Jan 26, 2013

Thailand - The AEC: fact and fiction

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Mention the Asean Economic Community or AEC, and most Thais still believe that come 2015, when it starts, Thailand will open its door to trade and services in the Asean region without any barriers and with labour moving freely about.

This is one of several major misunderstandings about AEC that need to be dispelled.

The Thailand Development Research Institute's (TDRI) year-end conference in November last year, we pointed out the AEC myths and countered them with facts and research. If we are going to meet the challenge of sorting out the AEC effectively, we need to start with facts, not fiction.

Myth 1: In 2015, Thailand will face major economic changes after the AEC takes effect.

The fact is that major changes for trade liberalisation have already taken place since 1993. The Agreement on the Common Effective Preferential Tariff Scheme for the Asean Free Trade Area (Afta-CEPT) has established trade liberalisation and the progress is nearly complete for most countries in Asean.

The original Asean members have mostly enjoyed zero tariff rates and while tariffs remain intact for the new Asean members _ Laos, Cambodia, Vietnam and Myanmar _ we can be quite certain they will continue to decline.

However, in terms of service liberalisation, the impact is yet to be felt and the changes are unlikely to be significant until 2015.

This is because the level of commitment among Asean countries is appallingly low. In addition, the limitations of individual country's domestic regulations remain significant barriers in these sectors. As a result, almost all countries, except for Singapore, still limit the extent of foreign participation in their domestic services.

Myth 2: AEC will enable free movement of all types of labour in the region.

The movement of labour will become freer, but will remain far from free in 2015. Furthermore, there are only eight types of professional/skilled labour which will be affected by greater mobilisation due to the Mutual Recognition Agreement (MRA) under the AEC.

However, even these eight professionals (namely, doctors, dentists, nurses, engineers, accountants, architects, surveyors and tour guides) will still face varying domestic professional standards which will prevent them from delivering their professional services in other Asean countries. In the case of Thailand, language requirements will remain the main obstacle.

More importantly is the movement of unskilled labour, which is outside the scope of the AEC negotiations.

Figures show that 1.35 million foreign workers held jobs here in 2010. Of those, 1.17 million of them came from Myanmar, Laos and Cambodia. Most are working as manual or unskilled labourers and household workers. The movement of these unskilled labourers has been happening for a long time and has no relationship to the AEC.

Myth 3: The AEC is similar to the European Union (EU), and therefore will face similar risks and challenges.

Many fear that, if not careful, Asean countries will suffer the same fate as many countries in the EU.

This is perhaps the biggest myth of all. The AEC is merely a free trade area. All Asean countries enjoy the benefits of zero tariffs but remain largely in control of their own monetary policies.

The EU is an economic union, which goes many steps further than a free-trade agreement by establishing a supra-national authority overseeing monetary policies of its member countries. Many members of the EU also share the same currency: the euro. Without sharing monetary policy and a common currency, the risk of economic integration in Asean is very different from the EU.

These myths about the AEC have created unnecessary worries.

Most trade liberalisation measures that we fear are already in place, particularly among the original Asean members.

Misunderstandings about the movement of workers in Asean has created unnecessary uproar, worries and misguided public opinion.

In short, many of these fears are about things that have already happened and things that will not happen in 2015. That sort of fear is unnecessary and counterproductive.

Instead, the public and academic community should pay more attention to figuring out how Thailand can cultivate and seize the opportunities presented by this larger and growing economic community. We should not forget the AEC will provide a market which is five times larger than Thailand's economy alone, with nine times the population.

Thailand is strategically situated in the hub of Asean, with 33 provinces connected to its neighbouring countries. Thailand would also benefit from the opportunity to gain access to cheaper labour and immensely rich natural resources and energy in Myanmar (natural gas), Laos (electricity), Indonesia (coal), and Malaysia/Brunei (oil).

The AEC debate should move away from fiction and focus on fact. How can this new economic collaboration open new doors for Thailand's businesses and citizens, as well as offer benefits to its neighbours? If we continue to be guided by myths about the AEC, we will arrive in 2015 uninformed, unprepared and unable to seize opportunities brought about by the real integration within Asean.

Somkiat Tangkitvanich

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