10 - Malaysia's Participation in the ASEAN Economic Community

Summary

Introduction

The ASEAN Economic Community (AEC) was established in 2007 with the objective to create a single market and production base. The AEC is meant to allow the free movement of goods, services, skilled labour, and capital within the ten ASEAN economies by 2015. Malaysia has given its commitment to ASEAN's initiative to establish a single market, and has consistently been working towards enhancing regional and international linkages to mutually benefit from its trading partners and Asian neighbours. In fact, the AEC's vision and the goals of Malaysia's national economic development plans under the New Economic Model (NEM) are compatible. The vision of the AEC is “to create a highly competitive single market that promotes equitable economic development for member states, as well as facilitating their integration with global economy” (ASEAN Secretariat 2010). This is consistent with the key objective of NEM to develop Malaysia into a “high income nation with inclusiveness and sustainability by 2020” (NEAC 2009). In addition, the NEM highlighted the importance of integration especially with ASEAN countries and Asia through trade and investment in driving the long-term growth of the economy. Hence, it is understandable why Malaysia has been in the forefront in advancing ASEAN's initiative to strengthen regional economic cooperation and convergence.

This chapter intends to study the motivation and prospects for Malaysia in participating in ASEAN Economic Community. The chapter also discusses the progress of Malaysia's implementation of AEC Blueprint and how Malaysia's involvement in ASEAN's initiatives is in line with its economic development objectives. Discussion on the challenges faced by Malaysia in deepening economic integration concludes the chapter.

ASEAN Economic Community

In 1992, the ASEAN leaders announced to form a free trade area, which at that time was seen as a bold and ambitious decision. Throughout the 1970s until the mid-1980s, many ASEAN officials were sceptical over the benefits from economic cooperation and prospects of successful integration (Akrasanee and Stifel 1992). Lack of complementarity and competition for similar developed market were seen as main impediments in establishing economic cooperation. Economic crisis in the mid-1980s and its aftermath policy response triggered the concern among the ASEAN nations to deepen regional economic cooperation. It also made countries in the region to shift their policy emphasis towards more outward-oriented and liberal trade policies. This gave the right atmosphere in ASEAN to jumpstart its economic cooperation plans (Akrasanee and Stifel 1992).