Can ASEAN rise to the next level?
Deputy director for investment, SMEs, competitiveness and issues in the ASEAN Directorate of ASEAN Negotiation
ASEAN will celebrate its 50th anniversary this year as a momentous milestone for the region after five decades of success and achievements. This remarkable year will be led by the Philippines as the new ASEAN chair country.
Proclaiming this year’s theme, “Partnering for Change, Engaging the World,” Philippine President Rodrigo Duterte pledged to promote ASEAN, home to more than 640 million people at different stages of economic development, as the ideal model of regionalism and as a global player with the interests of its people at its core.
During the handover of ASEAN chairmanship from Lao at the ASEAN Summit last Sept. 8, the President promised to steer and guide the association to pursue initiatives and enhance cooperation with global partners, while retaining ASEAN’s centrality, unity and solidarity.
The 50th anniversary can become the starting point to prepare for new challenges that lay ahead in the region. As ASEAN chair and one of the founding members, the Philippines has the huge task of leading the region to better economic prospects, political stability and security amid major challenges within the country, within the ASEAN region and also in the wider world. Those challenges need to be faced and resolved simultaneously.
We can see that trade within ASEAN has been stagnant at between 20 percent and 24 percent over the last couple of years, even though the elimination of tariff barriers has been an important point on the agenda. Unimplemented measures and pending matters still exist in the second year of the ASEAN Economic Community (AEC), which started in 2015. These issues should be addressed more deeply, while ASEAN also tries to broaden its ambitions by endorsing the ASEAN Blueprint 2025 as a new milestone to be achieved.
Rising protectionism correlated with stagnating economic growth worldwide and growing unease over globalization creates a major setback to efforts of regional integration and could disrupt global supply chains.
In addition, business growth (for example in the digital economy) has lagged behind international commitments. Negotiations on a new global trade agreement have stalled. Progress on the Trans-Pacific Partnership has been abruptly ended after Trump’s victory, creating greater pressure for ASEAN to conclude negotiations on a Regional Comprehensive Economic Partnership agreement.
Adding extra weight to the chairmanship role, there have been problems in several member states (Indonesia is on that list) to abide by existing commitments or upgrade commitments made under the ASEAN and ASEAN+1 free trade agreements. The absence of an adequate dispute-settlement mechanism to address the problem makes matters worse.
The way to tackle these problems is by discussing them the “ASEAN Way,” which embraces solidarity rather than legal rigidity. Limited budgetary and human resources among all trade negotiators within the region are an additional burden to concluding talks in a timely manner.
ASEAN faces prominent economic challenges, such as the rising political and economic dominance of China, uncertainty and protectionism in the US under Trump, questions about Brexit and European stability as well as a possible global financial crisis.
Taking into account a global economic crisis and challenges within the region, can ASEAN reach a higher level of integration during the Philippine chairmanship?
To achieve that objective, the Philippine government has proclaimed nine main deliverables to be achieved this year. They are regional self-certification of micro, small and medium enterprises (MSMEs), an ASEAN trade facilitation index, a focused and strategic action agenda on investment, conclusion of the ASEAN Trade in Services Agreement, a peer review for the AEC, ASEAN inclusive business, the ASEAN Declaration on Innovation, Women and Youth Entrepreneurship.
With a gross domestic product of US$2.6 trillion, the AEC is the seventh-largest economic block. With a population of more than 620 million, it is the third largest in Asia, after China and India. In this regard, the Philippines will highlight ASEAN MSMEs as the main drivers of inclusive growth in the region.
It’s very reasonable that the Philippines want to foster the development of SMESs, since this can help overcome development barriers and stimulate national and regional economies. SMEs as a key driver and contributor to the GDP of ASEAN economies account for 95 percent to 99 percent of all business establishments and for 51 percent to 97 percent of employment in many ASEAN members.
The GDP contribution of SMEs is significant at 23 percent to 58 percent, and their impact on exports ranges from 10 percent to 30 percent. By enhancing their market access, SMEs can take advantage of trade and investment opportunities and benefit from regional economic integration.
However, most SMEs on a domestic and regional scale still struggle in their operations, which limits their capacity and makes it difficult for them to compete internationally due to limited funds and resources, poor packaging, networking and marketing plans.
The question is, can those issues be solved? Quite simply, doubts still remain. In addition, there are growing fears about possible attempts to reject Duterte’s programs. Nevertheless, strong leadership is actually more needed now to give the region direction into becoming stronger and more stable.
All members have to fully support the achievement of these deliverables. The responsibility to move forward with economic integration rests not solely with the chairman country; every ASEAN member country needs to share the burden to expedite process, support all agreed work plans and give supporting input to accelerate integration and resolve any remaining domestic and regional matters.
It is also crucial for all members to continue to find amicable solutions to remaining issues in order to prevent further gaps and establish a more effective dispute settlement mechanism to address future issues. All members should exploit all the foreseeable economic opportunities to avoid greater losses across the region. If these ideals can come be achieved, then surely we can rise to the next level.
The writer is the deputy director for investment, SMEs, competitiveness and issues in the ASEAN Directorate of ASEAN Negotiation, Directorate General of International Trade Negotiation. The views expressed are her own.
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