04 Sep ASEAN beyond 2015: Can higher growth be sustained?
The Association of South-east Asian Nations (ASEAN) is the third-largest economy in East Asia after China and Japan — needless to say, a robust, growing ASEAN has a positive impact on Asia and the world.
A sustained growth spurt would push the region’s poor out of dire poverty and onto the road to middle-income status. Malaysia today has zero dire poverty, Thailand virtually zero. The prospect of most people in ASEAN becoming predominantly middle-class augurs well for long-term growth.
The challenge, however, is for ASEAN to sustain a high growth spurt. Maintaining an average of 5.5 per cent to 7.3 per cent per annum growth of per capita income for at least a decade is not easy — but is nonetheless achievable. And in so doing, ASEAN would be able by 2025-30 to surpass its economic dynamism of the late-1980s and early 1990s; reduce dire poverty to 5 per cent or less by 2025, completely eliminating it by 2030; and reduce income disparity.
If this growth target is achieved, four ASEAN member states would become high-income countries, three would be upper-middle income, and Cambodia, Laos and Myanmar would have tripled their per capita incomes.
In fact, most ASEAN countries have experienced comparable growth spurts over the past 25 years. Even the Philippines, the laggard among the region’s middle-income countries, is growing this year at a pace that could double per capita income within a decade.
As China’s breakneck growth slows and labour costs rise fast, and as India struggles to regain its economic footing, ASEAN has the opportunity to shine further as an investment destination, production base and consumer market, leading to a new sustained high growth phase for the region.
To achieve this, ASEAN needs to move more aggressively to become the favoured investment destination — to be more integrated, competitive, dynamic, inclusive and resilient.
First, the prospect of an integrated ASEAN market is an increasingly important consideration for multinational corporations investing in the region’s economies. Greater integration depends on good physical infrastructure, institutional connectivity and regulatory coherence within the region.
Second, a more competitive and dynamic ASEAN needs to be even more plugged into the production networks in East Asia — and the world. For example, now that China’s dominant labour advantage as a global supplier of assembled finished goods and intermediates is diminished, ASEAN has the opportunity to exploit the gap. In addition, to move up the value chain and past the middle-income trap, strengthening technological development and innovation capacity in tandem with much better human capital is critical.
Finally, an inclusive and resilient ASEAN requires high growth that does not worsen income disparity. One strategy is to ensure that small- and medium-sized enterprises are more deeply integrated among themselves, and with larger companies and multinationals in domestic and regional production networks.
These proposals hew closely to the pillars of the ASEAN Economic Community Blueprint, which guides the community’s establishment by 2015.
Ultimately, the private sector is the key motor of ASEAN’s sustained high and equitable growth — so it is crucial that member states are more responsive to business concerns in the region. While there have been significant improvements in recent years, a lot more remains to be done for truly conducive business and investment environments in much of the region, especially in the face of stiff global competition.
ABOUT THE AUTHOR:
Ponciano Intal, Jr is a Senior Researcher at the Economic Research Institute for ASEAN and East Asia in Jakarta. He is a panellist at the 6th ASEAN and Asia Forum on Sept 12, organised by Singapore Institute of International Affairs, to discuss key issues in the region that matter for business.
This commentary originally appeared in TODAY on Tuesday, 4 September 2013.