While many of us might have been preoccupied with the reform agenda at home, we must not forget another significant event that will happen soon, and it’s going to have a direct effect on our economy. If you’re thinking a three-letter word, you’re probably right. By the time this year ends, the Asean Economic Community (AEC) is scheduled to emerge as one of the world’s most important and dynamic markets.

Although AEC has become a buzzword only recently, the idea dates back to December 1997, when regional leaders announced the Asean Vision 2020. Still plagued by the Tom Yam Kung crisis at the time, they envisioned closer economic integration, alongside stronger political-security and sociocultural links.

Some of the economic plans have been achieved, more or less, including free trade and an improved flow of investments in services within Asean. Others lag seriously behind such as the promotion of a modern and competitive small and medium-sized enterprises (SME) sector and use of Aseanto help ease “unequal economic development, poverty and socioeconomic disparities”.

…So has Asean shared economic risks? Pradumna Rana of Singapore’s Nanyang Technological University found business cycles in Asean were becoming more synchronised, which is conducive to integration. His 2007 study found that, especially after the 1997 financial crisis, correlations in GDP growth converged towards 100% in most of the Asean-5 thanks to intra-industry trade. But again, correlations are significantly lower among the other Asean members.