Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(18)

Comparative Study on the Perception and Response of Singapore and Indonesia

Above all, Singapore has been acclaimed the most advance country with per capita GDP of 60,300 USD in 2017. In particular, Singapore is leading the region this year as it chairs the ASEAN summit and subsequent summits. In contrast with Singapore, Indonesia is ranked the first place in terms of the economic size.

Indonesia has occupied as much as 40% of the regional GDP and has consistently beefed up its clout across Southeast Asia. Consequently, both Singapore and Indonesia have played enormous roles in the course of the ASEAN economic integration 

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(17)

Comparative Study on the Perception and Response of Singapore and Indonesia

For example, in spite of the recent economic boost, CLMV countries (Cambodia, Laos, Myanmar and Vietnam) are estimated to possess only around 5% share of the overall ASEAN GDP (Growth Domestic Product). 

In this regard, this paper primarily concentrates on two countries. They are Singapore and Indonesia in the maritime Southeast Asia. The two countries shouldn't be thought lightly of in any economic point of view in the region.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(16)

Comparative Study on the Perception and Response of Singapore and Indonesia

Though all the ASEAN members have been closely related with each other over history, each country shows different interests in the era of the AEC. This is mainly because 10 countries aren't in an identical economic situation. 

Components of a national economy such as natural resource reserves, labor force abundancy, industrial structure and infrastructure condition are all dissimilar, more or less. This disparity inevitably results in economic gap among the ASEAN members.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(15)

Comparative Study on the Perception and Response of Singapore and Indonesia

They are a single market and production base, a highly competitive economic region, a region of equitable economic development and a region fully integrated into the global economy. 

The graph below explains key milestones of the AEC and four pillars of the AEC. And a step further from the inauguration of the AEC, AEC Blueprint 2025 guiding the strategic direction of the regional economic integration for the next 10 years was additionally adopted at the 27th ASEAN Summit in November 2015.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(14)

Comparative Study on the Perception and Response of Singapore and Indonesia

As projected by the AEC Blueprint, the AEC was finally launched on the 31th of December, 2015. The AEC has been perceived to open a new phase of more deepened economic integration in Southeast Asia. It is because the AEC's ultimate target is to become an Asian version of the EEC (European Economic Community), the precursor of the EU (European Union). 

Consequently, 10 member states have put considerable efforts to keep pace with the new economic norm envisioning a single market in the region. The goals of the AEC go with the interrelated four pillars upon which the AEC Blueprint is based.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(13)

Comparative Study on the Perception and Response of Singapore and Indonesia

In January 2007, at the 12th ASEAN Summit, the ASEAN leaders collectively agreed to accelerate the establishment of the ASEAN Community from 2020 to 2015. 

The joint vision for an integrated future was adopted by leaders in November 2007 at the 13th ASEAN Summit and culminated in the ASEAN Economic Community (AEC) Blueprint. It is a blueprint that has served as a comprehensive master plan to chart the region's journey towards the formal establishment of the AEC.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(12)

Comparative Study on the Perception and Response of Singapore and Indonesia

The AEC Blueprint 2015 was initiated at the 38th ASEAN Economic Ministers Meeting (AEM) in Kuala Lumpur. The AEM agreed to develop a single and coherent plan progressing step by step to the AEC. 

In essence, this was undertaken by identifying the characteristics and elements of the AEC consistent with the Bali Concord II, involving clear targets and timelines for implementation, while taking into account the ASEAN member states' varying levels of development.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(11)

Comparative Study on the Perception and Response of Singapore and Indonesia

It was not until 2003, at the 9th ASEAN Summit, that the ASEAN leaders first declared the formation of an 'ASEAN Economic Community' as stated in the Bali Concord II. 

This was in line with the ASEAN Vision 2020, which aimed to transform the ASEAN into a stable, prosperous and highly-competitive region with equitable economic development, reduced poverty, and socio-economic disparities, progressing in tandem with the establishment of the ASEAN Political Security Community and the ASEAN Socio-Cultural Community.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(10)

Comparative Study on the Perception and Response of Singapore and Indonesia

The first articulation of the concept of ASEAN economic integration is revealed in the Framework Agreement on Enhancing ASEAN Economic Cooperation signed in Singapore in 1992. The Agreement highlighted the importance of cooperation in the areas of trade; industry, minerals and energy; finance and banking; food, agriculture, and forestry; as well as transport and communications.

This Framework Agreement eventually led to the establishment of ASEAN's earliest key agreements including The Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN Free Trade Area in 1992.

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(9)

Comparative Study on the Perception and Response of Singapore and Indonesia

In this context, taking a brief look at how the ASEAN economic integration has been developed and eventually led to the establishment of the AEC would be meaningful. 

A publication from the ASEAN Secretariat titled 'ASEAN Economic Community 2015: Progress and Key Achievements' describes the road towards the AEC. Summary of the report (p. 3-6.) can be introduced as below:

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(8)

Comparative Study on the Perception and Response of Singapore and Indonesia

As widely known, the ASEAN consists of 10 member states. 5 countries including Myanmar, Thailand, Laos, Cambodia and Vietnam are located in the continental ASEAN. Remaining 5 countries, Malaysia, Singapore, Indonesia, Brunei and the Philippines are positioned in the maritime area. 

Since its foundation slightly more than 50 years ago, the ASEAN has evolved into one of the most dynamic regions with speedy economic achievements. Experts have pointed out that the ASEAN's remarkable performance has been greatly attributed to its economic cooperation and integration initiatives picking up steam over the last two decades. 

Advent of the Era of the AEC and Its Impacts on Singapore and Indonesia(7)

Comparative Study on the Perception and Response of Singapore and Indonesia

My argument will move on to potential benefits and drawbacks the two countries may enjoy or suffer by performing SWOT analysis . In the final section, results of comparative examination on the impacts of the AEC on Singapore and Indonesia will be demonstrated. 

This study will be concluded with brief suggestions especially for the governments of the two countries in hopes of stalwart execution of the AEC in the near future.