The challenges of deeper economic integration to realize the ASEAN Economic Community (AEC).

Bridging the economic divide between the ASEAN-6 and the less developed member countries, namely Cambodia, Laos, Myanmar and Vietnam (CLMV).

Greater private sector participation on the implementation of the AEC.

(i) From the Bali Concord II, it was clearly evident that ASEAN leaders were not prepared to establish supranational institutions to co-ordinate economic activities in the region. ASEAN appeared to want the benefits of European-style economic integration without the concomitant commitments. In this light, ASEAN could consider using the NAFTA model where there were legally binding agreements to ensure the successful implementation of economic measures.

(ii) ASEAN should not be using economic terms like a “single market” (Bali Concord II, para. B.3) without understanding its full economic implications. Even AFTA was not about free trade on all goods and services — it was just fifteen commodity groups, while non-tarriff barriers (NTBs) had yet to be tackled.

(iii) ASEAN countries were not prepared to harmonize tariffs and have a common external tariff policy (as required of a customs union). Consequently, this has led to difficulties in ASEAN's FTA negotiations with China, Japan and India.

(iv) ASEAN had agreed to a sectoral approach to economic integration — as reflected in the eleven priority sectors identified by the High-Level Task Force (HLTF). However, the road map to integrate these sectors were not carefully thought out and there were serious concerns whether this project would be successful. The ASEAN Secretary-General had made a request to the ASEAN Economic Ministers (AEM) to keep the road map open-ended to allow for further measures to be introduced at a later stage (when a proper study had been undertaken).

(v) To create an integrated ASEAN market, hindrances to the movement of goods must be removed. This would, inter alia, involve improved customs co-ordination and the harmonization of standards and technical regulations.