ASEAN ECONOMIC COMMUNITY

(AEC)

By:
1. Amelia Chintya Dewi / 181524308
2. Bernadeta Ratri Dewi / 181524419
3. Chiesa Jordan Alfathan / 181524312
4. Erika Putri Aviancy / 181524181
5. Michael Nicholaus Chandra / 181524311

Faculty of Business and Economics

Universitas Atma Jaya Yogyakarta
 Table of Contents
A. About AEC......................................................................................................3

B. Background of the Establishment of AEC......................................................3

C. AEC’s vision...................................................................................................5

Four Pillars of the ASEAN Economic Community (AEC):.............................5

D. The Impact of ASEAN Economic Community (AEC) Towards Indonesia...5

The Positive Impact..........................................................................................5

The Negative Impact........................................................................................6

E. The ASEAN Economic Community (AEC) Achievement.............................7

F. The next steps for ASEAN Economic Community (AEC).............................8

References............................................................................................................8
A. About AEC
The AEC is the realization of the region’s end goal of economic
integration. It envisions ASEAN as a single market and production base, a
highly competitive region, with equitable economic development, and fully
integrated into the global economy. Once AEC is realised, ASEAN will be
characterized by free movement of goods, services, and investments as well
as freer flow of capital and skills. With harmonised trade and investment
laws, ASEAN, as a rules-based organisation will be strengthened and
become more interesting as a single investment destination.
Initiatives towards the establishment of the ASEAN Economic
Community (AEC) can be traced back to as early as 1992 when ASEAN
leaders mandated the creation of the ASEAN Free Trade Area (AFTA).
In 2003, ASEAN leaders agreed to build-on the momentum and
progress it gained in AFTA and other efforts to broaden and deepen
regional cooperation. Through Bali Concord II, ASEAN leaders committed
to maximize opportunities for mutually beneficial regional integration and
declared the AEC as one of the three pillars of the ASEAN Community, the
two other being Political-Security Community and Socio-Cultural
Community. Succeeding years saw the signing of several regional
cooperation agreements, some of which replaces or improves earlier
agreements, to support the realisation of the economic community.

B. Background of the Establishment of AEC

Established in late 2015 by the Association of Southeast Asian Nations
(itself founded in 1967), the AEC has been seen as a way to promote
economic, political, social and cultural cooperation across the region. The
idea was to move South-East Asia towards a globally competitive single
market and production base, with a free flow of goods, services, labor,
investments and capital across the 10 member states: Indonesia, Vietnam,
Cambodia, Singapore, Malaysia, Brunei, Philippines, Laos, Myanmar, and
Thailand. Its ultimate goal is to allow for the free movement of goods,
skilled labor, services, and investment. The AEC creates a single market
and production base within ASEAN, and it aims to facilitate freer flow of
capital. This economic union spans some 640 million people and has a
combined GDP of $2.94 trillion. The progress and growth of the AEC
leaves it ranked as the 7th largest economy in the world and the 3rd largest
in Asia.
ASEAN’s development of a single market and production base faces
both opportunities and challenges. The strategic location of the South East
Asian countries has proved beneficial for trade, in particular through
shipping, and companies can leverage the ease of moving capital, goods,
and labors. ASEAN also boasts a wide range of natural resources and strong
industries in tourism, agriculture, and manufacturing. The AEC, however,
does face a number of constraints in its development. While the disparities
in development across ASEAN can provide the advantage of cheap labor
and production costs, the gaps in infrastructure and income levels present an
additional obstacle to ASEAN’s goals. With 10 member states, reforms can
be slow and arduous as agreement is needed across all members. In
addition, managing the migration of skilled labor is a significant task and
accompanies the added pressure of illegal low-skilled labor migration.
C. AEC’s vision
The AEC’s vision for the next nine years, laid out in the AEC Blueprint
2025, includes the following:
1. A highly integrated and cohesive economy
2. A competitive, innovative, and dynamic ASEAN
3. Enhanced connectivity and sectoral cooperation
4. A resilient, inclusive, people-oriented and people-centered region
5. A global ASEAN.
Four Pillars of the ASEAN Economic Community (AEC):
1) Single market and production base
The region as a whole shall become a single market and production base
to produce and commercialize goods and services anywhere in ASEAN.
2) Competitive economic region.
The region must emphasize on the competitiveness of its production and
capacity for export, as well as the free competition inside of its frontiers.
3) Equitable economic development
To receive the benefit of the AEC, the people and businesses of ASEAN
must be engaged into the integration process of the AEC.
4) ASEAN’s Integration into the globalized economy.
 ASEAN must not be isolated but an integrated part of the global
economy.

D. The Impact of ASEAN Economic Community (AEC) Towards

Indonesia
1. The Positive Impact
a. Increase competition in work field.
b. Improving Indonesia economic because many professional
workers have been brought in from abroad.
c. Work efficiency will certainly be applied in order to minimize
salary and may impact the modernization of the company

2. The Negative Impact

a. Many domestic workers will be eliminated because of lack of
education and skill.
b. Layoffs everywhere.
Because there will be employees from other countries that must
be paid a large salary, the company have to reduce the number of
employees in order to pay the salaries of employees from abroad
without burdening the company
c. Unemployment will be increase.
Because the quality of Indonesia’s education is still lagging
behind other countries, especially the poor and displaced
children in Indonesia are still quite a lot.
E. The ASEAN Economic Community (AEC) Achievement
ASEAN is one of the success stories of modern economics. In 2014, the
region was the seventh-largest economic power in the world. It was also the
third-largest economy in Asia, with a combined GDP of US$2.6 trillion –
higher than in India. Between 2007 and 2014, ASEAN trade increased by a
value of nearly $1 trillion. Most of that (24%) was trade within the region,
followed by trade with China (14%), Europe (10%), Japan (9%) and the United
States (8%). During the same period, foreign direct investment (FDI) rose from
$85 billion to $136 billion, and in share to the world from 5% to 11%. With 622
million people ASEAN is the world’s third largest market, which behind China
and India has the third largest labor force.
F. The next steps for ASEAN Economic Community (AEC)
The launch of the AEC needs to mark not the end but the beginning of
another dynamic process. ASEAN has to boost intra-regional trade to reduce
the vulnerability to external shocks. This requires a common regulatory
framework to address infrastructure gaps and the simplification of
administrative policies, regulations and rules. Only 50% of ASEAN businesses
have utilized tariff reductions set out in the ASEAN’s regional free trade
agreement (FTA). And although tariffs are in decline, non-tariff measures –
health and safety regulations, licenses and quotas – are on the rise and need to
be addressed.
Provided the agreement is well managed over the next decade, the AEC
could boost the region’s economies by 7.1% between now and 2025 – which is
more than ASEAN’s growth of 5.4% of from 2004 to 2014. It could also
generate 14 million additional jobs, according to a study by the International
Labor Organization and Asian Development Bank.

References
Delina, L. (2019). Towards an Energy-Secured ASEAN: Beyond Conventional Patterns.
Academia, 2.

Pangestu, M. E. (2009). Competitiveness Towards Asean Economic Community.

Journal of Indonesian Economy and Business, 23.

Wibowo, W. (2013). The Prospects of Asean Economic Community. Journal of

Economics, Business, and Accountancy Ventura, 62.