AEC Blueprint 2025 Analysis: Paper 16 | An analysis of the ASEAN priorities on Global Megatrends and Emerging Trade-Related Issues
by Dr. Bambang Irawan | Originally published on 31 January 2017
Global flows of goods, services and finance are very different today than they were 10 years ago. The advancement of technology has changed the global landscape and how people do business. Relationship between employers, workers and government, known as industrial relations, is nothing new, but the AEC has just recognised the importance of nurturing this tripartite relationship to foster a healthy industrial environment to promote ASEAN’s competitiveness. These are examples of trends and issues that will be beneficial if ASEAN could take care of them properly. Continuous cross-sectoral dialogue and public-private partnership will be of the utmost importance in dealing with them, and possible other trends and emerging issues later on.
The following report is part of a series which attempts to provide a detailed analysis on the ASEAN Economic Community (AEC) Blueprint 2025. Each report will cover a single element of the blueprint, providing a comprehensive look at past achievements, present problems, and the future plans of the AEC. Special attention will be placed upon the strategic measures outlined in the AEC Blueprint 2025. This report aims to provide insight into the viability surrounding regional economic integration under the AEC.
Global Megatrends and Emerging Trade-Related Issues
The rapid changes in world trade has encouraged ASEAN to include this new initiative in the AEC Blueprint 2025. The nature of global trade in both goods and services, as well as in foreign direct investments (FDIs), are now very different than it was a decades ago, prompting ASEAN to seriously take these into consideration when formulating their external economic strategies. The first pillar of the AEC Blueprint 2015, which is to establish the ASEAN region as a single market and production base, strongly remains in spirit in the new blueprint, under the first pillar of “a highly integrated and cohesive economy.” The components of a single market and production base, which include further and continuous liberalisation of trade in goods, trade in services, investment, greater cooperation in the financial sector, and facilitation of skilled labour movement across the region, are still very important components of the new blueprint. Therefore, emerging trade-related issues, has rightfully been included in the new blueprint as they will surely become important factors in shaping ASEAN’s future trade and regional economic policies.
This report has been prepared to provide some analysis on the aims at analyzing how this particular analysis can be beneficial for the AEC in the next period of implementation.
A. Targets under the AEC 2015 Blueprint
Global megatrends and emerging trade issues are a new initiative that was not yet a priority in the previous AEC Blueprint. Inclusion of this new priority in the new blueprint is expected to help ASEAN strengthen its trade policies and negotiations by taking into account new global trends that may significantly affect ASEAN’s way forward.
B. Significant Achievements To Date
- Given that the AEC Blueprint 2015 did not specifically include global megatrends and emerging trade-related issues, there were not any measured targets to be achieved by end of 2015.
- Nevertheless, we can look at how ASEAN has progressed in terms of moving goods along international supply chains. The three indicators used here are the International Supply Chain Connectivity Index (ISCCI) from the United Nations Economic and Social Commission for Asia and Pacific (UNESCAP). The ISCCI is made up of the trade across border (TAB) indicators of the World Bank Doing Business Report and the Liner Shipping Connectivity Index (LSCI) of the United Nations Conference on Trade and Development (UNCTAD). The following table shows how ASEAN member states have participated in the global supply chains (listed by their global ranks 2015)1:
- According to the UNESCAP report, Singapore is the global leader in international supply chain connectivity to support trading across borders (efficiency of import and export procedures). Malaysia is not too far behind, with Thailand and Viet Nam in the top 50 globally
- In terms of being part of international trade, it is very clear that the gap is still large among ASEAN member states. More work needs to be done just to ensure that the other member states are ready to participate in the global trade network. Attention to the global developments in trade and economic issues has become very important in shaping ASEAN future policies.
C. Current Issues and Challenges
- Closing the development gaps among member states, particularly in terms of capability in participating in global trade and value chains, should be a priority of ASEAN so that each member state can be an active player to take advantage in the global market and strengthen their external sector.
- The Initiative for ASEAN Integration (IAI), which is aimed at narrowing the development gaps between ASEAN6 and the CLMV countries, has been working on support, technical assistance and capacity building activities for the newer members of ASEAN. The IAI can be a strong avenue to expedite the process of narrowing the gaps.
D. Plans under the AEC 2025 Blueprint
- The AEC Blueprint 2025 does not formulate any strategic measure for this initiative. The blueprint simply outlines the general rationale and objectives of taking into account global megatrends and emerging trade-related issues to shape ASEAN’s economic policies. Further more detailed strategies may be needed along the course of 2016-2025 and those will be discussed later.
- Basically, the general information on this initiative in the new blueprint encourages ASEAN member states to look into some new potentially relevant issues such as industrial relations and technological advancement, which may require closer cross-sectoral cooperation among the sectoral working groups or working committees under the AEC.
E. AEC 2025 Blueprint Analysis
As mentioned above, there is no specific measure for this initiative. The analysis below refers to
some developments under the two possible issues mentioned in the blueprint.
F. Conclusion: Moving Forward with the AEC 2025 Plans
ASEAN needs to be closely monitoring the global changes and trends in trade and finance to be able to participate and take advantage of the opportunities offered. In this regard, improving market intelligence will be very beneficial to get the most immediate feedbacks on what is happening on the global scale and business arena. Closer public-private partnership (PPP) will significantly improve ASEAN’s ability to cope with and possibly participate in the increasing global flows as both sides will have resources that can complement each other substantially. One possible example of this is the development of the much needed infrastructure to allow the region to participate in global value chain activities. An Economist Intelligence Unit (EIU) report2 states that in developed countries, the governments are faced with the challenges of improving their infrastructure and through the PPP scheme, they invite the private sector to support financing and contribute their expertise and incentivized management to promote efficiency, better designs and innovative construction
techniques. The government’s role then is to develop conducive regulatory framework and effective institutions, which in turn gives the tax-payers best value in the government infrastructure expenditure.
- Within the ten-year period of the new AEC Blueprint, short-term plans can be formulated to provide quick guidance to the stakeholders on how to move forward. The public-private partnership mentioned above is a very important avenue in development of short-term, flexible and dynamic plans.
- Cross-sectoral dialogues must be significantly enhanced to be able to capture the new trends and how to deal with them. Given that ASEAN is still very sectoral in its implementation of measures, some form of semi-structured for a (for different areas of cooperation), endorsed by the highest authority, could be established to promote this kind of dialogues.
1 The table is taken from the Asia-Pacific Trade and Investment Report 2015: Supporting Participation in Value
2 The 2014 Infrascope: Evaluating the Environment of Public-Private Partnerships in Asia Pacific, EIU, 2014
ASEAN Secretariat (2008). ASEAN Economic Community Blueprint
ASEAN Secretariat (2015). ASEAN 2025: Forging Ahead Together
ASEAN Secretariat (2015). ASEAN Integration Report 2015
ASEAN Secretariat (2015). A Blueprint for Growth ASEAN Economic Community 2015: Progress and Key Achievements
Maragtas SV Amante, Tripartism in Social Security: Representation & Inclusion in Selected ASEAN Countries, presented at the Asian Conference of Globalization and Labor Administration, November 2014, Manila, Philippines
McKinsey Global Institute. Digital Globalization: A New Era of Global Flows, February 2016
UNESCAP (2015). Asia-Pacific Trade and Investment Report 2015: Supporting Participation in Value Chains