ASEAN leaders meet to launch regional economic community

Member nations of the Association of Southeast Asian Nations (ASEAN), an economic bloc comprising diverse interests and communities, have decided to create a regional economic community far larger than the EU or North America that would compete with China and India.

The move gained pace amidst mounting concern over developments in the South China Sea, where China's construction of artificial islands has fueled tensions with other claimants.

Foreign ministers of the Association of Southeast Asian Nations gathered for a weekend summit in Malaysia to formally create a unified economic community, have expressed serious concern over tension over developments in the South China Sea.

The 10 leaders representing the ASEAN will sign a declaration on Sunday establishing the ASEAN Economic Community (AEC), originally envisioned in 2002 and remodelled in 2007.

"The coming into being of the ASEAN community marks a new beginning for more than 630 million people, the birth of an integrated region- an entity that is a global economic force," Malaysian Prime Minister Najib Razak told business leaders.

Creation of the AEC will be the centerpiece of a weekend summit that will also grapple with maritime disputes with their common rival, China. Not far from the surface will be worries about Islamic extremism, especially in the Muslim-majority nations of Indonesia and Malaysia.

Although ASEAN has helped greatly increase the region's economic, cultural and political cooperation, there is a long way to go before the AEC becomes fully functional after becoming a legal entity on 31 December.

ASEAN countries have lifted tariff barriers and have removed some visa restrictions, allowing people to work in other countries mainly in eight sectors, including medical, engineering and tourism.

But ASEAN falls short in more politically sensitive areas such as opening up agriculture, steel, auto production and other protected sectors.

AEC "is not the finished article. Neither is it officially claimed to be. There is much work to be done," said Mohamad Munir Abdul Majid, chairman of a council that advises ASEAN on business matters.

"There is a disparity between what is officially recorded as having been achieved ... And what the private sector reports as their experience."

There are also other hurdles, such as corruption, uneven infrastructure and unequal costs of transportation and shipping.

A wide economic gulf divides Southeast Asia's rich and middle income economies - Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines - and its four less developed members, Vietnam and Laos, Myanmar and Cambodia.

These 'behind the border' barriers are a key impediment slowing down the process of integration.

The AEC was envisaged in 2002 - and a blueprint created in 2007 - to face competition from China and India for market share and investments. While China's economic growth is expected to slow to an average of 6 per cent annually over the next five years, India's expansion is likely to pick up to 7.3 per cent in the same period, according to the OECD.

The ASEAN summit will also include separate meetings with China, South Korea, India, Japan and the United States.