The Association of South-East-Asian Nations is a ten-member economic and political regional organisation. It holds incredible economic potential, with a new report insisting that the ASEAN market is more open for global trade than either it’s US or EU rivals. Htet Tayza comments.
ASEAN consists of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam. Together, these countries hold incredible economic potential. Experts believe that ASEAN could become the world’s fourth largest economy by 2030.
Existing growth has been fuelled by the creation of the ASEAN Economic Community (AEC) in 2015. This initiative is designed to facilitate ASEAN integration, along with co-operation between member states, so it can compete with other unified economies like the EU. In a recent report, the World Economic Forum (WEF) noted hailed ASEAN’s “increased integration into the global economy.”
WEF made this observation in its recently-released 2016 Global Enabling Trade Report. Compiled every two years, it assesses the capacity of 136 countries to facilitate the flow of products across borders. Commenting, the report’s authors were quoted by Business Times noting: “ASEAN’s progress as an economic power comes at a time when the United States and EU are becoming less open.”
Both the EU and US are currently being overtaken by anti-globalist populist movements. US President-Elect Donald Trump campaigned on the possibility of levying tariffs against massive economies like China and withdrawing from global trade agreements. Meanwhile, European states are currently under public pressure to turn away from proposed free trade deals with the US and Canada.
Klaus Schwab, the WEF’s Founder and Executive Chair, warned that the benefits of free trade deals must be shared more widely among the global populace, to stave off populist movements. Elaborating on this warning, Klaus Schwab went on to say: “Free trade remains the most powerful driver of global economic development and social progress. The challenge for leaders today is to confront protectionism but they also have a duty to make trade a source for more inclusive growth.”
In its report, the body also stated that “large swathes of the global population” are being left out of international value chains and global trade. Many of these citizens are located in the most populous countries of Africa and Asia. This means that companies are losing out on selling goods to potentially billions of people. For example, Asian countries like India rank as some of the most unbanked on earth, so by excluding them, financial institutions are missing out on a major opportunity to make money.
Indeed out of the ten most populous nations on earth, only China appeared in the top half of WEF’s ranking. Explaining further, Philippe Isler, the Director of the Global Alliance for Trade Facilitation, commented: “Businesses and entrepreneurs in many developing and emerging economies are being constrained… due to costly and inefficient border processes… Governments must consider trade facilitation reforms as a strategic priority to make trade work for all.”
With this report, WEF confirms that ASEAN possesses astounding economic potential, but faces key challenges. Due to low labour costs, ASEAN states benefit highly from free trade deals, so if Trump makes good on his word and European leaders bow to pressure, their ability to operate effectively in the global economy will be hampered. ASEAN leaders also need to attract more global investors and facilitate easier cross border trade, so its businesses can take part in the worldwide marketplace.
ASEAN leaders should focus on developing a favourable trading environment for small to medium-sized enterprises (SMEs) in future. These businesses comprise between 88.8% and 99.9% of companies in the ASEAN territories, so when they succeed, the bloc’s member economies thrive. ASEAN governments are focusing on providing SMES with key resources, like opening an online academy which will give them the information needed to upgrade operations. ASEAN leaders would be advised to follow WEF’s recommendations concerning protectionism and cross-border trade, to ensure its markets remain open, so the bloc’s SMEs can compete globally, enabling economic expansion.
Image courtesy of Epinzentrum.