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Conclusion
In 20035, 10 countries wanted to take the European Union idea and adopt it to the ASEAN region, in the
form of the AEC. They aimed to have One Vision, One Identity and One Community. The ASEAN community
has large economic potential, with the third largest labour force in the world behind China and India, and
is similar to the size of the EU. The AEC will be effective from 31st December 2015. Cambodia, Laos,
Myanmar and Vietnam will join in 2018.
1) Tariff elimination and the free movement of trades and services between countries
2) Easy movement of capital and funds
3) Easy movement of skilled workers (Eg. Teachers, doctors, lawyersEg. Engineers, tourism professionals,
surveyors, accountants, nurses and doctors)
4) Streamlined customs clearances
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These benefits will be more applicable to the heavy lifters in the ASEAN region, mainly being Indonesia,
Thailand, Malaysia, Singapore and the Philippines. The aim of the AEC is to increase trade between these
ASEAN countries, and to increase the share of global output from 3.1% 3.9%.
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away a lot of cumbersome application procedures. This would help to boost tourism between the nations,
allowing the tourism numbers in ASEAN to continue to grow.
Impact on Banking
The AEC would not require a central bank, or a single currency. Instead, national central banks and financial
regulatory authorities will need tohave agreed on the standards for Qualified ASEAN Bank. Hence, each
nation will continue to have its own interest ratecurrency, and its own central bank.
Every yearPotentially, 2 or 3 banks within each country will become a Qualified ASEAN Bank (QAB), that
will be able to qualify other banksoperate as local banks outside their own country. This will allow banks to
operate and cooperate with other banks in other different nations. This would create a level playing field,
as a smaller bank (in a smaller country) would then be able to expand more easily to other nations. This
would support the long-term growth of ASEAN banking institutions, and is expected to help boost
competitiveness against foreign banks outside that of the ASEAN countries.
It is possible that banks may start forming alliances. There is discussion between banks to start to
cooperate. We already see this in the form of correspondent banking. For example, Myanmar banks offers
branch and ATM network services to foreign banks, such as ANZ.
Impact on Currency
Without the single currency, the ASEAN economy will not be able to achieve price stability, lower costs,
and reduce the risk of cross-border business through the elimination of currency risk. However, it seems to
be infeasible to set up a single currency in the ASEAN region, as the vast income differences and differences
in monetary policies are too significant. The single currency for ASEAN remains a distant target for now.
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be able to experience the same cost savings that the EU managed to experience without the central bank
and the single currency?
Impact on SMEs
Singaporean companies operate in many different countries, and needs to find ways to move their goods
and capital in more efficient ways. Customs and regulatory issues are a major hurdle for SMEs to conduct
businesses in different regions. With the AEC, this would help reduce the costs for SMEs. However, this
would mean increased competition with the foray of foreign firms.
There is also the chance that SMEs in Singapore would now be able to go to other nations, such as Vietnam,
to borrow money at low interest rates, which has the potential to result in politics among local banks.
However, Singaporean banks would also now be able to establish banks in these other nations, and
compete at similar interest rates. On the other hand, other banks can also open in Singapore, and compete
with with the local banks there. Furthermore, this is not easy as cross-border lending remains complicated,
and not straight-forward.
Conclusion
It is not going to be an easy ride for nations and businesses involved in the AEC, but hopefully the economic
benefits for individuals, such as the easy transport of goods and services between nations, as well as the
vast business opportunities for Corporates within a single large community, will make it worthwhile.
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