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Analysis
Improving Asean integration

Improving Asean integration

Southeast Asia advancing single market

by National University of Singapore authors

Wed 12 Apr 2017

The Association of Southeast Asian Nations has a combined population of more than 620m, a GDP greater than that of India, and the potential to be an influential economic bloc. To achieve this, member states must share their expertise, embrace digitalisation and commit to change.

The launch of the Asean Economic Community in December 2015, to promote a single market, incentivised countries like Vietnam to intensify their infrastructure development and improve regulatory transparency. Vietnam’s government is aiming to narrow the income gap between itself and the top Asean economies, as the region moves towards deeper integration.

Other middle-tier Asean economies, such as the Philippines and Indonesia, are also promoting development plans. The efforts of some of their peers, however, are yet to show meaningful results.

The region’s diversity is reflected in the World Bank’s Ease of Doing Business rankings. While Singapore ranks second globally, Myanmar sits at 170 out of 190 countries. Concerns remain over whether younger Asean nations like Cambodia, Laos and Myanmar can bridge the large regional development gap.

Poorer Asean nations are also being affected by global developments beyond their control. There are fears that the collapse of the Trans-Pacific Partnership and growing US protectionism could inhibit AEC goals.

Vu Minh Khuong, associate professor of the Lee Kuan Yew School of Public Policy at the National University of Singapore, disagrees. He argues the failure of the TPP has spurred a reflection in Vietnam over how to mobilise its strengths and seek out new ways to boost development.

Asean leaders had hoped the bloc’s nearly zero tariffs would stimulate exchange. But regional trade remains relatively low. Though 24.2% of total trade in 2013 for member states was intra-Asean, this represented only a 5% increase from two decades prior. Some Asean ministers still predict intra-Asean trade will reach 30% of member countries’ total trade by 2020, bolstered by AEC initiatives.

One way for less developed Asean nations to improve their economic competitiveness is to raise efficiency gains. Countries can carve out specialisms to enhance their competitive advantage in specific sectors and attract foreign investors to the region.

The Philippines has found success as the region’s call-centre hub. This reflects the low cost of doing business in the country and the high level of English literacy. Asean states might also look to Singapore as an example of regional excellence. The island nation has grown into a global hub for the petrochemicals industry, despite having no natural resources of its own.

Governments and the private sector must work together to create successful platforms for collaboration. There must be an honest sharing of best practices and the genuine desire to learn from one another.

AEC nations continue to demonstrate their commitment to substantive economic and political reforms, which benefit not only themselves but the entire region. In spite of its numerous and diverse socio-cultural practices and differing political systems, Asean stands out as one of the world’s most united trading blocs.

This is an edited version of an article that first appeared on Global-is-Asian, the digital platform of the Lee Kuan Yew School of Public Policy, and reproduced here with the permission of the National University of Singapore.

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