As Southeast Asia cautiously emerges from lockdown, the policy focus is shifting from triage to kick-starting their economies.

In its June forecast, the IMF estimated that Southeast Asia’s five biggest economies will shrink by 2 per cent in 2020, which is better than the global average of -5 percent, but it will still be a severe shock for a region that has experienced growth every year since the 1960s.

Rebuilding Southeast Asia’s growth engine will be a challenge. The region’s Big Three trade sectors – commodities, electronics and textiles – all face economic uncertainty as demand stalls. And investment, which has historically been an important economic growth driver, is set to fall dramatically across Southeast Asia, stunting the region’s manufacturing growth.

The temptation at times of global economic uncertainty is to pull up the drawbridge and try to isolate the economy. Even before COVID-19, there is evidence that Southeast Asia was retreating from internationalism as the global economy wobbled. In April 2019, the EU-ASEAN Business Council estimated that the 10 members of the Association of South East Asian Nations had imposed some 6,000 separate nontariff barriers to trade across the region.

But giving in to the temptation of more protectionism would be a mistake. Barriers built in an attempt to isolate an economy from uncertainty have a tendency to become barriers to growth.

Recovery from the pandemic is a challenge, but it is also an opportunity for a policy reset: a new chance to create a transparent, coordinated low-tariff trade environment which facilitates short-term recovery and sets the stage for long-term prosperity.

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