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Commentary: AEC Must Anticipate and Respond to Megatrends

30 Nov Commentary: AEC Must Anticipate and Respond to Megatrends

by Simon Tay 

The ASEAN Economic Community (AEC) has helped bring focus to the region’s growth. The 2008 global financial crisis notwithstanding, ASEAN economies have continued to grow at an average of around 5%, outperforming global rates. The region is not only a production base but an emerging and sizeable consumer market of some 635 million people. Majority of multinationals from all its major partners and across a wide range of business sectors express confidence in ASEAN.

ASEAN governments have not been complacent even with this growth. After the 2015 inauguration of the ASEAN Community, the ASEAN 2025: Forging Ahead Together sets out a roadmap for further consolidation, integration, and cohesiveness through the three corresponding community blueprints.

ASEAN now aims to become a global player; but this will not be easy. To move forward, the region must anticipate and respond to global megatrends that may pose risks to its economic integration agenda.

Three trends particularly bear attention. The first is the upsurge of populism and anti-globalisation in national politics, as evidenced by Brexit and the victory or rising popularity of populist leaders or parties in the US and around Europe. There is no obvious current threat but ASEAN is not immune to similar sentiments. Populism and anti-globalisation attitudes have long been featured in the nation-building phase of politics.

The second are the shifts in geo-politics and geoeconomics. China’s rise has increased the sense of competition, especially with the US and Japan. ASEAN has played a central role to promote multilateral dialogue and build trust through dialogues like the East Asia Summit, hosted annually by ASEAN since 2005. All major powers participate but as the shifts become more prominent, expectations increase to go beyond dialogue to a more active management of crises and tensions.

A third megatrend is arising from technology. Combinations of robotics, artificial intelligence, the Internet of Things and other advances are transforming economic sectors, value chains, and social patterns in the so called fourth industrial revolution. Although technological developments can help spur productivity and economic growth, these developments also challenge the region. Unless ASEAN can bring together the right policies, skilled workers and innovative entrepreneurs, there will be missed opportunities and, potentially, disruptive shifts.

How best can ASEAN and its AEC respond to these megatrends?

The overarching logic of ASEAN must be to work together. The need for unity and cooperation bears re-emphasis and indeed reinvigoration. ASEAN can best respond to these global megatrends by moving towards higher levels in region-wide diplomacy, economic integration and cooperation on social policy.

To counter populism and anti-globalisation, the AEC must be shown to make life better for the wide majority of ASEAN peoples. Beyond the elite and larger companies, Micro, Small and Medium-sized Enterprises (MSMEs) must be assisted to reap the benefits of the AEC by better integrating them into global and regional value chains. Workers must experience the prospect of better jobs and upgraded skills. An improved framework to protect vulnerable peoples across borders – including undocumented workers – is also needed. With such efforts, the AEC can show a “human face” and secure broader social support for economic integration.

Amidst increasing geo-political competition, the AEC would do well to foster ties with all major partners and avoid domination by any single power. This need is especially felt in developing ASEAN’s infrastructure. Gaps need to be filled to enable national development as well as intra-ASEAN connectivity. Countries would do best to frame these within ASEAN’s current connectivity agenda and reach out to all major partners. There should be intra ASEAN efforts to exchange experiences and for mutual assistance.

Similarly, as ASEAN negotiates the Regional Comprehensive Economic Partnership (RCEP), ways must also be found to balance the interests of advanced economy partners – Japan, Australia and New Zealand – with those of China and India as large developing economies. In trade and economic agreements with partners and other regions (and RCEP is no exception), ASEAN must reinforce its own unity so that its diverse members benefit.

The growing digital economy, combined with technology and innovation, can create a multitude of opportunities in ASEAN. The impact and the opportunities that arise are leading some ASEAN countries to adopt national plans to promote adoption. These can enhance the existing and planned interconnectivity and value chains to bear further benefits for the AEC.

One emerging area is e-commerce. Singapore hopes that during its chairmanship, countries can streamline rules governing e-commerce to promote greater digital connectivity and lower costs and entry barriers. E-commerce can especially benefit ASEAN MSMEs by creating cost-effective ways of reaching out to a much larger consumer base and for participating in different nodes of the value chains.

The existing AEC agenda is considerable. These megatrends call for forward-looking and cross-cutting approaches that can help evaluate and coordinate strategies at national and regional levels, many of which cut across the traditional taxonomy of ASEAN policy processes e.g. by community pillars. Only then can ASEAN and its AEC move further forward in a turbulent world to deliver a deeper integration that allows the region to be more competitive and globally connected.

About the author
Simon Tay is chairman of  the Singapore Institute of International Affairs. This article was originally published in the second issue of the ASEAN Economic Integration Brief  in November 2017.