ASEAN’s Economic Outlook

The Khmer Times, 29 August 2016

Although it is a work in progress, the Asean Economic Community has gained steam and attracted remarkable attention and interest from the international community, particularly foreign investors.
Asean’s economy is projected to grow at 4.5 percent in 2016 and 4.8 percent in 2017. The region needs to deal with potential external and domestic risks or shocks to maintain its growth momentum.
Asean is growing faster than any other region in the world. Private consumption is believed to be the main driving force of future Asean economies. If the regional governments quickly harmonize regulations and liberalize the information technology sector, the digital economy has the potential to be the new driver of Asean’s economy.
With a population of 625 million and a combined gross domestic product of $2.43 trillion in 2015, Asean is one of the main global markets and economic powers.
Asean is the world’s third largest labor force after China and India. By 2050, Asean is predicted to be the fourth largest world economy.
Asean regional economic integration is open and inclusive. Asean total mechanized trade hit $2.28 trillion in 2015, of which intra-regional trade within Asean accounted for 24 percent.
China is Asean’s largest trading partner, which accounts for 15.2 percent of total Asean trade, followed by Japan (10.5 percent), the EU (10 percent) and the US (9.3 percent).
The inflow of foreign direct investment (FDI) to Asean increased by 18.5 percent in 2015 and accounted for $120 billion, while intra-Asean FDI remained stable at $22.1 billion.
FDI concentrates on service sector and manufacturing.
According to the Asean Business Outlook Survey 2017 by the US Chamber of Commerce and AmCham Singapore, the top reasons Asean markets are more important for worldwide operations and revenues over the next two years are relatively high economic growth rate, a rise in the middle class, deepening regional integration and improvement in infrastructure.
The survey also looks at the main obstacles in regional economic integration particularly in areas of government administration.
The obstacles that need to be overcome or changed include corruption, transparency, good governance, non-tariff barriers to trade (excessive paperwork, discriminatory regulations), responsive regulatory regimes, labor mobility, standards of conformance and intellectual property rights.
Asean remains one of the most outward-looking economic regions in the world, although the global economy is facing inward-looking political orientation with a raising trend of protectionism in Europe and America.
The Brexit decision in the UK and political rhetoric in the US election season have serious implications for the future of the neo-liberal global economic order.
However, for an open and liberal economic system to work and sustain, it necessarily requires good governance, just and fair industrialization and sustainable and inclusive development.
Otherwise, the development is not sustainable. The working class, the marginalized and the poor are left behind.
Asean is facing critical development gaps measured in terms of income distribution, education, healthcare, access to information technology and governance index. If the gap is not effectively and comprehensively addressed, Asean will not be able to realize its true community.
The study by the Organization for Economic Co-operation and Development suggests that Asean needs to further harmonize and synchronize regional initiatives and national agendas, reduce disparities in the region by assisting the less developed Asean members in their catching up phase, further integrate Asean into the world economy and strengthen monitoring and evaluation capacity of the regional blueprints.
Regulatory harmonization, institutional streamlining, seamless logistics development, good governance, sustainable and inclusive development, innovation, skills development and private sector development are the main areas of the regional economic cooperation agenda.
Asean needs to strengthen partnerships and promote a culture of shared responsibility between governments, the private sector and civil society to concretize regional agenda, which is more sustainable and inclusive.
Asean may also need to align its regional agenda with the United Nations Development Goals, which consist of 17 goals. An Asean-UN partnership or cooperation framework for sustainable development needs to be developed.
Asean will become one the top five world economic powers by the mid-21st century if it can effectively deal with the existing challenges and shortcomings, stand ready to address potential domestic and external risks and better harness multi-stakeholder partnerships for an inclusive, resilient and sustainable Asean community.

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