The blueprint for the Asean Economic Community promises the free flow of goods, services, investments and skilled labour as well as of capital across the region, with the long-term aim being to allow Asean to line up next to China and India as one of Asia’s great superpowers of an integrated market valued at $2.6tr.
Now that it doesn’t cost much to transport goods from one country to another we’re seeing supply lines being organised on the level of duties. For example, Cambodia exports bikes to Canada and the UK. Parts for the bikes come from Malaysia to Cambodia duty free and the finished bikes are then sent to Europe and Canada via the free-trade agreements Cambodia has with them.
The investment race sees more mature Asean countries pour cash into their less-developed neighbours, with Malaysia investing in the gambling industry in Cambodia and Laos, while Singapore is funding hotels and resorts across the region. The ten nations come from such different starting points that Asean members are competing with each other to attract foreign direct investment.
Singapore offers a reduced corporate tax rate via its Regional Headquarters Award and International Headquarters Award, while the Malaysian Investment Development Authority offers major tax exemptions to so-called pioneer companies. Singapore, which is by far Southeast Asia’s most developed state, is widely expected to win this race, meaning the most advanced of the Asean countries could stand to benefit most from the integrated market.
Add in the fact that the whole of Asean is also part of the Regional Comprehensive Economic Partnership (RCEP) negotiations, which propose to bring down trade barriers between Asean and Australia, China, India, Japan, South Korea and New Zealand and suddenly there is a link to the largest economy in the world. The RCEP has not yet come into force, but when it does the benefits could be huge.
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