CIMB Group chief executive calls for more intensive preparations for AEC

At CIMB’s annual Asia-Pacific conference in Kuala Lumpur last week, Nasir voiced his concern over the slow progress in implementing deeper and wider economic integration as Asean moves toward the AEC in 2015.
He reminded Asean leaders of their promises by saying they should make an honest assessment of what had been done to achieve a single market and production base – free flow of goods, services, capital, investment and skilled labour.
According to a report by the CIMB Asean Research Institute (CARI), the main hurdle in achieving the AEC is the mismatch among political ambitions, lack of capabilities and political will among several member states.
The conclusion was reached after the research team examined key integration areas of the AEC, including free trade, customs harmonisation, competition law and policy, investment regime, free flow of services, SME support, and standards and non-tariff barriers to trade.
Intra-Asean trade has increased by a mere 4.4 per cent since 1998, but has stagnated at about 25 per cent of total trade from 2003-11. The utilisation of free-trade agreements remains low. From 2009-12, Asean has, however, made some progress in the area of customs harmonisation, while the soft objective of competition law and policy is unlikely to result in a regional regulatory framework, the report said.
“Asean needs to get serious. Businesses across Asean are banking on the AEC to deliver. The issue here is not to criticise the remarkable efforts by our governments, but to constructively examine where the shortfalls are, and identify where these gap can be closed,” he said.
The report said estimated intra-Asean trade last year remained at 25 per cent of total trade. Only two countries accounted for about 60 per cent of the intra-Asean trade volume – Singapore’s exports and imports within Asean represent about 40 per cent and Malaysia’s 20 per cent.
Only 29 per cent of respondents indicated that their organisations used preferential provisions in Asean or Asean-plus economic agreements. Nearly half of the surveyed firms said they were not planning to use such provisions in the future.
A higher share, 36 per cent, of large firms were users of free trade agreement provisions compared to only 21 per cent for small firms.
Companies with some degree of foreign equity ownership were more likely to be users than a wholly locally owned company.
A larger proportion of businesses in Thailand, 47 per cent, were users of free-trade agreements.
Thailand was well-prepared to take advantage of free-trade agreements as the country was also one of the key players pushing for deepening Asean economic integration, said Joern Dosch, senior fellow of CARI and professor of international relations at Monash University.
In Vietnam, 45 per cent of businesses were users of agreements, compared with other Asean countries, where the share ranged from 20 per cent in Brunei and Indonesia to 30 per cent in Cambodia.
Dosch said the slow progress of deepening economic integration could be partly attributed to the non-binding agreement among Asean leaders.
“Economic integration cannot work on the basis of a non-binding agreement. If member states are allowed to opt out at any time or choose not to implement agreed actions, integration is hardly achievable,” he said.
CIMB Group, Malaysia’s second largest bank, has set its strategy on an Asean universal banking platform in order to take advantage of Asean economic integration. It maintains a presence in Cambodia, Indonesia, Singapore and Thailand, is negotiating to buy a bank in the Philippines and plans to open branches in Laos this year.