The devil and the details : ASEAN’s struggle with its economic community and implementation

Abstract

This study examines the reason why ASEAN countries fall short of their AEC commitments. While agreeing with the existing studies that ASEAN economic integration is a function of globalisation and has substantial welfare generating effect, this dissertation argues that this is only part of the story. The globalisation variable is unable to explain why AEC offers flexibilities in its commitments. It is also unable to explain why despite such far-reaching benefits, member countries are not able to align their domestic policies to regional promises. There is indeed a gap in the existing literature on why, despite agreeing to binding commitments, AEC implementation remains incomplete among member countries. The dissertation introduces the domestic variable to explain the disconnect between policy goals and policy implementation. Following International Political Economy (IPE) rather than neoclassical economics, domestic variable, derived from the demand side of trade policy, explains the flexible design of AEC measures. The division over liberal and protectionist preference in national economies and varied domestic interests across members explain the broad principles in AEC policy documents, which makes implementation difficult. The broad measures provide room to implementing agencies to interpret the policy as per their own understanding and convenience, thereby creating a mismatch between policy goals and final outcome. Domestic variables, in terms of organising the national implementation process and supportive interest groups, are also key imperatives for timely implementation. Inefficiency in domestic administrative process and lack of government-private sector engagement are important reasons for ASEAN to fall short of full implementation. Unlike existing studies of AEC, which are mostly based on trade theory models or examine the progress in AEC policy implementation with limited explanation for the gaps, this dissertation considers domestic factors as a crucial analytical variable for success or not of policy implementation. Using documentary research and elite interviews, and guided by theoretical insights, the study concludes that although AEC is a function of both globalisation and domestic interest, it is the latter that plays a crucial role in the state of regional economic integration. It is the domestic variable that influences not only the form of the regional policy but also the national administrative process and attitude of interest group and has implication for policy implementation eventually. The domestic determinant explains why AEC has fallen short of ‘single market and production base’ in practice till now.