Student blog: What Are the Key Characteristics and Legal Achievements of the ASEAN Economic Community (AEC)?

Posted on

Author: Mohammed Motara

This post (edited for publication) is contributed to our blog as part of a series of work produced by students for assessment within the module ‘Public International Law’. We offer this module in the second year of Bristol Law School’s LLB programme. It is led by Associate Professor Dr Noelle Quenivet. Learning and teaching on the module includes the use of online portfolios within a partly student led curriculum. The posts in this series show the outstanding research and analytical abilities of students on our programmes. Views expressed in this blog post are those of the author only who consents to the publication.

Having been formally established in 2015 by the Association of Southeast Asian Nations, the ASEAN Economic Community is classified as a single market with a rising star status (video below). With the purpose of fulfilling the economic elements of ASEAN (see Article 1(2) of the ASEAN Charter), the AEC required a blueprint setting out goals and ambitions of a successful ASEAN Economic Community. Bearing in mind the age of the ASEAN Economic Community (AEC), fair competition is pivotal in developing each ASEAN Member State’s markets (Cassey & Fukunaga, ‘ASEAN Regional Cooperation on Competition Policy’ (2014) 35 Journal of Asian Economics 77, 78); as well as attracting Foreign Direct Investments. The four characteristics, and more particularly the second one, of the AEC are closely linked to competition. Accordingly, I will explain the four characteristics of the AEC, and subsequently discuss the astute approach taken by ASEAN in terms of competition policy and whether this approach can be deemed a legal achievement.

The Four Characteristics

The decision to create the AEC can be described as a milestone in the history of ASEAN. In effect, this has led ASEAN closer to replicate the successful characteristics of the European Union, i.e. free movement of goods, people and the elimination of import tariffs between Member States. In order for the AEC to reach the heights of the European Union, the AEC should bear similar characteristics. These features are highlighted within the Blueprint (see picture below).

Kong Ying, ‘What are the AEC’s Four Pillars’, 5 April 2015

The first characteristic of the AEC comprises of five elements (see A1- A5). All five elements are to be achieved through the reduction in tariffs (paragraph two), the adoption  of mutual recognition agreements such as architectural services and the creation of an ASEAN single window to aid the liberalisation of trade and investment flow. The second characteristic on the other hand refers to the regulation/deregulation of the region through the development of strengthening consumer protectionintellectual property rights and, most importantly, competition policy (see 1.13).

The third and fourth characteristics relate to overarching ideas. The third characteristic deals with improving the development of both SME’s (definition) and macroeconomic conditions within AEC Member States through SME initiatives whilst the fourth tackles the increasing role of ASEAN within the international community (a characteristic which is being addressed through Regional Comprehensive Economic Partnership negotiations).

Competition Policy 

ASEAN’s soft law approach to competition is at present effective; however, long term the approach appears futile. Thus, the European Union’s hard law approach should be considered. Classified under the second characteristic of the AEC, the blueprint (see part B) refers to competition policy through the use of a variety of modes: discussion forums, regional guidelines on competition policy and the ASEAN Experts Group on Competition. This is in complete contrast to the EU  where EU bodies implement and enforce supranational law, with the goal of allowing firms to compete on a level playing field in all EU Member states (Sivalingam, ‘Competition Policy and Law in ASEAN’ (2006) 51 Singapore Economic Review 241, 302).

So why is ASEAN’s approach effective at present? By taking a soft law approach, ASEAN has considered several factors uncommon to the EU such as the fractured development levels of its Member States. If the opposing EU approach were taken, whereby the ASEAN implements generic competition law for all of the ASEAN Member States based upon the same level of competence (second Copenhagen criterion), irrespective of the Member State having developed, developing or undeveloped markets, this could have a detrimental effect on the AEC Member States, in fact, potentially, supressing certain Member States’ growth.

For example, the situation of Brunei, a State with a debt amounting to 3.17% of the State’s GDP can be contrasted to that of Indonesia, with a debt amounting to 27% of the State’s GDP. It is submitted that imposing a set of complex supranational law in addition to an enforcement agency would worsen the various the AEC Member States’ economic situations (dependent upon the funding of the agency i.e. proportionate State contribution (see ‘contracting costs’ section in Abbott & Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421). Alternatively, when one looks at the non-pecuniary loss such as a loss of sovereignty with regard to the competence of negotiating and concluding international trade agreements (see Article 3(2) of the Treaty on the Functioning of the European Union), some AEC Member States may encounter potential political problems (see ‘sovereignty’ section in Abbott & Snidal, ‘Hard and Soft Law in International Governance’ (2000) 54 International Organization 421).

Choosing such an approach has allowed AEC Member States to develop competition law at their own pace to level the playing field (Huda, Nugraheni & Kamarudin, ‘Harmonizing Competition Law in the ASEAN Economic Community’ (2016) 9 International Journal of Business, Economics and Law 48, 52) with the aid of ASEAN through the use of guidelines and the ASEAN Experts Group on Competition (Cassey & Fukunaga, ‘ASEAN Regional Cooperation on Competition Policy’ (2014) 35 Journal of Asian Economics 77, 87). This has ensured that each Member State is able to tailor its competition laws to the State e.g. Singapore allowing vertical agreements (see 2.12 in the Competition Commission of Singapore Guidelines on the Section 34 Prohibition) whilst other States such as Malaysia prohibiting them (Section 4 of the 2010 Competition Act 2010 of Malaysia), reducing the likelihood of stagnating growth within potentially vulnerable markets.

For all the merits of using soft law, a hard law approach similar to the EU is the most effective. EU law is uniform as the EU has exclusive competence in ‘the establishing of the competition rules necessary for the functioning of the internal market’ (Article 3 of the Treaty on the Functioning of the European Union) and thus discrepancies under competition law are rare (in contrast, see table below for a comparison with AEC Member States). In return, what you achieve is a sustainable single market, the ultimate goal of the AEC.

table 7
Sivalingam G, ‘Competition Law and Policy in ASEAN’, (2006) 51 Singapore Economic Review 241, 249

In conclusion, the route taken by the ASEAN to encourage a competitive AEC is one that was wisely thought out and clearly addressed problems that would be encountered if taking a hard law approach. However, it is argued that to adopt this soft law approach long term would be nonsensical. The adoption of the hard law approach is by nature the most effective approach providing each of the ASEAN with the possibility to reach a benchmark level of development.



Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top