Mutual economic benefit
Officials and executives of the Association of Southeast Asian Nations agree that there is enormous potential to boost trade and investment with regional economic powerhouse China but that political and security issues may be a drag to realizing it.
This consensus emerged in a packed workshop at last week’s Asian Financial Forum 2015 in Hong Kong, where delegates tackled the topic “China, Asean and the new Silk Road.” Connecting the massive Chinese economy with Asean is a new dynamic that will impact the global economic system. This early, Hong Kong is positioning itself as the bridge between the two markets, noting that the Asean economy as a trade bloc is now its second-biggest trading partner ($96.3 billion in 2014), and that 500 Asean companies have a presence in the former British colony.
Asean itself was ranked the seventh biggest economy in the world last year. With the integration into the Asean Economic Community (AEC), it will be the fourth biggest in the world by the end of 2015. China’s trade with Asean grew 8 percent in 2014, faster than the 3.4-percent
increase in its trade with the rest of the world, according to Xu Ningning, executive president of the China-Asean Business Council. Bilateral trade with Asean is projected to reach $500 billion this year, or a growth of 10 percent from last year, and to $1 trillion by 2020.
Establishing the AEC is a laborious task for the 10 nations that make up Asean, and everyone at the Hong Kong forum agreed that help from neighbors, especially China, should be welcomed. Now comes China’s New Silk Road project, a $40-billion initiative divided into the Maritime Silk Road (which seeks to link various seaports in the region from China to Southeast Asia to East Asia all the way to Europe) and the Silk Road Economic Belt (which seeks to significantly strengthen economic and cultural trade among the nations along the Silk Road route). The project’s aim—including the cooperation between China and South and Southeast Asia—is touted to be a game-changer, with the potential to alter the regional and global economies.
In preparing for this, the Philippines can learn from Indonesia. Bank Indonesia deputy governor Perry Warjiyo explained how his country is getting ready, focusing mainly on three aspects. The first is to make sure that Indonesia’s economic fundamentals are strong, with the proper policy environment. The second involves structural reforms to open investment and trade. Warjiyo said that the Indonesian government has removed big subsidies on electricity and fuel, and that prices are now
market-based, freeing $21 billion for the government to spend on needed infrastructure. Indonesia is developing infrastructure and industry at a rapid pace, building 15 new airports and expanding 50 existing ones, and building 20 new seaports and expanding 115 existing ones. It has also added 3,000 kilometers of new roads and toll roads, and allocated $450 billion for infrastructure spending over the next five years. Third, Warjiyo said, Indonesia is engaging in cooperation on trade and investment not only with China but also with the United States and Europe.
At this point, however, what is crucial is China’s noneconomic relations with Asean, at least with members such as the Philippines and Vietnam. Michael Yeoh, cofounder and chief executive of the Malaysia-based Asian Strategy and Leadership Institute, emphasized that while prospects for Asean and its relations with China are getting better, it is very important for both China and Asean to address this most critical issue: a peaceful resolution of the West Philippine Sea (South China Sea) row.
Yeoh’s suggestion is for China to show “peace and goodwill” in November, referring to the annual leaders’ meeting of the Apec (Asia Pacific Economic Cooperation) in Manila, regarding this maritime dispute. “Connectivity, community and centrality—China should focus on these three Cs with Asean to boost relations with the region,” he added.
While Asean stands to gain from increased ties with China, the Asian economic giant will also benefit from building trade and investment relations with its neighbors. Regional cooperation has proven to be beneficial in other parts of the globe. China can choose to be a big
partner of Asean in trade and investments rather than a bully, as it is being pictured in the ongoing maritime territorial dispute with its neighbors.
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