ASEAN Economic Community explained for small business
ASEAN Economic Community means a goal of one shared market across the ten member states of Southeast Asia. It was formally established on 31 December 2015. For a small business, the main point is simple: it is a work in progress, not a finished single market, so check each border before you ship.
This guide explains what the community is, what has really changed, and what a small firm should do next.
Sources: ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015 (asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf).
What the community is
The ASEAN Economic Community, or AEC, is the economic part of ASEAN, the regional group of ten countries. Leaders signed the first AEC Blueprint in November 2007. It set out a plan to build the community by the end of 2015.
The plan rests on four ideas. The first is a single market and production base. The second is a highly competitive region. The third is fairer development across members. The fourth is full links with the world economy.
The first idea matters most for traders. It aims for a free flow of goods, services, investment and skilled workers, and a freer flow of capital. ASEAN's own fact sheet calls the community a dynamic process, not a static end goal.
Sources: ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015 (asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf).
Why the market is worth a look
The numbers are large. ASEAN's December 2015 fact sheet puts the region's population at more than 622 million people in 2014. That made it the third largest market in the world, behind only China and India.
Combined output was about US$2.6 trillion in 2014, which the fact sheet ranks as the seventh largest economy in the world. Total trade rose by nearly US$1 trillion between 2007 and 2014. Trade between ASEAN members made up the largest share of the region's trade by partner.
For a small firm in Singapore, Malaysia, Vietnam or Thailand, that means the nearest large market may be your neighbour, not a distant country.
Sources: ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015 (asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf).
What has changed in practice
ASEAN lists several gains from the first plan. The first is tariffs. The fact sheet says import tariffs between members have been virtually eliminated. That does not mean every product crosses every border free. Some items and some members still follow their own rules, so check the tariff line for your product.
The second is paperwork. The fact sheet says cross-border trade steps have been simplified, including customs procedures and rules of origin. Rules of origin decide whether your product counts as made in the region and so qualifies for the lower tariff.
The third is standards. Members have worked on shared technical rules and on mutual recognition of some tests and qualifications. The fourth is people. The fact sheet says the cross-border movement of skilled people has been made easier.
ASEAN also says gaps remain. It describes the new Blueprint as a way to finish unfinished work from the first plan.
Sources: ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015 (asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf).
The next plan, and what it means for you
In 2015 ASEAN leaders adopted a second AEC Blueprint to guide integration for the decade from 2016. It has five aims. They are a highly integrated and cohesive economy, a competitive and innovative region, better connectivity and sector cooperation, a resilient and people-centred region, and a global ASEAN.
Several measures speak straight to small firms. The Blueprint says rules of origin should be simple and business friendly, especially for micro, small and medium enterprises (MSMEs). It calls MSMEs "the backbone of the ASEAN economies."
It also plans to roll out national single windows in every member state. A single window lets a trader send customs paperwork once, to one online point. The Blueprint wants more documents and users on the ASEAN Single Window. It backs a self-certification programme too, where approved exporters certify the origin of their own goods. And it aims to cut the cost of non-tariff measures, which are rules on safety, health, labels and standards that can slow trade.
These are plans. Rollout differs by country, so do not assume a tool works the same way everywhere.
Sources: ASEAN Secretariat, second ASEAN Economic Community Blueprint, Jakarta, November 2015; ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015 (asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf).
A short checklist before you sell across a border
Start with your product. Find its tariff code, then look up the rate and the origin rule in the importing country. Ask your buyer or a customs broker which paperwork they need.
Next, check standards. Food, electrical goods and cosmetics often face local labelling or testing rules, even where tariffs are low. These non-tariff rules are the ones that most often catch small firms by surprise.
Then price the full journey. Include freight, insurance, local taxes and the cost of any certificate. Start with one neighbouring country, learn the process, and then add a second market.
Finally, keep records. Good origin and shipping files make every later sale easier. This is general information only. For tariff rates and origin rules on your own goods, ask a licensed customs broker or the customs office of each country.
Sources: ASEAN Secretariat, second ASEAN Economic Community Blueprint, Jakarta, November 2015.
Sources
ASEAN Secretariat, ASEAN Economic Community fact sheet, December 2015: asean.org/wp-content/uploads/2012/05/56.-December-2015-Fact-Sheet-on-ASEAN-Economic-Community-AEC-1.pdf. ASEAN Secretariat, second ASEAN Economic Community Blueprint, Jakarta, November 2015.