The ASEAN Economic Community (AEC 2015) arrived recently. But the difficulty of creating a single market of over 600 million people makes businesses and investors concerned.

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

The details of the bloc are similar to the Eurozone’s. However, it doesn’t include 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.

Some goals are seeing more progress than others. Specifically, moving products and money is easier than moving workers and companies. This is shown by the types of laws being implemented, along with the large focus on infrastructure projects throughout the region.

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

At the same time, several high speed rail developments are either in the planning or construction phases. These include a line from Singapore to the Malaysian capital of Kuala Lumpur. A high speed rail link from Bangkok to Kunming in China, which will cut through Vietnam and Laos, will begin construction in 2017.

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

All members must meet certain criteria. One is that businesses in most sectors must be able to have majority foreign ownership. But only a handful of nations meet this criteria.

Cambodia and Singapore are the least restrictive for foreign companies. 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 are challenging to realize. Countries such as Thailand, Malaysia and Singapore have laws which demand foreigners can only work if a suitable local cannot be found for the position.

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

Some places, such as the Philippines, have a large pool of English-speaking laborers who are willing to work cheaply. The AEC’s optimism could quickly turn to anger if Southeast Asia is overrun by workers who are more talented, speak better English, and will accept less pay.

 

AEC 2015: Will it Even Come?

The AEC probably won’t arrive on a single day. Instead, the community will be phased in over time. Some measures which sound good in theory may not be popular in practice. Full implementation will require small, gradual steps.

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.

 

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He’s an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. 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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