From AFTA Towards an ASEAN Economic Community... and Beyond

This chapter provides an overview of the recent developments in the process of Asian economic integration. In particular, it focuses on the integration initiatives undertaken within the framework of the Association for Southeast Asian Nations (ASEAN). ASEAN was not only the first regional integration arrangement in Asia, it also remains the centre for current and future economic integration initiatives in the wider East Asian region. The progress that has been made by ASEAN’s member countries in establishing an ASEAN free trade agreement (AFTA) is analysed. Given the important and reasonably successful integration initiatives in other parts of the world, such as the EU and NAFTA, academics and politicians have devoted much attention to the possibilities of both deepening and widening economic collaboration in the (East) Asian region. Ten ASEAN countries already decided to establish and ASEAN Economic Community by the year 2020 and some other countries seem eager to join. The chapter takes a closer look at recent initiatives taken in that direction. It also devotes attention to the role ASEAN plays in the regional monetary integration and cooperation schemes adopted in the region. Empirical tests, using the optimum currency area (OCA) theory, are reviewed to determine whether a common currency would be beneficial for certain groups or sub-groups of Asian countries. The chapter concludes with some thoughts on the viability of a wider East Asian Trade Area and East Asian monetary union in the long term and on the role ASEAN would have to play in its establishment.