AEC and China key drivers in long-term ASEAN trade and investment

AEC a new phase for SEA economy.

The rise of China, coupled with the establishment of the ASEAN Economic Community (AEC) from 2015, is expected to provide new catalysts for growth in Southeast Asia, which is expected to be larger than that of the UK by 2020 and that of Japan by 2025.

According to a release from UOB, domestic factors such as population growth and the rise in the middle income class in Southeast Asia will pave the way for AEC’s promise of an integrated production platform and market size, as well as to tap into a region that is already outward-oriented in its trade and investment.

The shift in domestic conditions in China is propelling further outward orientation, which will result in closer integration and relations with ASEAN through trade and investment channels.

Here's more from UOB:

AEC: A New Phase for Southeast Asia’s Economy. The commencement of the AEC from end-2015 will usher in a new era of cooperation and business opportunities among the grouping’s ten members.

The AEC will play a crystallising role for the region as it aims to achieve the objectives of 1) a single market and production base; 2) a highly competitive economic region; 3) a region of equitable economic development; and 4) a region that is integrated fully into the global economy.

This integration project will bring to the table a unified economic platform with more than 600 million population and nominal GDP value of US$2.4 trillion in 2013, which accounts for a 3.1% share of global GDP of US$75 trillion.

If ASEAN was a country, it would be the world’s seventh largest economy, just ahead of Brazil, though lagging far behind the US (the world’s largest) and the second largest, China. However, it should be noted that the AEC itself will not be a panacea the moment it is launched.

Rather, the AEC is the beginning of a long process integrating and leveraging each country’s strengths and guiding all the ten member states to move towards the objectives mentioned above.

But at the same time, it is also clear to the member states that any other alternatives would be sub-optimal to the AEC solution, as productivity, competitiveness, market size, among others, will be key factors for member countries in an increasingly competitive environment with the rising economic powers like China and India, as well as other emerging economies which are also vying for a piece of the trade and investment pie.