportunities in each sector.

Experts agree that business chambers of ASEAN countries need to do a better job of reaching out to overseas investors. Many are wary of the dangers yet unaware of opportunities.

 

ASEAN Governments Jump to Action

Overseas investors have indeed taken little action, but the same isn’t true for the regional ministers. Several meetings have passed since the beginning of the year and there has been some progress. The very first of such progress is an insurance policy and collective investment schemes.

One of the initiatives involves setting up the ASEAN Insurance Forum to support trade, investment and economic integration which will be “in line with the AEC.”

This aims to streamline the process which a fund manager in one country has to undergo to sell investments across ASEAN borders.

Even though the road ahead is long and tough, there will eventually be progress. ASEAN member nations will work together, bring about economic integration, and put ASEAN on the world stage. Businesses and investors who act now will benefit in the long-term.

UPDATE FOR 2017: This article was originally written two years ago. But there’s still little progress toward achieving the AEC’s goals. We still believe that deeper integration is possible for Southeast Asia over the long term.

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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