The ASEAN Economic Community (AEC) is an integral pillar of the ASEAN vision, envisaging the Southeast Asia region as an integrated community by 2015. The AEC Blueprint has set an ambitious agenda that seeks to establish ASEAN as a single market and production base, a highly competitive economic region, with equitable economic development and one that is fully integrated into the global economy. This is a vast canvas of integration, harmonization, and coordination activities, and its scope is matched by the complexity of the process.

The first element above, namely “ASEAN as a single market and production base”, is critical to the development of the AEC, and includes in itself five core elements: (1) the free flow of goods; (2) the free flow of services; (3) the free flow of investments; (4) the freer flow of capital; and (5) the free flow of skilled labour. Recognizing the complexity and scale of the changes needed, the AEC Blueprint laid out action plans with targets and timelines that provided additional temporal flexibility for the CLMV (Cambodia, Lao People's Democratic Republic [PDR], Myanmar, and Vietnam) economies. However, the time targets for even the other ASEAN economies are considerably behind schedule and it is natural to expect that the deadlines for the CLMV countries, currently in the future, will likely also not be met.

This chapter looks at the readiness of two ASEAN economies, Cambodia and the Lao PDR (henceforth Laos), for the challenges of implementing the AEC. The approach adopted in doing so is to focus in detail on specific areas, rather than attempt to cover the broad range of areas listed in the AEC Blueprint, for which the space here is rather limited. The chapter consequently provides a relatively detailed look at a narrow, albeit central, component of the preparation for the AEC, namely transport and trade facilitation (TTF), which is of critical importance to the free flow of goods which, in turn, is crucial to the goal of ASEAN as a single market and production base. Solid progress on the TTF agenda is a prerequisite to the vision of the development of production networks to enhance ASEAN as a global production centre or as a part of the global supply chain.