Why is the economy important to consumers, households, and

firms?
TOPIC:
College Teacher | (Level 3) Distinguished Educator
Posted on July 19, 2015 at 4:00 PM
The economy is important to households, consumers (these two
are essentially the same thing), and firms because it determines
the sorts of opportunities those groups have to make money and to
buy goods and services.
Households and consumers can be seen as the same thing. These
are both made up of individuals who sell their labor to firms and
who buy goods and services from those firms. The economy
matters very deeply to these people. People in households need
money. In order to get money, they have to sell their labor to
firms (or to other producers like government agencies). When the
economy is poor, it is harder for them to do this and their
economic prospects dim. The economy also impacts their ability
to consume. When the people are able to work, they have more
money to use to consumer. When the economy is strong, there are
generally more things for them to consume as more firms are
making more things.
For firms, the economy is important as well. When the economy
is strong, firms have more opportunities to make money by selling
goods and services. Consumers have more money and are more
willing to buy so firms can produce things to satisfy those
demands. When the economy is strong, there is more money
available to borrow and so firms can expand their capacity to
produce.
In all these ways, the economy is very important to consumers
and households on the one hand and firms on the other.
Importance of humanity
As soon as we understand the importance of humanity, the
purpose for which we are on Earth is automatically fulfilled.
Published: 16:39 August 16, 2014
By Anju Chhatwani
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Religion is a broad entity that should add some higher purpose to
ones life and keep you grounded. It is not just a set of rules and
teachings that you must devote your life to. Its what you take
from any religion thats important. All religions give the teachings
of love, peace and unity. It should be something to believe in, and
not just something to define our very actions and thoughts. The
most important requirement is peace. Where there is peace there is
abundance.
For me the most important religion is humanity - just being a
good human being defines you everywhere. All that you need to
work upon is being helpful to the needy at all times and every
place. Being loving and caring towards all living beings even
plants and animals, and above all to understand another persons
problem and realise the situations they are in and be considerate.
Humanity means caring for and helping others whenever and
wherever possible. Humanity means helping others at times when
they need that help the most, humanity means forgetting our
selfish interests at times when others need our help. Humanity
means extending unconditional love to each and every living
being on Earth.
If eating and having fun is only what we are born to do then we
should keep one thing in mind; even animals can do this. One
does not need a hefty bank account to contribute towards
humanitarian activities. Paying our domestic help fairly is also
humanity. Lifting the heavy bag for an old woman is humanity,

helping a disabled person to cross the road is humanity, helping

your mum in chores is humanity; in fact helping anyone who is in
need is humanity.
As soon as we understand the importance of humanity in day to
day life, the purpose for which we are on Earth is automatically
fulfilled.
http://gulfnews.com/news/uae/society/importance-of-humanity1.1372752
About Human Development
What is human development?
2015 marks 25 years since the first Human Development Report
introduced a new approach for advancing human wellbeing.
Human development or the human development approach - is
about expanding the richness of human life, rather than simply the
richness of the economy in which human beings live. It is an
approach that is focused on people and their opportunities and
choices.

People: human development focuses on improving the lives

people lead rather than assuming that economic growth will lead,
automatically, to greater wellbeing for all. Income growth is seen
as a means to development, rather than an end in itself.
Opportunities: human development is about giving people more
freedom to live lives they value. In effect this means developing
peoples abilities and giving them a chance to use them. For
example, educating a girl would build her skills, but it is of little
use if she is denied access to jobs, or does not have the right skills
for the local labour market. Three foundations for human
development are to live a long, healthy and creative life, to be
knowledgeable, and to have access to resources needed for a
decent standard of living. Many other things are important too,
especially in helping to create the right conditions for human
development, and some of these are in the table below. Once the
basics of human development are achieved, they open up
opportunities for progress in other aspects of life.
Choice: human development is, fundamentally, about more
choice. It is about providing people with opportunities, not
insisting that they make use of them. No one can guarantee human
happiness, and the choices people make are their own concern.
The process of development human development - should at
least create an environment for people, individually and
collectively, to develop to their full potential and to have a
reasonable chance of leading productive and creative lives that
they value.
As the international community seeks to define a new
development agenda post-2015, the human development approach
remains useful to articulating the objectives of development and
improving peoples well-being by ensuring an equitable,
sustainable and stable planet.
http://hdr.undp.org/en/humandev
Higher education is key to economic development (but it's not as
simple as you think)
We need to look at geography, skills and local companies to
accelerate development
By Lucy Goodchild van Hilten | July 2015 winner | Posted
on 27 July 2015
atlas: Research for a better world

Each month the Elsevier Atlas Award recognizes research that

could significantly impact people's lives around the world.
July 2015 winner (free access)
Higher education and economic development: The importance of
building technological capabilities
Glenda Kruss, Simon McGrath, Il-haam Petersen, Michael
Gastrow,
International Journal of Educational Development, Volume 43,
July 2015, Pages 22-31
Higher education is expanding rapidly in Africa. Millions more
men and women are enrolling in university; according to
the UNESCO Institute for Statistics, the number of students
enrolled in tertiary education shot up from 6.1 million in 2000 to
12.2 million in 2013. But what does this mean for economic
development?
Its not quite as simple as "more students equals higher income",
say the authors of an Atlas Award-winning study. Higher
education is key to economic development, but the way the two
relate is complex, say the researchers.
Of course investing in education leads to improved incomes, but
thats just too simple a model to account for real development in
the real world, said Dr. Simon McGrath, Professor of
International Education and Development at the University of
Nottingham and one of the authors of the study, which is
published in theInternational Journal of Educational
Development.
Until recently, the focus was on primary education, since more
people can be reached with the same investment. However, since
2000 there has been an increasing understanding that higher
education plays a key role in economic development.
The study, funded by the South African Department of Higher
Education and Training, proposes a new way of looking at the
relationship between higher education and economic
development. The widely adopted human capital view is that
higher education increases skill and knowledge and results in
higher income. But the researchers behind the new study say
many more things need to be taken into consideration: geography,
sectors, available skills and education systems and networks of
companies are all important factors.
Development is actually deeply contextualized, its deeply based
in particular sectors, in particular skillsets, in particular firms, in
particular countries, said Dr. McGrath. Theres got to be a focus
on how you build the capability in those spaces to do those things,
not just thinking its a simple case of investing in education and
leaving it to the markets. That will only do so much.
The team looked at case study sectors in South Africa on three
levels primary (sugarcane farming), secondary (automotive) and
tertiary (astronomy) to see what factors account for the effect
education has on the economy in each case. They conducted
background research on aspects like the value chains, employment
patterns and policy frameworks associated with each sector. They
then mapped out all the actors involved and interviewed them to
find out more about the skills and strategies needed in each sector.
They also interviewed all universities in the region.
The case studies highlighted the importance of geography: for the
automotive industry, South Africas location is not conducive to
rapid growth, since surrounding countries are not well equipped
for the market. However, for astronomy, the country won a large
international research project because of the clear sky in rural
areas that are within close proximity to Cape Town, a world city.
Higher education will continue to play a key role in economic
development, said Dr. McGrath. As we start working towards
the new Sustainable Development Goals, we will need
professionals across all sectors doctors, teachers and engineers

will be vital to our future success, and education is central to

producing those professionals.
The project was led by Dr. Glenda Kruss, and involved
researchers at the Human Sciences Research Council of South
Africa.
A conversation with Simon McGrath
We talked to author Simon McGrath, Professor of International
Education and Development at the University of Nottingham, to
find out whats so important about higher education, and what role
it might play in the future.
In this podcast Professor Simon McGrath talks about the complex
role of higher education in economic development, and why its
key to producing the right professionals for our future success.
Why is education in general important for development and
why has there been a focus on primary education until
relatively recently?
In the last 20 years weve had a combination of a very powerful
human capital view, that if you invest in your own education
youll get returns in a better job and better income. Weve also
had a very powerful human rights argument that education is a
fundamental right, and therefore we need to do something in
developing countries about getting children into schooling. Then
there was the negative view that higher education was for the
wealthy, the elite, and that it was very expensive. So many
organizations questioned why you would put money into higher
education when primary education was much more important, and
for the same amount of money could reach many more people.
What is the connection between education, innovation and
economic development?
If you take a human capital view of economic development, its
fairly straightforward: if you invest in peoples education, then
incomes will develop. But that presupposes that people are going
to get jobs and that theres something thats actually driving the
development. So part of the attempt to talk back to that from an
innovation approach is to ask: how do jobs get created? How do
countries take on new technologies and become effective
producers? In this kind of argument its not just thinking about
supplying the education, its saying that knowing where the
possibilities for an economy to specialize and develop are going
to be important in thinking about how economic development
takes place.
Did you come across any correlations or differences that
surprised you?
I think we became very clear on the importance of geography in
all of this. Part of the reason why South Africa won a large
international astronomy project was because they were looking
for a southern hemisphere site with clean skies. So having a
remote rural area within striking distance of a world city Cape
Town was a distinct advantage for that project. Whereas when
you look at the auto industry there are limitations because of the
markets that are within striking distance of South Africa. And so
in a sense geography was a force that I think became much clearer
to us as important how it limited in certain cases but permitted
certain things in other cases.
Could this model apply in different countries and economies?
Yes, in a sense what were saying is its not a simple universal
model invest more in education, good things will come out but
if you take a particular country, you can look at what capacity it
already has in terms of education and training systems, its
industrial system, the existing network between firms and the
capacity of the state to support them, but also what positions it
could possibly take up within the global capitalist system. Does it
have a potential to really take an industry a long way forward? Its

an analysis in which the specifics will vary according to different

contexts, but the general argument that you need to look at a range
of different factors rather than just say invest in more education.
What challenges could be associated with this approach to
planning higher education and what will need to change in
order for higher education to have the optimum impact on
development?
I think what the model points to is the complexity thats required
to do those things. It isnt a message that this is easy, its a
message that several countries have succeeded. Part of what it
stresses maybe is rather than focusing on the whole system at one
time, its focusing in on what sectors may be most capable of
achieving some kind of takeoff. What would they need in order to
do that? There are successes, but you have to focus on what are
realistic success stories, rather than just a blanket approach that
we will do this.
The new Sustainable Development Goals will be in place from
January 2016, what role should higher education play in the
future?
The message of the paper is the need to think about higher
education for development in economic development terms in
important ways, that higher education is a key element of
developing innovation, that higher education would be important
to any kind of success at those upper ends of the economy. But I
think another important role of universities is around
professionals. Professionals play a key role in meeting health,
education, agricultural and water goals: engineers, doctors, nurses,
teachers the whole range of professionals who will be vital to
any approach to development. So I think reaffirming that higher
education is not just for people to invest in their own human
capital and become part of the elite, but for development to
happen, theres going to have to be a lot of professionals trained.
https://www.elsevier.com/atlas/story/people/higher-education-iskey-to-economic-development
Will the ASEAN Economic Community be a bang or a bust?
Aza Wee Sile | @Aza_Wee
Thursday, 31 Dec 2015 | 12:20 AM ETCNBC.com
The ASEAN Economic Community (AEC) will come into effect
Thursday and holds immense potential for the region. However,
the full-scale of implementation is far from complete.
The initiative rests on four pillars: integrate the region into a
single market and production base; turn Southeast Asian into a
highly competitive region; ensure equitable development across
ASEAN and to fully integrate ASEAN into the global economy.
A key point of the AEC is it envisages free trade in goods and
services, investment liberalization and the free flow of skilled
labor.
The Association of Southeast Asian Nations (ASEAN) comprises
of ten member nations, forming the world's third largest
population with 622 million people in 2014. The combined 2014
GDP of ASEAN countries makes it the 7th largest economy in the
world worth $2.6 trillion, according to the ASEAN Statistics.
Unlike the European Union, the AEC aspires for economic and
financial integration without a monetary union or political
integration.
Southeast Asia will have integrated market byyear-end
The implementation of the AEC is the ASEAN's most ambitious
undertaking, and will boost the region's GDP by 5 percent by
2030, with Singapore benefitting the most as a percentage of GDP
growth, said HSBC Global Research in a November report.
However, Joseph Incalcaterra, Asia-Pacific economist at HSBC
Global Research, wants to make it clear that "the AEC represents
an important new chapter rather than inflection point."

Similarly, a Mizuho Bank note cautions against expecting a "big

bang" from the roll-out of the AEC.
The boost to growth should be felt over the next decade as
measures are gradually implemented through the AEC Blueprint
2025, which maps out how the bloc will continue working
towards an integrated economy from 2015 to 2025.
But one timely impact is the ASEAN Single Window, a regional
initiative to expedite cargo clearance, notes Incalcaterra.
This initiative has already been established by many ASEAN
countries and will help to facilitate the trade of goods.
Rasid Mohd | LightRocket | Getty Images)
ASEAN leaders at the 27th ASEAN Summit.
"The free trade in goods is largely a fait accompli, and the free
flow of skilled labor [remains] complicated due to political
concerns, which leads us to believe that the liberalization of
services and investment are the most important parts of the AEC
and can bring about the most tangible economic benefits," said
Incalcaterra.
On the 2015 OECD Services Trade Restrictiveness Index,
ASEAN is seen as fairly closed in terms of services, particularly
Indonesia which had one of the lowest scores.
HSBC notes that Indonesia's closed services sector is a "largely
structural issue in Indonesia [and] serves as a significant
impediment to the country's broader reform efforts" adding that
this is why Indonesia will not stand to gain much from the AEC.
The integration of services trade will benefit Singapore the most
with its high value-add finance and insurance industry, followed
by the Philippines and Malaysia, said HSBC.
Southeast Asia's hazy politics of pollution
On the investment liberalization front, Rahul Bajoria, regional
economist at Barclays Capital said he expects "rapidly growing
economies such as Vietnam, Indonesia and Philippines to gain the
most in terms of investments."
In addition, more mature economies such as Malaysia and
Singapore could see more corporate investments, "which they will
leverage by deploying capital within the region," said Bajoria to
CNBC.
Financial integration and capital account liberalization will help to
facilitate economic rebalancing within ASEAN, towards the
AEC's goal of equitable development, said HSBC.
However, this coordinated approach might be hard to reach
because without political integration, the ASEAN has a much
weaker institutional framework to ensure that commitments are
met.
HSBC adds that the ASEAN Secretariat that acts as the main
authority of the bloc and implements projects has limited powers
and only a tiny budget of $17 million as of 2014.
Therefore, improvements need to be made not only to the AEC
but to ASEAN as a whole, before the region can see stronger
integration and benefit from it.
http://www.cnbc.com/2015/12/31/will-the-asean-economiccommunity-be-a-bang-or-a-bust.html
The ASEAN Economic Community: The Force Awakens?
The AEC is here, but can it deliver on its promise?
The agreement on the creation of an ASEAN Economic
Community signed on November 22 in Kuala Lumpur by the
leading nations of Southeast Asia finally entered into force with
much fanfare on December 31, heralding the awakening of
what could be defined as a new Asian power bloc. Almost echoing
the European Unions Common Market of the 1950s, ASEAN
seeks to allow for the free movement of goods, services and

skilled labor, a major departure from what has been considered

since the earliest days of its existence as a political project for
peaceful regional integration.
For outsiders, the AEC is the culmination of the massive
integrationist leaps made by ASEAN since the early 2000s,
suggesting new momentum in the integration process of this
gigantic market of 600 million people. But size matters not, and
from a pragmatic perspective, the entry into force of the AEC is
reminiscent of Shakespeares Much Ado About Nothing: Given
ASEANs extremely weak institutional base, reliant on a skeleton
secretariat of no more than 400 staff sustained by an annual
budget of barely $17 million, there is much uncertainty as to
whether ASEAN can deliver on its ambitious targets.
With the AEC, the 48-year-old ASEAN finds itself at a critical
juncture, yet sobriety should drive any analysis. The reasons for
skepticism center on two questions. First, can ASEAN effectively
pursue coherent economic integration on the sole basis of
voluntary commitments especially given the extreme diversity
of the region? Second, if so, which objectives it should pursue
next to build on the AEC?
Unity in Diversity?
Significant hope has accompanied the AECs formation. Many
analysts have pointed out that integrating ASEAN economies
would create the worlds seventh-largest single market, and they
are certainly right. However, taking advantage of this market
requires dealing with its complexities and contradictions, and
accommodating the vast differences and national sensibilities. The
challenge of diversity is formidable enough: Politically, the
somewhat cacophonous, unstable democracies of Indonesia and
the Philippines cohabit with the Communist dictatorship of
Vietnam and the military junta of Thailand; economically, highdeveloped states and top ranking economies stand along with
some of the poorest countries in the world; culturally, the plurality
of religions, languages, ethnicities, and ways of living is difficult
to describe. To cite only one example, Malaysia and Indonesias
Muslim populations co-exist with peoples who are mostly
Buddhist (as in Myanmar), alongside the predominantly Roman
Catholic Philippines. Against this kaleidoscopic backdrop, it is
surely reasonable to question the ability of the AEC to deliver on
its promise of a seamless economic bloc.
What is more, the extremely pervasive and, some would say, blind
adherence to the overarching principles of consensus and noninterference, combined with the lack of a robust and sound
institutional architecture, have left intact the problem of ensuring
compliance and effective implementation of targets by national
governments and agencies. In spite of the various commitments
entered into under the AEC, ASEAN is still missing the necessary
institutional glue, which could take the form of an overarching
regional mechanism that ensures the smooth coordination of the
vast array of government actors from the different national
sectors, ministries and agencies. The numbers speak for
themselves: Although 95 per cent of tariff lines are at zero, nontariff barriers on goods and services render cross-border trade
particularly painful. Consumer laws, intellectual property rights,
land codes, and investment rules have yet to be harmonized at the
regional level, while the lack of common, integrated banking
structures, alongside the absence of an agreement on common and
acceptable currencies, are likely to hinder market access for
regional small and medium-sized enterprises. Also still unresolved
is the question of the free movement of labor, including in the socalled high-skilled sector, with many ASEAN countries
imposing heavy requirements on firms wanting to employ
foreigners. Meanwhile, in the shadow of the regional debate on
skilled labor migration, millions of marginalized migrants deemed

unskilled, from domestic workers to fishermen, illegally flit

between countries.
For economic integration to succeed, minimum levels of
uniformity in political, economic and cultural standing among
countries are essential. Given the wide development gaps between
countries, combined with the lack of solid and inclusive
institutional structures and agencies to govern the newly formed
markets under the AEC, ASEAN as an economic project is likely
to emerge as a chain of disparate markets, divided between fastgrowing modern economies (ASEAN-6) and inward-looking poor
countries (Cambodia, Laos, Myanmar and Vietnam, CLMV). The
fact that Myanmars total trade was worth $23 billion in 2013,
compared with Singapores $783 billion, underscores the gulf.
Against this mixed backdrop, the ASEAN Civil Society
Conference and ASEAN Peoples Forum recently warnedof the
dangers of unequal and unsustainable economic growth, which
may lead to the negative externalities of worsening poverty,
inequalities of wealth, resources, power and opportunities
between countries, between the rich and the poor and between
men and women. One could argue that the Economic
Community project has sought to address the line of fracture
between the ASEAN-6 and the CLMV through its stated goal of
narrowing the development gaps, bolstering inter alia the
development of intra-regional infrastructure, and reducing the
administrative burdens of national regulations on the creation of
new businesses and foreign investment. However praiseworthy,
these objectives will take decades to achieve if ASEAN does not
provide the adequate institutional means and material resources to
give the final impetus to economic integration.
The China Factor
With the AEC, ASEAN seeks to position itself as a competitive
alternative to the rising economic and military powers of China
and India, maintain its central position at the very core of the
Asian noodle bowl of agreements and multilateral frameworks,
and boost its global clout as a common bloc to counter Beijings
aggressive policy in the South China Sea. That said, economic
influence goes hand in hand with political influence, and
economic integration will be of little significance if it is not
backed by sound political reforms. It is somewhat ironic that
ASEAN as a regional entity, whose very raison dtre was born
out of its leaders burning desire to avoid the recurrence of war
and establish a durable and peaceful regional equilibrium, has to
date remained focused on the integration of its economic pillar.
Unfortunately, in the latter realm of political and security
integration, there is no shortage of problems. The evolution of the
security landscape in the Asia-Pacific region, together with the
speed and scale of Chinas construction activities in the Spratly
Islands, are likely to determine the future path of the Association.
In many aspects of ASEAN inter-state relations, it is still Beijing
that calls the tune, the latter capitalizing on the groupings divides
and confusion. Meanwhile, Chinas massive military
modernization program, which is equipping the Peoples
Liberation Army Navy with the ability to operate in areas far
beyond its waters, has fuelled unrest in the disputed region,
hinting at the emergence of an old-fashioned arms race among
Asia-Pacific nations. In a similar trend, the power struggle
between China and Japan is driving a fierce naval competition in
the East China Sea, while the progressive involvement of the
United States in the dispute through its historical alliances with
Vietnam, the Philippines and Japan has exacerbated feelings of
distrust, and widely polarized the already bitterly divided member
states. The U.S. rebalance, illustrated by the presence of military
vessels in the South China Sea, has been regarded by China as an
act of provocation, symbolizing a U.S. shift from constructive
engagement to containment.

But the simple, brutal truth of the matter is that the wait and see
posture idiosyncratic to the so-called ASEAN way of conducting
business has failed to live up to its original promise to promote
perpetual peace, everlasting amity and cooperation among their
peoples which would contribute to their strength, solidarity and
closer relationship. The spectacular failure of the 10 ASEAN
defense ministers to issue a joint declaration on the SCS at the
biannual ASEAN Defense Ministers Plus meeting held last
November is somehow reminiscent of thefiasco of the ASEAN
Regional Forums summit of 2012 under the (China-friendly)
Cambodian chairmanship. Incidents such as these make a case for
a firm, resolute approach to the much divisive and contentious
issue of China. Today, much of the hope rests with South Korean
President Park Geun-hyes attempts at a Northeast Asian
trustpolitik, a strategy that aims at lumping together the three
regional powers of China, Japan and South Korea in a pragmatic
and functional cooperation framework, the so-called Northeast
Asian Peace and Cooperation Initiative (NAPCI), to deal with
matters of common concern, spanning nuclear safety, cyber
security, climate change and disaster response, to name but a few.
The non-participation of ASEAN in this new, innovative trilateral
dialogue, perhaps best attests of the obsolescence of the
organizations hands-off approach and informal modus
operandi as a response to Chinas assertive divide et
impera strategy.
Given these constraints, it will certainly be no easy task for the
impoverished, tiny state of Laos to assume the ASEAN
chairmanship in 2016. There is great uncertainty as to whether
Laos will be able to provide ASEAN with the much-needed
leadership and diplomatic acumen to find a common denominator
among the widely diverging national views, and further the
momentum of integration generated by the AEC. Strategically
located at the heart of continental ASEAN and wedged between
the fast-emerging states of Thailand and Vietnam, Laos has
attracted considerable attention from China in recent years. In
2014, China became Laoss leading investorwith funds totaling
more than $5 billion, while the Sino-Laos agreement on the
building of a $6 billion high-speed railway project as part of the
PRCs One Belt, One Road project offers a telling glimpse into
how Laos has become a frontier for Chinese investment. An
unwanted corollary of this increasingly dyadic relationship would
imply a situation in which Laos faces a major political dilemma,
emerging out of the discord between declared loyalty to ASEAN
and actual economic dependence on Chinese investment. In this
scenario, whereby the rotating chair, supposedly bound by an
imperative of independence and neutrality, favors one party over
another and/or accedes to external demands, would deal a serious
blow to ASEAN credibility. Malaysias leadership and principled
attitude during the 2015 chairmanship turned out to be a
particularly well-suited approach in these years of crucial change
and uncertainty, yet Kuala Lumpur has set the bar particularly
high for the small, landlocked Republic of Laos.
Connecting the Dots, Closing the Chasms
These mounting challenges demonstrate that a certain relaxation
of the principles of consensus and non-interference, alongside
greater emphasis on regional institution-building, are currently
needed to accommodate the ever-evolving economic and security
landscape in the Asia-Pacific region. This is not to suggest that an
integration process along the lines of the EU, underpinned by
deep institutionalization through robust governance structures and
complex legal frameworks, is the remedy par excellence to
ASEANs problems. However, if ASEAN is to realize what
it purports to be politically cohesive, economically integrated,
socially responsible and truly people-oriented, people-centered
rules-based concert of Southeast Asian nations, it will need more

than just empty statements to overcome the say-do chasm and

address the pervasive issues of worsening poverty and inequalities
of wealth, resources, power and opportunities, let alone the
questions of human rights and democracy.
Inevitably, a clear core message requires a certain amount of
consistency between words and deeds, between the official
rhetoric and actual behavior. Over the past few years, the
language of ASEAN official documents, marked with strong
commitments to fundamental rights and the rule of law, has
proven a hard sell for ASEAN people at a time when Thailands
military junta, led by General Prayuth Chan-o-cha, is making
draconian efforts to curb freedom of expression, while
Vietnamese independent writers, bloggers, and rights activists
continue to face ruthless persecution by the Communist Party,
regardless of the outcry generated within the international
community.
Ultimately, it is clear that the workings and developments of the
AEC should not be seen independently from, but rather as
complementary to, the crafting of the political and security and
socio-cultural communities. As member states slowly absorb the
externalities generated by the AEC, ASEAN leaders may want to
consider preparing the groundwork to build more stable, secure
societies, deepen ties with geographical neighbors and, eventually,
develop a shared sense of regional community and purpose.
Otherwise, any attempt at more integration is likely to ring
hollow, and all the hard work that brought about the AEC will
have served only to paper over the cracks of ASEAN communitybuilding, thereby consciously hiding the divisive tendencies and
disagreements underneath the surface, and inevitably falling short
of the goal of an ASEAN identity.
Elodie Sellier has conducted extensive research on Europe-Asia
relations and has worked for various international organizations,
including the European Union Delegation to Hong Kong and
Macao, the Brussels-based think-tank Centre for European Policy
Studies (CEPS) and the International Crisis Group (ICG).
http://thediplomat.com/2016/01/the-asean-economic-communitythe-force-awakens/
] ASEAN Economic Community: 12 Things to Know
Established in 1967, the Association of Southeast Asian Nations,
or ASEAN, is widely recognized as a successful model for
regionalism. The ASEAN Economic Community is a major step
toward greater cooperation and integration.
Ten countries in Southeast Asia are attempting to launch a single
market for goods, services, capital, and labor, which has the
potential to become one of the largest economies and markets in
the world. Here are 12 things to know about the ASEAN
Economic Community.
The center of global economic gravity is shifting toward Asia.
Within Asia, it is shifting toward the two giant economies of the
Peoples Republic of China and India. Their emergence as
economic superpowers suggests that economic size bestows
significant advantage in accelerating growth and fostering
development.
Source: ADBI. 2014. ASEAN 2030: Toward a Borderless
Economic Community
The Association of Southeast Asian Nations (ASEAN) is in the
process of creating a single market and production base, called the
ASEAN Economic Community, which will allow the free flow of
goods, services, investments, and skilled labor, and the freer
movement of capital across the region. This is envisioned to be in
place by 31 December 2015.
Source: 24th ASEAN Summit. 2014. Myanmar. Nay Pyi Taw
Declaration
If ASEAN were one economy, it would be seventh largest in the
world with a combined gross domestic product of $2.4 trillion in

2013. It could be fourth largest by 2050 if growth trends continue.

Source: Speech by ADB Vice-President Stephen Groff. 2014.
Berlin, Federal Republic of Germany. ASEAN Integration and the
Private Sector
With over 600 million people, ASEAN's potential market is larger
than the European Union or North America. Next to the People's
Republic of China and India, ASEAN has the world's third largest
labor force that remains relatively young.
Source: Speech by ADB Vice-President Stephen Groff. 2014.
Berlin, Federal Republic of Germany. ASEAN Integration and the
Private Sector
ASEAN is one of the most open economic regions in the world,
with total merchandise exports of over $1.2 trillion - nearly 54%
of total ASEAN GDP and 7% of global exports.
Source: ADBI. 2014. ASEAN 2030: Toward a Borderless
Economic Community
ASEAN is taking a more cautious approach to regional economic
integration than Europe. In Asia, there is currently no serious
consideration of a single currency.
Source: ADB news release. 2015. An Increasingly Unified Asia
Is Keeping an Eye on Greece
The ASEAN Economic Community is founded on four basic
initiatives: creating a single market and production base;
increasing competitiveness; promoting equitable economic
development; and further integrating ASEAN with the global
economy.
Source: ASEAN. 2007. Singapore. Declaration on the ASEAN
Economic Community Blueprint
ASEANs physical infrastructure is critical to the ASEAN
Economic Communitys goal of establishing a single market and
production base. Cross-border roads, power lines, railways and
maritime development will help propel the community forward.
This will boost existing and new value chains or production
networks.
Source: Speech by ADB President Takehiko Nakao. 2015. 19th
ASEAN Finance Ministers' Meeting. Kuala Lumpur, Malaysia
One of the challenges to the ASEAN Economic Community is
bridging the perceived "development divide" between the older
and economically more advanced members - Brunei, Indonesia,
Malaysia, Philippines, Singapore, and Thailand, known as the
ASEAN-6, and the four newer members - Cambodia (1999), Lao
People's Democratic Republic (1997), Myanmar (1997), and Viet
Nam (1995).
Source: ADB. 2013. The ASEAN Economic Community: A Work
in Progress
Some analysts believe that the ASEAN Economic Community
will miss its December 2015 deadline because of the challenging
requirements of economic integration, including changes to
domestic laws and in some cases constitutional changes.
Source: ADB. 2015. Realizing an ASEAN Economic
Community: Progress and Remaining Challenges
The flexibility that characterizes ASEAN cooperation, the
celebrated "ASEAN way," may hand member states a convenient
pretext for noncompliance, according to one ADB report. How to
enforce the accords remains an issue. Currently, the economic
integration commitments lack sufficient mechanisms to ensure
compliance.
Source: ADB. 2015. Realizing an ASEAN Economic
Community: Progress and Remaining Challenges
ASEAN needs a plan beyond the ASEAN Economic Community
to achieve the long-term development aspirations of its 10
member countries, according to an ADB study. This includes
introducing structural reforms nationally and taking bold actions
regionally to further deepen economic integration.

http://www.adb.org/features/asean-economic-community-12things-know
Waking up to an ASEAN community by 2015 - Dream or reality?
Since 2007, ASEAN has set in motion an ambitious plan to spur
further economic growth in the region through the formation of an
EU-style single market, while mindful of the problems faced in
Europe. The target is to make ASEAN Economic Community
(AEC) a reality by the end of 2015. But will a unified market be
realised? Asia Insurance Review tracks some of the progress and
the likely future scenario for insurers.
By Ridwan Abbas
For one week last month, Southeast Asia became the centre of
international relations as the region played host to three highprofile gatherings namely the 25th APEC Summit in Bali as
well as the annual ASEAN Summit and the East Asia Summit
which were hosted by Brunei.
ASEANs clout as an international grouping continues to grow
and as the ten member states work towards greater integration, the
formidable goal of an ASEAN community similar to the European
Union seems a plausible and enticing prospect.
One of the key planks of realising an ASEAN community is the
pursuit of economic integration in the form of the ASEAN
Economic Community (AEC) which aims to fuse the member
states into a single market by the end of 2015.
But unlike the EU, ASEAN does not envision central
bureaucracies like the EU Commission or the European Central
Bank, but rather is focused on removing trade and business
barriers.
Since the start of the grouping back in 1967, its leaders have come
to realise that ASEAN is greater than the sum of its individual
parts. Creating a common market with 600 million people and a
combined annual gross domestic product of US$2.1 trillion would
unleash the vast economic potential of the region.
ASEAN has never been devoid of critics who deride it for its
soft stance in the face of indiscretions by certain member states
over the years, or the slow pace in which agreements are reached
as a result of its emphasis on consensus-building. Similarly, the
pursuit of an integrated economic community has had its share of
detractors.
So can the AEC come to fruition by the end of 2015 as targeted?
And what would be the plausible outcome for the regions
insurance sector amid the proposed era of freer movement of
goods, services and capital?
The AEC Blueprint
The work in realising an economic community is guided by the
AEC Blueprint which outlines four key pillars: a single market
and production base; creating a competitive economic region;
fostering equitable economic development and integration into the
global economy.
The first component relating to the single market aims to reduce
barriers to ensure freer flow of goods, services and capital.
Looking at the financial services sector, member countries have
undertaken to progressively liberalise restrictions in sub-sectors
relating to banking, insurance and capital markets by 2015.

It covers the four modes of supply for the delivery of services in

cross-border trade as defined by the WTO namely cross-border
supply (Mode 1), consumption abroad (Mode 2), commercial
presence (Mode 3), and movement of natural persons (Mode 4)
[see table in What is Trade in Service?].
In recognising that member states are at varied stages of financial
sector maturity, liberalisation through the ASEAN minus X
formula allows countries that are ready to proceed to go ahead
while others can join in later. This allows member states to pace
their liberalisation efforts while ensuring orderly financial sector
development and maintenance of financial and socio-economic
stability.

A Mid-Term Review of the implementation of the AEC Blueprint

was conducted by the Economic Research Institute for ASEAN
and East Asia (ERIA) and published in October 2012.
Progress was noted in several areas including lowering of trade
barriers for goods and greater facilitation in the movement of
skilled labour.
ASEAN has also enhanced its integration with the wider global
economy and have in recent times signed free trade agreements
with China, Japan, Korea, India and Australia/New Zealand.
Negotiations are also ongoing for services and investment
agreements with Japan and India.

Insurance sector
Where the insurance sector is concerned, the following is the list
of sub-sectors identified for liberalisation by 2015 and the
member countries that are committed to it.
Looking at the insurance sector in the region, life insurance has a
relatively large market in ASEAN 5, whereas general insurance
dominates the insurance market in the BCLMV (Brunei,
Cambodia, Laos, Myanmar, Vietnam) members. And compared to
the banking sector, the insurance industry is substantially more
open to foreign investors.

AEC report card

In tracking its progress, ASEAN has established a monitoring
mechanism called the AEC Scorecard to ensure timely
implementation of the AEC initiatives.

In fact, the majority of ASEAN countries are already in

compliance with the AEC blueprint benchmark for foreign equity
participation. Foreign ownership in insurance companies can be as
high as 80% in Indonesia and 70% in Malaysia.

The score appears to suggest that challenges with regard to nontrade barriers remain considerable and have yet to be tackled to
create a smooth-functioning single market and production base.

However in comparison, cross-border trade in insurance services

is still widely restricted and consumers have significant barriers.
This is despite the fact that the blueprint is unequivocal about the
liberalisation of this mode of delivery (Mode 1). So there is still
somewhere to go before clients can passport their insurance
coverage throughout Southeast Asia, as done in the EU.
Various stages of liberalisation
Significantly, the level of commitment to liberalisation among
ASEAN countries is varied, due to respect for national policy
objectives and the level of economic and financial sector
development of the individual members.
For example, Singapore has reached the most liberalised stage
among ASEAN countries especially in the area of insurance
services. However, there are still some restrictions on modes 2 &
3 for insurance intermediation comprising of broking and agency
services.
In Myanmar, there are tight restrictions on modes 1, 3 and 4 for
both market access and national treatment. The Central Bank of
Myanmar and existing domestic laws have determined the
approval for commercial presence and movement of natural
person in the country. Nonetheless, reforms are underway
following the recent opening up of the country. Last month,
MetLife announced it that had received regulatory approval to set
up a representative office in the country.
While over in Vietnam, great strides in liberalisation have been
made for modes 1, 2 & 3 in insurance & related services though
mode 4 is strictly limited.
What has been achieved?

According to the latest AEC Scorecard published in March 2012,

the overall score is 68.2 out of the maximum score of 100. Among
the four pillars, Pillar IV, Integration into Global Economy, has
made the most progress scoring 85.7. Pillar I, Single Market and
Production Base, has the lowest score of 66.5.

Economic spin-offs a net positive for Asian insurers

The liberalisation in the movement of goods and services in the
ASEAN region would promote greater flow of business activities
and investment in the region. As seen with the European Union,
the formation of its single market led to the gradual increase in its
share of global foreign direct investment inflows from 34% during
1980-1992 to 41% during 1993-2007.
Increased foreign direct investment and economic activity in the
region would naturally mean greater demand for insurance
services in Southeast Asia. Economic prosperity would also lead
to income growth and usher in a new cohort of middle-class
consumers with disposable income - a prime customer base for
insurers.
ASEAN states are at differing levels of financial sector strength
and maturity, and full-fledged financial sector liberalisation may
not yet even be feasible in certain countries without risking a
destabilising effect. Hence, financial services liberalisation which
promotes the use of a broad spectrum of financial instruments and
allows the unfettered presence of foreign financial institutions still
has some distance to go before coming into fruition.
AEC is a work in progress and it would be unrealistic to expect a
smoothly functioning economic community right from the start.
However, the AEC framework has had a positive effect in guiding
countries forward, and will have a galvanising effect for business
and consumer confidence from 2015 onwards.
From the industrys perspective, the push towards regional
integration sets the ground for the existence of regional
champions within the insurance sector. We are already seeing it on
the banking side with the likes of Singapores DBS Bank and
Malaysias Maybank actively expanding their footprints in
Southeast Asia.

As the AEC slowly takes shape, perhaps the time is ripe for the
growth of a truly pan-ASEAN insurer? Ambitious industry
players can use this gestation period to cultivate more local and
regional talent of international standard to achieve such a goal and
push the regions industry further forward.
http://www.asiainsurancereview.com/Magazine/ReadMagazineArt
icle?aid=34327
] BUSINESS
'ASEAN integration an opportunity, not a threat to PH SMEs'
MANILA, Philippines Small and medium enterprises (SMEs) in
the Philippines are urged to welcome the Association of Southeast
Asian Nations (ASEAN) integration as an opportunity for their
tremendous growth. But the challenges must be addressed soonest
for the sector to realize its potentials, experts said in the 1st
ASEAN Credit Congress and the 33rd National Credit Congress
(organized by the Credit Management Association of the
Philippines) held at the Manila Hotel recently.
The ASEAN Economic Community (AEC) envisions the free
movement of goods, services, investment, skilled labor, and freer
flow of capital among the 10 ASEAN member states: Brunei
Darussalam, Cambodia, Lao PDR, Indonesia, Malaysia,
Myanmar, the Philippines, Singapore, Thailand, and Viet Nam.
SME development is one of the two priorities under the AECs
equitable economic development characteristic.
Increased market access is a major benefit that SMEs can reap
from the AEC, considering the regions about 660 million people
as potential consumers of Philippine products, Department of
Trade and Industry - Bureau of Investments (DTI - BOI) Industry
Development Group OIC Corazon Dichosa said. At present,
99.65% of goods sourced from ASEAN are already traded tarifffree.
Tapping the opportunity
AEC provides an opportunity for Philippine industries and
services to become a major player in the ASEAN market and
allows domestic industries to be more deeply integrated in
regional production networks and global value chains, Dichosa
cited. The global value chains are not only sources of additional
investments but also of technology, research, knowledge, and
inputs essential for economic and human capital development, she
added.
The Philippines improved investment attractiveness is also an
additional lure to both ASEAN and global investors, Dichosa said.
The country climbed to 59th in the World Economic Forum's
Global Competitiveness Index for 2013, while it moved to 38th in
the latest IMD World Competitiveness Report. The countrys
ranking jumped 30 places to 108th in the International Finance
Corporation's Ease of Doing Business Index. However, the 2013
ASEAN - Business Advisory Council Survey on Competitiveness
showed that the Philippines placed 7th out of the regions 10
member states as an attractive investment destination.
Despite the impressive rankings and the opportunity the AEC
brings, the congress speakers acknowledged that SMEs
comprising 99.6% of total firms in the country (including micro
enterprises at 91%), are still facing challenges. (READ: Is PH
business ready for ASEAN integration?)
Changing the mindset
SMEs are a significant part of the ASEAN economy. To date, 96%
of ASEAN enterprises are SMEs; comprise 50% to 95% of
domestic employment; 30% to 53% of Gross Domestic Products
(GDP); and 19% to 31% of exports.

Thus, Philippine SMEs are urged to be regionally and globally

competitive and increase their productivity for the AEC and
beyond. Various programs are already in place to help the
Philippine SMEs, among them are: clustering, SME Roving
Academy, Doing Business in Free Trade Agreements Campaign,
and Shared Service Facilities of DTI; set up or Manufacturing
Productivity Extension for Export Promotion of the Department
of Science and Technology; industry roadmaps care of BOI;
inclusive finance / Credit Surety Fund of the Bangko Sentral ng
Pilipinas; Halal industries of the Bangsamoro and DTI; and the
trade facilitation for SMEs of the Bureau of Customs.
To do so, SMEs are encouraged to have a competitive mindset;
connect to target markets; conform to international standards and
best-in-class processes; compete sustainably; and adapt best
practices and benchmarking. Yet, the overall business
environment, access to finance, access to markets, and
productivity and efficiency remain the challenges faced by SMEs,
making the sector more vulnerable as the AEC sets in, University
of the Philippines Institute for Small-Scale Industries Director
Nestor Raeses said. The ASEAN integration will happen,
whether we like it or not. We will never be ready unless we do
something about it, Raeses stressed.
Access to finance is considered a major hurdle thus it is on top of
the ASEAN SMEs Development strategic plan of action for 2010
- 2015. SMEs, specifically micro enterprises which have the
potential to move from small or medium enterprises still
experience that banks and other financial institutions are wary of
lending to them since they have no financial documentation and
records, no banking relations, and lack financial literacy. The
information asymmetries on SME credit, availability or lack of
collateralized credit, mismatch of financing programs to SMEs,
and under-utilization of funds for SMEs in government-owned
and controlled corporations (GOCCs), compound the problem.
Collaborating toward a favorable SME lending environment
Collaboration is the key to create a more favorable lending
environment for SMEs, as mandated by Republic Act 9501 or the
Magna Carta for MSMEs.
Better access to finance for SMEs can be achieved through
improving the financial institutions risk management skills and
understanding further the needs of the sector, thus enhancing their
capability in administering SME financing programs, Raeses
highlighted.
Helping business owners realize that their own good payment
behavior can support the credit request for their MSMEs, CRIF
Philippines Managing Director Simone Colombara said. For them
to be more informed, MSME owners should also understand and
control the financial and liquidity risks, total exposure (incurring
debt higher than their income), identity fraud (their personal
information is used by someone else to obtain credit), and when
they were refused a loan so they improve their borrowing
behaviors and obligations, he added.
Implementing a system that allows lending based on empirical
data will improve the availability of credit for MSMEs, Credit and
Information Commission (CIC) president and CEO Jaime
Garchitorena said. Thus, the need for data integration to make
veritable credit information available, and will only be made so as
authorized by the data subject. If we talk about data integration,
people are scared. Youre not allowing yourself to expand if you
keep your data in silos . Everyone can benefit from credit
reporting. A person who is diligent in paying his or her bills has a
fair advantage to have credit. [Banks should] offer better terms to
people. Offer the concept of credit to those who are not aware and
yet eligible, he said.

Expanding the countrys database will increase the Philippines

credibility with the ASEAN markets, Dun & Bradstreet
Philippines president Sheila Lina said, and cited that the
availability of payment data tremendously helped Singapore as it
recorded a 3-year high of prompt payments. Increased
transactions will be experienced as AEC sets in thus
professionalizing further the decision-making processes in
determining the credit worthiness of a borrower is a must, Lina
added.
All businesses rely on information thus sharing such is beneficial
to the Philippines as it opens itself further to the larger markets,
COFACE country manager for Philippines and Indonesia JeanMichel Lafage cited.
Overall, being good in what you do is key for SMEs to be ready
for the ASEAN Integration, Raeses said. There will be winners
and losers. To win, we must systematically improve our abilities
and capabilities to compete now, he stressed. Rappler.com
http://www.rappler.com/business/11816-ph-jumps-to-65th-incompetitiveness-index

With lower start-up costs and a vastly

expanded market for online services, the result
is a global economy that for the first time will
be fully digitally wired-the dream of every
cyber-visionary of the early 1990s, finally
delivered, a full generation later.
Marc Andreessen
Time, Dream, Full
For me, when you put a MakerBot in a school,
you add a manufacturing education to the
environment where I think we can really
empower the next generation to compete in the
global economy.
Bre Pettis
Education, Next, Economy
To ensure continuing prosperity in the global
economy, nothing is more important than the
development and application of knowledge and
skills.
Martin Rees
Knowledge, Economy, Global
Yet in this global economy, no jobs are safe.
High-speed Internet connections and low-cost,
skilled labor overseas are an explosive
combination.
Bob Taft
Computers, Internet, Economy
Well, I think the global economy is in the
position for continuing good growth with
inflation well in check.
John W. Snow
Good, Economy, Growth

I think because we're such a trading nation, I

think Canadians understand that first and
foremost we're part of the global economy.
Stephen Harper
Understand, Nation, Economy
What's going on in this country? Unions stand
against those trends. We've got to somehow
insulate the robust American economy from this
global economy that seems to want to devour
our standard of living.
James P. Hoffa
Living, Against, Seems
An economy genuinely local and neighborly
offers to localities a measure of security that
they cannot derive from a national or a global
economy controlled by people who, by
principle, have no local commitment.
Wendell Berry
Cannot, Security, Economy
Scientists and supercomputers have amplified
our ability to look ahead. For decades, experts
have warned us that human numbers,
technology, hyper-consumption and a global
economy are altering the chemical, geological,
and biological properties of the biosphere.
David Suzuki
Technology, Ability, Economy
We got into a recession because the global
economy went into the recession and we're a
big exporting nation.
Stephen Harper
Nation, Economy, Global
If you followed this economic crisis and you do
not think that the world is getting flatter, you
are not paying attention. We saw the entire
global economy at one time acting totally in
sync. The real truth is the world is even flatter
than I thought. Our mortgage crisis is killing
Deutsche Bank. You still don't think the world is
flat?
Thomas Friedman
Time, Truth, Acting

* The ultimate aim of production is not

production of goods but the production
of free human beings associated with
one another on terms of equality.
-- John Dewey

http://www.betterworld.net/quotes/economyquotes.htm