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Asean at 53: Transition and recovery

/ 05:02 AM August 08, 2020

Today, Aug. 8, the Association of Southeast Asian Nations celebrates the 53rd anniversary of its establishment. Along this remarkable growth journey, Asean has undergone significant transitions.

The bloc turned from a region of conflicts and diversity, which characterized the region until the 1980s, to a region “inspired by and united under One Vision, One Identity, and One Caring and Sharing Community.”

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From a less-developed region, Asean has become much more prosperous and dynamic. It successfully weathered economic headwinds such as the Asian financial crisis of 1997 and the global economic recession of 2008-09. The region’s GDP has been raised to $3 trillion in 2018, more than four times the figure of 1999, making it the fifth-largest economy in the world.

If almost half the Asean population in 1990 lived below the poverty line ($1.23 purchasing power parity per day), after 25 years, the proportion was reduced to 14 percent. Notably, the reduction was not restricted to the major economies, but also included the less developed CLMV countries (Cambodia, Laos, Myanmar, and Vietnam) where poverty rates fell from 66 percent of the population in 1990 to 18 percent in 2015 when the Asean Economic Community was established.

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In 2018, Asean received $154.7 billion of foreign direct investment flows, the highest in its history and a 30.4-percent increase from total FDI inflows of $118.7 billion in 2015. Asean’s efforts in economic integration have also paid off with intra-Asean accounting for the highest shares in trade and investment at 23 percent and 15.9 percent, respectively.

Efforts to boost intra-regional trade openness were manifested by the fact that 98.6 percent of intra-Asean trade flows are now tariff-free, not to mention the ongoing harmonization of technical standards, a facilitation for greater labor mobility for eight industries (engineering, nursing, architecture, medicine, dentistry, tourism, surveying, and accountancy). It is now deemed a “hub” for global trade and investment. When foreign investors look for investment destinations in Southeast Asia, they not only aim to seek a base in Asean member countries for their factories, but also seek a market of 600 million people and the whole world.

In the future, Asean will likely face more challenges and uncertainties caused by tensions between major powers and the COVID-19 pandemic. Despite growing at 4.6 percent in 2019, the Asean economy is expected to contract by 2.7 percent due to the substantial impact of COVID-19.

Since the outbreak, and as lockdowns and quarantines were enforced in many Asean member states (AMS), job losses and business closures have mounted. This led to a sharp fall in productive economic activities particularly in the hardest-hit sectors such as tourism, aviation, manufacturing, as well as among vulnerable groups.

The pandemic is likely to have a prolonged impact on the macro-economy. A well-thought-out recovery plan to restore in particular fiscal discipline among the AMS is vital in the post-pandemic period. At the regional level, Asean should formulate a regional socioeconomic recovery plan post-COVID-19 to facilitate regional growth. A detailed plan for the regional post-COVID-19 recovery would require close coordination across sectors and community pillars, as well as a dialogue with various stakeholders.

“Even in Asean, which has suffered less than other parts of the world, we cannot take the transition to a post-pandemic stage for granted in either health or economic terms,” said Victoria Kwakwa, the World Bank’s vice president for East Asia and the Pacific, in the Asean Economic Integration Brief publication in July. To make that transition, she said that Asean must not treat containment of the disease and mitigation of the economic pain as separate goals to be achieved with separate instruments. Instead, the bloc needs to take an integrated view of policy where health and economic authorities work together to help preserve both lives and livelihoods.

If Asean could do these tasks effectively, we have a firm foundation to believe that its central role and position in shaping the wider region’s future would be maintained. Viet Nam News/ANN

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Võ Trí Thành is a senior economist at the Central Institute for Economic Management and a member of the National Financial and Monetary Policy Advisory Council.

The Philippine Daily Inquirer is a member of the Asia News Network, an alliance of 24 news media titles across the region.

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TAGS: Asean, ASEAN 53rd anniversary, economy, Growth, Southeast Asia
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