The Association of Southeast Asian Nations

The Association of Southeast Asian Nations was established on August 8, 1967 in Bangkok, Thailand, with the signing of the ASEAN Declaration by the Founding Fathers of ASEAN Indonesia, Malaysia, Philippines, Singapore and Thailand. Brunei Darussalam joined on January 8,1984, Viet Nam joined on July 28, 1995, Lao PDR and Myanmar joined on July 23, 1997, and Cambodia on April 30, 1999, making up what is today the ten Member States of ASEAN.

The signing of the ASEAN Declaration established by the Founding Fathers of ASEAN Indonesia, Malaysia, Philippines, Singapore and Thailand represented an important milestone for economic development and affirmed the commitment to the aims and purposes of ASEAN as set forth in the ASEAN Declaration. To accelerate the economic growth, social progress and cultural development in the region through joint endeavor’s in equality and partnership in order to strengthen the foundation for a prosperous and peaceful community of South-East Asian Nations.

To promote regional peace and stability through abiding respect for justice and the rule of law in the relationship among countries of the region and adherence to the principles of the United Nations Charter. To promote active collaboration and mutual assistance on matters of common interest in the economic, social, cultural, technical, scientific and administrative fields. To provide assistance to each other in the form of training and research facilities in the educational, professional, technical and administrative spheres.

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To collaborate more effectively for the greater utilization of their agriculture and industries, the expansion of their trade, including the study of the problems of international commodity trade, the improvement of their transportation and communications facilities and the raising of the living standards of their peoples. To promote South-East Asian studies, to maintain close and beneficial cooperation with existing international and regional organizations with similar aims and purposes, and explore all avenues for even closer cooperation among themselves.

This later evolved into the ASEAN Charter signed on December 15, 2008, which served as a firm foundation in achieving economic growth, social development, and regional integration, by legally binding the ASEAN community to its rules and values. The ASEAN Free Trade Area was established in January 1992 to eliminate tariff barriers among the Southeast Asian countries with a view to integrating the ASEAN economies into a single production base and creating a regional market of 500 million people.

The Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for the ASEAN Free Trade Area requires that tariff rates levied on a wide range of products traded within the region be reduced to no more than five percent. Although originally scheduled to be recognized by 2010, the target of a free trade area in ASEAN was continuously moved forward. As early as 2000, most of the tariff lines on goods traded within ASEAN-6 (Indonesia, Malaysia, Philippines, Singapore, Thailand and Brunei), representing almost 90 percent of intra-ASEAN trade, were already in the 0-5 percent range.

The elimination of tariffs and non-tariff barriers among the ASEAN members has served as a catalyst for greater efficiency in production and long-term competitiveness. The reduction of barriers to intra-regional trade gives ASEAN consumers a wider choice of better quality consumer products. Only 247 tariff lines within the region remained outside the remit of CEPT. The Council also announced that uptake of CEPT in the newer ASEAN member countries Vietnam, Cambodia, Laos and Myanmar (CLMV) was keeping pace with the original members.

The CLMV countries are greatly underdeveloped and struggle economically compared to the ASEAN-6, CLMV total GDP is only about $97 billion only 7. 5% of the $1. 3 trillion total ASEAN-6 gross domestic product. Cambodia one of the newest members of ASEAN has a trade value of $7. 58 billion as compared to Malaysia’s trade value of $323. 5 billion. ASEAN has created the Initiative for ASEAN Integration (IAI) program, which gives direction to and sharpens the focus of collective efforts in ASEAN to narrow the development gap between ASEAN’s older and newer members.

Vietnam has expressed its concerns with there new membership to ASEAN and ASEAN’s Initiative for ASEAN Integration as they face several possible economic disadvantages. Vietnam and the other ASEAN economies are essentially competitive not complementary, Vietnam’s developing industry faces potentially stiff challenges from its ASEAN counterparts. Vietnam was told they would need to end its quota system, eliminate other non-tariff barriers, and enhance the transparency of its trade regime.

These steps may aggravate Vietnam’s trade imbalance with ASEAN and increase an already growing trade deficit. More than half of Vietnam’s trade deficit of $3. 5 billion is with other ASEAN countries. There is also the possibility that Vietnam’s tax base could be undermined by the in-flow of goods from ASEAN states as part of the AFTA (ASEAN Free Trade Area). At present Vietnam earns a portion of its domestic revenue from tariffs on imported goods. When these tariffs are lowered or eliminated the flow of revenue from this source to the central government will decline.

Despite the difficulties of integration and the concerns of new ASEAN members the ASEAN Charter and the AFTA have seen economic growth by lowering barriers to trade among its member-countries, ASEAN is creating an integrated regional market. This makes economies more efficient through a better division of labor, through the benefits of economies-of-scale. It stimulates healthy competition, lowering costs. It enlarges the domestic market. The region thus becomes more attractive to investors, creating more jobs.

The CMLV economies have on average grown faster than the ASEAN-6 countries during the past decade by 5. % compared to -8. 8% in 1998 and 8. 5% compared to 6. 4% in 2007. Over the years, ASEAN's overall trade grew from $ 10 billion in 1967, $ 14 billion in 1970, $ 134 billion in 1980, $ 302 billion in 1990 to $ 650 billion in 1995. With its combined trade value, ASEAN is the fourth largest trading entity in the world after the European Union, the United States and Japan. For about 25 years from 1970 to 1995, ASEAN's GDP grew at an average annual rate of 7. 0 percent. Today, Southeast Asia has a total market of about 500 million people and a combined GDP of more than US$ 700 billion.

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