Assessing the impact of ASEAN economic integration on labour markets

Enhancing regional economic integration has become an important priority for the Association of Southeast Asian Nations (ASEAN). Building on the ASEAN Free Trade Area, ASEAN has been implementing the ASEAN Economic Community (AEC) since 2007, scheduled for completion in 2015. The AEC is in many ways the most ambitious economic cooperation programme in the developing world, with its goal being the creation of an economic space in which there will be a free flow of goods, services, foreign direct investment and skilled labour. In addition, ASEAN has cemented free trade areas with six regional partners (Japan, Republic of Korea, People’s Republic of China, Australia, New Zealand and India) and, together with these economies, launched the Regional Economic Comprehensive Partnership (RCEP) in November 2012, also with the goal of completion in 2015. This study estimates the implications of the regional integration initiatives on ASEAN Member States using a cutting-edge computable general equilibrium model. In addition to gauging the effects on welfare, trade and economic structure, it considers the ramifications for labour markets. Using detailed data from the labour force surveys available for six ASEAN markets, the paper captures the effects of these initiatives on seven categories of labour at the occupational level. It also includes estimates of the distributional effects of these initiatives for labour relative to other factors (capital and land) and on gender.