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Riding the megatrends: ASEAN’s leadership opportunities

21 Jan Riding the megatrends: ASEAN’s leadership opportunities

By Julia Tijaja and Simon Tay
For The Jakarta Post 

Two years into the COVID-19 pandemic, the situation is still not fully stabilized, and the coming weeks may prove crucial with Omicron variant increasing uncertainty. Yet ASEAN largely rode out the Delta variant surge in the months of July to October. At its end 2021 Summit, ASEAN leaders signalled their commitment to a comprehensive recovery post- Covid-19 as well as to keep markets open and interconnected.

This is less of an option than a necessity. Lockdowns and border closures have had heavy impacts – not only to the overall economy but on so many human lives and livelihoods. Opening up will be necessary for growth and for hope for better prospects.

This must of course be allied to safe and better management. Ramping up and rolling out vaccinations and better understanding of protocols for detection and treatment will be essential. The easing of restrictions within countries and more travel lanes between them have also delivered some early dividends and more can be done.

Growth for Southeast Asia is estimated at 3.0% for the year and, if omicron is not a major disruption, this can climb further in 2022. The estimate by ADB is for 5.1% growth across the region. Besides pandemic related impacts, other immediate concerns can also arise, such as the terrible floods in Malaysia and the spike in global freight price that can further disrupt supply chains that the region depends upon.

Looking Ahead

Yet for the longer term, governments must also give attention not only to economic but also human, political and sustainability shifts that hold implications for ASEAN’s prospects. As we detailed in our 2017 ASEAN publication, Global Megatrends: Implications for ASEAN Economic Community, some of these started prior to the pandemic, but have accelerated in the year. Unless governments fully address them, the region might face diminished prospects going forward. On the other hand, if preparations can be accelerated, some of these can turn to positive advantages.

The first concerns are in commercial trends and patterns of globalization. Our region is buoyed by exports to other markets but this will need to consider the reconfiguration of global value chains. Even before the pandemic, investors have started to look at ways to diversify their supply chains, starting with cost in mind but increasingly – especially since the pandemic – to also consider supply chain resilience and sustainability. Notwithstanding the onshoring and re-shoring trends, there is a renewed opportunity for regional value chains and alternative production hubs.

ASEAN must therefore increase its own connectivity and competitiveness. This is not only a defensive response but will yield results into the medium term. The key is that this needs to be complemented by investment facilitation, critical infrastructure, enabling business environment, skilled workforce, and ease of digital technology adoption. An early and effective implementation of the Regional Comprehensive Economic Partnership Agreement (RCEP) will also strengthen the region’s position.

The next challenge is in digitalization. This has underpinned economic and social survival for many through the pandemic and will be even more critical for recovery. ASEAN has started a number of initiatives which more recently include its Digital Master Plan 2025, Agreement on Electronic Commerce and its implementation work plan, the Consolidated Strategy on the Fourth Industrial Revolution, and the Bandar Seri Begawan Roadmap as well as specific initiatives such as the ASEAN Data Management Framework and ASEAN Model Contractual Clauses for Cross Border Data Flows.

These may seem an ASEAN documentation overload but are necessary to align the diverse policies among its 10 members, and momentum should be maintained. The ASEAN Digital Economy Framework Agreement (DEFA) referred to in the Bandar Seri Begawan Roadmap can significantly elevate the overall aim of making ASEAN a more integrated economic community that befits the 21st century reality.

The nature of digital transformation is to cut across and impact all sectors. This requires more than having one or two bodies discreetly dealing with “digitalisation” in isolation.  A broader Community-wide mindset change and a bold transformation of the regional agenda across sectors are needed.

Another new cross-cutting priority will be the region’s transition to a low-carbon economy. Climate is usually seen as specialized, but a holistic approach will be needed to address connections to areas such as finance, energy, and transport. An ASEAN-wide dialogue will also be key, on top of what each country does on its own. The joined statement by ASEAN at the recent Glasgow COP26 on climate change, and the group’s adoption of the taxonomy of sustainable finance and a framework for a circular economy are welcome but only first steps. ASEAN needs to twin its economic integration to carbon- and climate-related policies and move forward as a region where feasible to do so.

Finally, and perhaps most fundamentally, much needs to be done to address the impacts of the pandemic on society and the most vulnerable people, and better prepare them for the future. There are concerns that there may be generational scarring effects arising from effects on the labour market, education and schooling, and erosions to health, and ultimately human capital. Some that lost their jobs may never re-enter the job market; the same goes with those whose education has been affected. Women, the differently abled, and informal workers bear disproportionately higher costs.

Unless governments tackle this head on, inequalities will worsen. Policies to strengthen social protection, and better provide health and education are critical. Underlying these is the need for adequate and sustainable finance.

Offering Leadership

The shocks from the pandemic must be used to energize broader and longer-term efforts to meld the immediate recovery with the longer-term integration, competitiveness and resilience of ASEAN economy and society. While we have framed a number of risks, if each can be addressed, there is great potential for ASEAN to promote itself as a stable, secure, and competitive regional production hub in the global economy and with positive benefits to its peoples.

There is also a question of timing. As ASEAN moves forward into 2022, there will be efforts to refocus and reprioritise the past plans for deeper economic integration that were agreed before the pandemic, especially given the factors that we have mentioned. A comprehensive approach will be needed to go beyond the recovery and establish foundations for the longer term as ASEAN starts its post-2025 visioning process.  The responsiveness and agility of institutions and initiatives at the regional and also national levels will be key.

To galvanize efforts, ASEAN must aim for a clear and compelling vision that can be understood and supported not only governments but by the peoples of the region. Translating that vision into implementation and tangible benefits will be key.

Based on that, ASEAN can step up in engaging major partners. With growing major power tensions, a strong ASEAN as a middle power representation can make a real contribution. ASEAN is an epitome of what small and middle power countries can achieve by working together as demonstrated through the RCEP and also through offering dialogue platforms for major power to engage and shaping its own regional future.

The timing cannot be better for ASEAN members and the group as a whole to be more proactive on multilateral platforms. In 2022, Indonesia will assume the presidency of the G20 presidency while Thailand will serve to chair the Asia Pacific Economic Cooperation (APEC) process. These can present many opportunities to showcase and synergise with its emerging agenda so that, if united and progressive, ASEAN can increasingly provide a global voice and offer leadership by example.

***

Julia Tijaja is Former Director of ASEAN Integration Monitoring at the ASEAN Secretariat. Simon Tay is Chairman of the Singapore Institute for International Affairs


Source: This article was first published in The Jakarta Post with the title “Riding the megatrends: ASEAN’s leadership opportunities” on 17 January 2022. Republished with permission.