ASEAN needs to pull together to ensure economic recovery in 2021

Kuala Lumpur - The Insitute for Democracy and Economic Affairs (IDEAS) has published its ASEAN Integration Report 2020: To Compete or Co-operate? A call for ASEAN Convergence in Policy in the Wake of COVID-19. Economic growth for most of the ASEAN countries appears to have bottomed out during the second quarter of 2020, and recovery seems to be underway in the third quarter. Although the primary response to the pandemic has occurred at the national level, a regional response from ASEAN can play a complementary role. The recent signing of the Regional Comprehensive Economic Partnership (RCEP) between the 10-member ASEAN and five of its major trade partners should also pave the way for greater regional cooperation in undertaking structural reforms especially within ASEAN’s governance framework in order to spur higher quality economic integration.

The report assesses the state of the ASEAN integration in four distinct areas and highlights the challenges and opportunities arising from the pandemic: 

Supply chains: with many economies vying for the role as primary regional manufacturing base in the recent wave of firm relocation from China, it is tempting for member states to compete for Foreign Direct Investments in a ‘race to the bottom’. However, in the long-run, the report concludes that would be in the best interest of ASEAN member states to strive towards the goal of economic integration.

Aviation: air travel has been hard hit by the pandemic, but integration of ASEAN’s aviation markets offers a path to recovery. This would include liberalising ASEAN’s air space through reforms in regional aircraft requirements and relaxing ownership restrictions for ASEAN’s airlines to enable industry consolidation.

Digitalisation of logistics: the pandemic has stressed the need for digitalisation of logistics, to support the rapid growth in e-commerce accelerated by social distancing. The report outlines steps by which ASEAN can follow in the footsteps of the EU, starting with establishing a new Digital Transport & Logistics taskforce for both the private and public  stakeholders to build a common vision and road map for the region’s digital integration for the sector

Migration: movement of people across borders has been brought to a halt, highlighting the dependence of ASEAN economies on intra-regional migration. However, the report highlights the unequal focus within ASEAN migration policies which primarily exist to facilitate high-wage labour mobility rather than improving the governance of low-wage labour – which comprises the vast majority of people – and recommends ASEAN take the opportunity to adopt policies which can facilitate migration and minimise abuse.
 
IDEAS CEO, Tricia Yeoh commented that, “One unsurprising but ever-relevant conclusion from the report is that collaboration rather than competition is crucial in the COVID-19 recovery strategies ranging from travel, global supply chains, aviation, digitalization and migration. The foundations of ASEAN regional integration have already been set by recent efforts such as the launch of the ASEAN Economic Community (AEC) in 2015 and the AEC Blueprint 2025. However, the pandemic has exposed the limits in the current state of ASEAN integration. ASEAN Member States should take the opportunity of the pandemic to take concrete steps to strengthen ties as part of a sustainable recovery.”

This report is the culmination of various briefing papers and advocacy activities in the past year under IDEAS’ ASEAN Prosperity Initiative (API). The report urges ASEAN governments to consider a more concentrated approach towards cooperation as the region recovers from the pandemic. The report includes inputs from Dr. Jayant Menon, Visiting Senior Fellow at ISEAS and Senior Fellow at IDEAS; Ridha Aditya Nugraha, Assistant Professor at Universitas Prasetiya Mulya; and Suraj Nair, researcher on political economy of Malaysian industrialisation; and the IDEAS research team.