Get access

ASEAN Economic Community: A General Equilibrium Analysis

Authors


  • Petri (corresponding author): Brandeis University and East-West Center, MS032, P.O. Box 9110, Waltham, MA 02454-9110, USA. Email: ppetri@brandeis.edu. Plummer: Johns Hopkins University, SAIS-Bologna, East-West Center, Via Belmeloro, 11, 40126 Bologna, Italy. Email: mplummer@jhubc.it. Zhai: China Investment Corporation, New Poly Plaza, No. 1, Chaoyangmen Beidajie, Dongcheng District, Beijing 100010, China. Email: zhaifan@china-inv.cn. This paper is based in part on a study commissioned by the USAID Regional Development Mission Asia. Early results were discussed in Plummer and Chia (2009) and Rashid et al. (2009). This paper presents a full description of the approach and a comprehensive analysis of the results. Some of the analysis was conducted while Petri was a Visiting Fellow and Zhai a Research Fellow at the Asian Development Bank Institute (ADBI) in Tokyo. The cooperation and support of USAID, the ASEAN Secretariat and ADBI are gratefully acknowledged.

Abstract

The ASEAN Economic Community (AEC) is the largest integration effort attempted in the developing world; if realized, it will create a single market with the free movement of goods, services, foreign direct investment and skilled labor, and freer movement of capital encompassing nearly 600 million people. This study, a first attempt to evaluate the full benefits of the AEC, finds that the project could produce gains similar to those resulting from the European Single Market, amounting to 5.3 percent of the region's income. The benefits could be doubled if, as expected, regional integration also leads to new free trade agreements with key external partners. The whole region will share in these gains. There will be mild trade and investment diversion effects for some other countries, but the world will benefit too. Nevertheless, the AEC poses political challenges: the present study finds that the project will imply significant structural adjustments in several ASEAN economies.

Ancillary