The Potential Impact of the AEC on ASEAN Cross-Border Movements

There is much anticipation about the ASEAN Economic Community (AEC) as its target launch date of 31 December 2015 approaches. The AEC aims to establish a regional market economy, creating opportunities for Southeast Asian countries to enjoy reciprocal advantages and leverage the region’s collective growth. The AEC Blueprint, signed in 2007, outlines the goals of regional integration, one of which is greater mobility for skilled labor and professionals within Southeast Asia.

Free flow of skilled labor

Under the mandate of the AEC Blueprint, together with the 1995 Framework Agreement on Services, ASEAN governments entered into the Agreement on Movement of Natural Persons (the Agreement) in 2012.

The Agreement aims to facilitate the movement between member states of personnel engaged in the trade of goods, services and investment, while at the same time ensuring border security and protecting the integrity of domestic and permanent workforces. The Agreement applies to measures affecting the temporary entry or stay of business visitors, intra-corporate transferees or contractual service suppliers as defined under the Agreement, and any other categories specified under each member state’s Schedule of Commitment. It does not apply to individuals seeking access to the job market of another ASEAN country, nor to the requirements for citizenship, permanent residence or permanent employment.

A Mutual Recognition Agreement (MRA) is another mechanism created to facilitate the cross-border movement of professionals within their industry. The MRAs establish unified standards and qualifications of professionals in the region, particularly in the medical, healthcare, engineering, architecture, surveying and accountancy industries.

What employers can expect

Some view the end-2015 goal of AEC integration as aspirational at best, believing that in reality it may take three to five years or more, if not longer. However, it is also widely perceived that the AEC’s main goals of the free flow of goods, services, investment and capital, skilled labor and professionals, will be met eventually. Structure and progress toward integration are now well underway and their incremental introduction is also generally favored as it is seen as limiting the risk of large, adverse shocks to existing government systems and policies.

Companies are expected to benefit from improved infrastructure, stronger intellectual property rights protection, regionally consistent investment laws and facilitated movement of capital and labor. It is also anticipated that the potential for growth will foster the movement of highly skilled and educated ASEAN professionals toward economies with greater opportunities and higher paying jobs. However, it should be remembered that policies and requirements regarding the hiring of local personnel into permanent jobs, and the acquisition of citizenship or permanent resident status, are subject to the laws of individual countries and are outside the scope of the AEC.

A possible consequence of the AEC on corporate immigration is that distinctions would emerge between ASEAN and non-ASEAN temporary workers. Participating countries are expected to give priority to ASEAN nationals as the standardization of rules and easing of work and entry barriers continue to evolve. This is already formalized for certain industries by MRAs. This could give rise to a separate set of restrictions for non-ASEAN nationals moving to or within the region.

The changes proposed by the AEC will be administered at country level, so it will be interesting to see how each government will approach these open door plans alongside their existing domestic legal framework, including policies that are protective of local labor. At this time, it is expected that any changes to regulations will not be immediate and the pace could differ significantly from country to country.

The authors wish to thank BMI Research and Shruthi Gopal for their contribution to this article.