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

This paper gives an overview of recent developments in the process of Asian economic integration. A large part will focus on the integration initiatives undertaken within the framework of the Association of 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 Area (AFTA) will be analysed. Given the important and reasonably successful integration initiatives in other parts of the world, such as the EU and NAFTA, academics and politicianshave 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 an ASEAN Economic Community by the year 2020 and some other countries seem eager to join. We will have a closer look at the recent initiatives taken in this direction. We also devote 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, will be reviewed to determine whether a common currency would be beneficial for certain groups or sub-groups of Asian countries. The paper concludes with the authors’ thoughts on the viability of a wider East Asian Free Trade Area and East Asian monetary union in the long term and on the role ASEAN would have to play in its establishment.