With the creation of the Association of South-East Asian Nations (ASEAN) Economic Community in 2015, this regional body is developing a powerful, integrated economy. But the President of Bangkok Bank, Chartsiri Sophonpanich, recently argued that ASEAN is fast-becoming a tale of two economies.
Speaking recently at the Nikkei Asia300 Global Business Forum, Sophonpanich noted that integration is funding high infrastructure spending in Cambodia, Laos, Myanmar and Vietnam (CLVM). Nation Multimedia reports that he said ASEAN is fast-evolving into an economy of two tiers. One consists of developed nations like Thailand, which can serve as ASEAN’s backdoor to major global economies like China. The other consists of CLVM countries, where economic expansion is high, but not as stable.
Zeroing in on the CLVM sub-region, it is important to note that these nations recorded gross domestic product expansion rates ranging from 6.5% to 6.8% last year. Sophonpanich added that this sub-region supplies amazing infrastructure development opportunities for investors, with the value of these developments expected to register at roughly US$8tr over the next decade. Meanwhile, low CLVM interest rates prove advantageous to investors, prompting the flow of cash into their economies.
He also noted that CLVM infrastructure opportunities could benefit the whole region, as a manufacturing source in one nation could support one in another, creating a regional supply chain. The Bank President also said that ASEAN growth has fostered the development of multinational companies, such as Malaysia’s AirAsia, which trade globally, boosting the whole region’s prospects.
Tackling key issues
Speaking at the same conference, ASEAN Business Club President, Mohd Munir Abdul Majid, argued that there are key issues that ASEAN needs to tackle, in order to foster economic progress. It is critical, he noted, that the 10 ASEAN governments implement the same regulations across the region, creating a level playing field for companies to thrive. Majid also suggested that ASEAN needs to address the rising competitiveness of certain sectors, like healthcare and retail, to ensure member states benefit.
Majid suggested that countries which roll out initiatives should be encouraged and held as examples, for ASEAN integration to prove successful. Elaborating, he said, that “this way is better than telling each country [what] to do” as it allows each nation to tailor successful strategies to their own needs. For example, he cited a Malaysian company which created a successful peer-to-peer lending platform for small businesses and has shown firms in other ASEAN countries how to develop similar products.
Within this context, Majid argued, it makes sense to divide ASEAN into two sub-regions. One consisting of Cambodia, Laos, Myanmar and Thailand, would be characterised by its links to China, while the other would be made up of maritime nations Vietnam, Indonesia and Malaysia. A number of other key issues facing ASEAN were brought up during the event, such the need to support small to medium-sized enterprises (SMEs) to promote free trade and ensure firms can survive the global digital revolution, taking advantage of newly emerging technologies to promote regional economic growth.
Htet Tayza’s analysis
ASEAN holds incredible economic potential. Once fully integrated, ASEAN could become the world’s fourth largest economy by 2030. How does ASEAN tap into this incredible potential, without creating a tale of two economies? The bloc must create a favourable trading environment across the region, and help SMEs, which comprise the vast majority of its businesses, grow. With this approach, ASEAN member states could bolster businesses, spurring major economic growth across the region in future.