As talk of vaccines becomes more commonplace, world leaders are already looking towards the future and emerging from the pandemic stronger than before. ASEAN countries are no different – as infection numbers begin to fall, economic recovery is on everyone’s mind. Yet, challenges remain. The trend of ‘de-globalisation’ and geopolitical tensions between the US and China could potentially roadblock a timely recovery.
On 25 August 2020, Standard Chartered Bank and Reuters Plus kicked-start the ASEAN Business Forum with their first webinar titled, “Navigating ASEAN Beyond COVID-19”. Comprising Mr. Jon Lambe, UK Ambassador to ASEAN, Mr. Tan Chin Hwee, the Asia-Pacific CEO of Trafigura and Associate Professor Simon Tay, Chairman of the SIIA, the panellists discussed whether ASEAN could pull itself out of the economic downturn and successfully navigate itself towards a post-COVID world.
The Key to Economic Recovery
Nguyễn Xuân Phúc, the Prime Minister of Vietnam, opened the forum by highlighting three themes: unity, solidarity, and centrality. Indeed, this set the tone for the rest of the forum as the panellists, which included Associate Professor Simon Tay, Chairman of the SIIA, highlighted the importance of integration amidst growing trade protectionism.
Regional agreements, such as the Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Comprehensive Recovery Framework, play a critical role in mustering the political will for economic integration. Despite some protectionist tendencies exhibited by governments around the world, the overall trend remains fixed on globalisation.
When asked about RCEP in particular, the panellists remained optimistic about its prospects. Even with India’s withdrawal, RCEP still covers almost one-third of the world’s GDP and includes some of the fastest-growing regions. Besides, it is likely that RCEP signatories will opt to leave the door open for India’s re-entry and the inclusion of other nations. Although the full text of the agreement has not been made public yet, the panellists warned that RCEP should address key issues comprehensively; namely support for micro, small, and medium enterprises (MSMEs) and clearly defined rules-of-origin.
Growing Tensions and Maintaining Solidarity
One key issue the panellists touched upon was the growing US-China divide. Even with a change in administration after the US elections in November 2020, it is unlikely that tensions will dissipate anytime soon, indicating that this trend may continue for quite a while. The panellists agreed that ASEAN should take up the mantle as the foremost regional organisation and promote regionalism to ensure that small and middle powers are not pulled into bipartisanship.
Despite the threat of a fractured region, there are opportunities for ASEAN in the midst of this rivalry. Labour costs and regulatory barriers have been on the rise in China for some time, and the rising tensions have dealt a strong blow to an already uncertain business environment. With approximately a third of companies looking to shift at least some production outside of China, ASEAN is the perfect destination for relocation. Countries like Vietnam and Indonesia have already been able to capture some of this outflow.
However, the panellists agreed that economic prosperity is not a zero-sum game between the ASEAN and China – in fact, it brings the two regions closer together. Most companies are only looking to shift out some production, which means that it remains vital for ASEAN to maintain good connectivity with China to keep supply chains open. At the same time, many countries in the region rely on economic and military support from the US. While the two seem diametrically opposed, the panellists were confident that it is possible to maintain cordial relations with both powers and ASEAN states must play a delicate balancing act.
Next Steps
When the virus first emerged, most nations were caught off-guard. Now, governments are more resilient and better prepared to keep supply chains open in the event of another crisis. It is therefore vital to continue reinforcing systems and processes to prevent another economic crash.
On the topic of growth, the panellists encouraged governments to remain committed to free trade and multilateral agreements. Economic integration is necessary, both as a means of promoting trade and increasing cooperation with its external partners. ASEAN countries should work to push for RCEP and other multilateral agreements and ensure that these are inclusive. In particular, digitalisation remains elusive for many MSMEs, and these businesses should be supported in order to plug them into global supply chains and markets.
Diplomatically, the panellists urged ASEAN to maintain its solidarity and advance a rules-based multilateral order in order to balance relations between the two powers. The key here is banding together as small and middle powers to prevent taking sides. Ultimately, this will be the key to optimising the benefits of both and remaining united as a region.
