AEC 2025 and beyond: Making the most of Laos' 2024 ASEAN Chairmanship

Sanjita Basu Das and Julia Dijaja suggest ways for Laos to advance its leadership priorities under the ASEAN Economic Community (AEC).

With the theme of “Enhancing Connectivity and Resilience”, Laos is tasked with furthering ASEAN's economic agenda in an increasingly fragmented and complex world, ensuring greater inclusion amid the megatrends of climate change and digitization. In addition, Laos will begin its presidency of the ASEAN Economic Community (AEC) at the end of 2025. Thus, ASEAN will have its last chance to shape the post-2025 AEC before finalizing the post-2025 one. Vision and strategic plans.

To do the above, Laos should continue the efforts of Indonesia's 2023 leadership, especially in sustaining ASEAN's unity and relevance and promoting new growth drivers such as green transition and digital transformation. This is in line with Laos Prime Minister Sonexay Siphandone's pledge to build Indonesia's efforts with a „stronger focus on the ASEAN community, seizing opportunities amid geopolitical and geo-economic challenges”. In doing so, Laos will focus on improving connectivity, narrowing development gaps among ASEAN member states, promoting carbon neutrality and driving digital transformation in the region.

connection

Inspired by the transition from a landlocked to a “land-linked” economy, Laos is well positioned to advance the ASEAN integration agenda. So now is a good time to reconsider Master Plan for ASEAN Integration (MPAC) 2025 Launched during Laos' 2016 ASEAN Chairmanship. ASEAN's connectivity agenda may have its own master plan and governance structure, but it should add value to technical systems and implementing institutions within the wider ASEAN community rather than operating in a disconnected ecosystem.

The Mid-Term Review (MTR) of MPAC 2025 Seamless logistics and sustainable infrastructure highlighted uneven implementation progress lagging behind in population mobility and digital innovation, as well as sectoral work, national priorities and dialogue and other relevant initiatives by external partners.

Moving forward, the successor to MPAC 2025 should be better aligned with it ASEAN Outlook on the Indo-Pacific. It should address identified gaps in logistics and infrastructure in the MTR, add value to ASEAN sectoral work by improving visibility of related initiatives, facilitate prioritization and coordination, and mobilize support and resources. Enhancing connectivity within and beyond MPAC is central to the ASEAN Community architecture. Ownership and buy-in from implementing agencies and alignment with national development priorities are critical.

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Impact initiatives should be prioritized, including strengthening national regulations and strengthening institutional capacity for greater private sector financing of infrastructure projects. Strong travel and visa facilitation will support the Laos leadership's focus on tourism throughout the region. Relevant initiatives within ASEAN, such as ASEAN, can also be used An initiative based on the ASEAN Business Plan And this ASEAN Smart Cities Network and beyond, ADB, dialogue partners' programs and sub-regional initiatives such as the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Development Area (BIMP-EAGA) and the Indonesia-Malaysia-Thailand growth triangle (IMT-GT)

Narrowing the Development Gap (NDG) in ASEAN

Currently, the main way to bridge the development gap between ASEAN's old and new members Cambodia, Laos, Myanmar and Vietnam is the Initiative on ASEAN Integration (IAI). After two decades and four IAI work programmes, the landscape has changed considerably. New members are no longer 'newbies'. Vietnam's economy has grown at a remarkable pace, while ASEAN is expecting its eleventh member – Timor-Leste – which is one of the world's poorest developing countries. Meanwhile, some members are still grappling with challenges exacerbated by the COVID-19 pandemic. As Chair, Laos should take the lead in setting ASEAN's post-2025 Narrowing Development Gap (NDG) agenda.

Lessons from IAI Conversations should be reported. The Latest IAI Job Scheme Focused on five strategic areas of Food and Agriculture, Trade Facilitation, MSMEs, Education, Health and Wellbeing and implementation of actions, well aligned with AEC and ASCC Blueprints. However, implementation challenges remain, including lack of coordination between national coordinators, line and relevant agencies; lengthy approval processes; A disconnect between IAI plans, NDG objectives and AEC targets; and impaired executive function.

Post-2025, ASEAN's NDG approach should consider the effectiveness of IAI's country-centric approach and its implementation gaps, especially how to complement IAI with other initiatives, strengthen governance and enforcement, better map to ASEAN Community Pillars and other cross-cutting agenda Digital Digital Items such as globalization and climate change, and resource mobilization. A human-centered approach to NDG is worth considering, focusing on, among others, gender economic empowerment, disability and social inclusion, and the human impact of technology. These provide opportunities for cross-pillar collaboration. To track and measure progress, ASEAN NDG work should be better linked to the ASEAN Framework for Equitable Economic Development (AFEED)

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Laos' Permanent Representative to ASEAN, Ambassador Bovonethat Duongchak, will chair the 71st meeting of the Working Group on ASEAN Integration (IAI) in August 2023. (Photo by Kusuma Pandu Vijaya / ASEAN Secretariat)

Digital economy

Until recently, ASEAN pursued digital economy cooperation in a piecemeal fashion. It had separate initiatives for data governance, digital connectivity, e-commerce, MSME digitization, digitally enabled trade facilitation and payment connectivity, but lacked a unified vision and approach. While these efforts have yielded some results, a more comprehensive approach is needed to unleash the full potential of the digital economy.

ASEAN members are at different levels of digital readiness, so achieving harmonized norms is a challenge. Furthermore, if infrastructure and skills are redundant, frameworks and rules are insufficient to empower people and businesses to benefit from digital technology. Geostrategic competition has also spread to the digital technology space. Trade and investment restrictions are introduced in the name of security concerns, and competition is high in a stable system. After 2025, ASEAN will need a community-wide platform to discuss and respond to issues related to digital technology.

2023 saw a breakthrough with the launch of the ASEAN Digital Economy Framework Agreement (times) negotiations. Progressive provisions in DEFA could double the estimated value of ASEAN's digital economy to US$2 trillion by 2030. While DEFA's nine main provisions guide the negotiations, the details touch on many subsidiary provisions, some of which are sensitive and difficult. . Concluding the negotiations by the end of 2025 may prove challenging.

In this regard, Laos should work with Thailand as chair of the ASEAN DEFA to allow time for stakeholder consultations to promote mutual understanding on difficult arrangements while prioritizing issues that can generate relatively quick consensus. Dialogue with sectors across social pillars should be encouraged for initial and greater coordination between national focal points and line agencies.

But ASEAN DEFA is not enough for complete digital transformation. A round of ideas ASEAN Digital Community 2045 Meaningful conversations have been floated, though not yet taking place. This implies the need for a thorough understanding of the full potential and impact of digital technology and the fundamentals required for inclusive and participatory digital transformation.

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Laying the foundations for AEC post-2025

Laos' leadership must step up in achieving AEC 2025 and shaping the post-2025 strategic plan. First, Laos should deliver on AEC 2025 high-impact initiatives by addressing private sector concerns. Its 2016 legacy of leadership ASEAN Trade Facilitation Framework While there were many trade-off tools Improved. Enabling ASEAN's trade facilitation and securing an ambitious substantive outcome of the ATIGA upgrade are the two low-hanging fruits.

After 2025, two studies have been launched: AEC 2025 and AEC 2025 Post-Period Review. While the former is thin on concrete recommendations the risk of death must be overcome in detail. ASEAN cannot simply wait for the outcome of these studies to develop a post-2025 AEC strategic plan. Substantial work should begin in parallel, including cross-cutting consultations and thematic deep dives.

Laos should advance discussions on the content of the post-2025 AEC. Beyond connectivity, NDG and the digital economy, Laos can also consider strengthening sustainable investment promotion and facilitation, MSMEs and start-up financing, and global supply chain participation and resilience. AEC must address cross-pillar coordination issues, impact-driven prioritization, streamline work process, as well as monitor and communicate AEC work.

Conclusion

To relinquish its leadership identity, Laos should go beyond developing ASEAN strategies and aim for larger and practical deliverables while establishing relevant tools, institutions and processes.

It is unreasonable to expect Laos to address all of ASEAN's priorities. Nevertheless, it can focus on issues closer to its heart, from improving connectivity to narrowing the development gap, delivering high-impact achievements under AEC 2025 and advancing the foundation for AEC post-2025.


Editor's note:
ASEAN Focus+ Articles are timely critical insight pieces published by the Center for ASEAN Studies.

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