CARI Viewpoint: ASEAN needs to move forward with a coordinated post-pandemic recovery response while pursuing forward-looking community-building and market integration

CARI Briefings on How can ASEAN bounce back: Can the ASEAN Economic Community Retain its Vision in a Post-Pandemic World?

Published on 9 July 2020 | Written by Aznita Ahmad Pharmy, Research Fellow, CIMB ASEAN Research Institute

CARI Viewpoint: ASEAN needs to move forward with a coordinated post-pandemic recovery response while pursuing forward-looking community-building and market integration

CIMB ASEAN Research Institute (CARI) organised its third edition of “CARI Briefings: COVID-19 Economic Recovery Plan Series titled “How Can ASEAN Bounce Back: Can the ASEAN Economic Community Retain its Vision in a Post-Pandemic World?” on 3 July 2020 featuring His Excellency Dato Lim Jock Hoi, Secretary-General of ASEAN. The session was moderated by Tan Sri Dr. Munir Majid, Chairman of CARI, and the discussion centred on what ASEAN is doing to sustain the economies of member countries, its regional response and coordination towards a robust post-pandemic recovery and efforts to sustain momentum to achieve its vision.

During the briefing, among the key insights shared were:

1) ASEAN responded quickly to the COVID-19 pandemic

a) ASEAN merchandise trade down 32% in 2020 due to COVID-19 and its economy is projected to contract by 2.7%, a first since the Asian Financial Crisis

The world is currently facing an unprecedented health and economic crisis due to the COVID-19 pandemic. H.E. Dato Lim Jock Hoi said in ASEAN alone, the number of confirmed COVID-19 cases is estimated to be around 150,000 while the number of deaths is around 4,500.

According to Dato Lim Jock Hoi, the economic situation around the world is worsening, with a 4.9% contraction projected for the global economy, a 32% drop in global merchandise trade projected in a worst-case scenario in 2020. In terms of investment, global FDI is expected to decrease by up to 40% in 2020, bringing it down to below US$ 1 trillion for the first time since 2005, while FDI flows to developing Asia is expected to decline between 30% to 45%, he said.

In ASEAN, the region is expected to contract by 2.7%, a first in 22 years since the Asian Financial Crisis. Among ASEAN member states, Dato Lim Jock Hoi said the economic outlook varies: while some are expected to see a considerable contraction, others will be faced with stagnation, and just a few can still observe growth, albeit much more muted than the previous years. He revealed that more than 40% of the region’s workforce and 50 million enterprises are in the hard-hit sectors, while over 200 million informal sector workers have their livelihoods at risk.

b) ASEAN members responded swiftly to address the pandemic

“ASEAN individually and collectively as a region has been very quick in response to the pandemic and in the immediate instances, national governments sped up and ensured financial liquidity and market stability. Stimulus measures were rolled out on an unprecedented scale and speed to bolster the health system, save lives and safeguard the livelihood of most of the vulnerable groups,” said Dato Lim Jock Hoi.

“Regionally, the early announcement of a commitment to work together in the fight against the pandemic was critical to set the tone especially as the immediate reaction of many countries around the world to turn inward [in looking for solutions],” he added.

In March 2020, ASEAN Economic Ministers (AEM) announced their commitment to keep markets open and ensure supply chain connectivity, particularly essential goods. This commitment has since been materialised as the ASEAN Hanoi Action Plan on Strengthening ASEAN Economic Cooperation and Supply Chain Connectivity in Response to the COVID-19 Pandemic. The action plan was adopted on 4 June by the AEM and further endorsed by the ASEAN Economic Community (AEC) Council on 19 June, and by ASEAN leaders on 26 June at the 36th ASEAN Summit.

Dato Lim Jock Hoi pointed out that commitment alone was insufficient to drive the region’s response to the pandemic. The establishment of the ASEAN Coordinating Council Working Group on Public Health Emergencies (ACCWG-PHE) was instrumental to ensuring the right steps were taken; the working group had its first meeting on 31 March. Reporting directly to the ASEAN Coordinating Council, Dato Lim Jock Hoi said the cross-sectoral and cross-pillar working group allows for a holistic and coordinated response, stronger political buy-in and prompt decision-making process. “This is one area we will be putting more emphasis on how to work together among the three pillars [of ASEAN],” he added.

c) Cross-sectoral measures to mitigate the economic fallout from COVID-19

At the sectoral level in ASEAN, the commitment to work together was also made by the most affected sectors such as food and agriculture, tourism and other sectoral bodies, according to Dato Lim Jock Hoi.

He cited the food and agriculture sector which committed to cooperate to ensure the continuance of food security, safety and nutrition in the region, in light of COVID-19’s impact on food supply.

The tourism sector is committed to coordinate measures in the new normal and to work together for a more resilient and sustainable recovery. “This is an important area because most of our member states’ economies are very much dependent on tourism. Other sectors are also looking at how COVID-19 has affected or raised the issue relating to their work such as consumer protection, digital economy and transport,” commented Dato Lim Jock Hoi.

He added that at the highest political level, ASEAN leaders continue to lead the region’s response, such as holding the Special Summit on COVID-19 on 14 March, and the virtual 36th ASEAN Summit on 26 June, where the leaders announced:

The establishment of the COVID-19 ASEAN Response Fund,
The setting up of regional reserves of medical supplies for public health emergencies,
The development of standard operating procedures (SOPs) for public health emergencies, The development of a comprehensive recovery plan, and
A proposal to look into the feasibility of an ASEAN safe travel corridor to explore facilitated movement of people such as business people as the region slowly enters into the new normal.

2) How ASEAN should move forward

With the health and livelihoods of the people in the region at stake, many are looking to see how ASEAN as a region takes the next step. Dato Lim Jock Hoi presented three points on how ASEAN should proceed.

a) Coordinated post-pandemic recovery plan

“ASEAN must have a coordinated, whole-of-community, comprehensive recovery plan, that will take ASEAN through the recovery stages, from reopening to recovery, and to long term resilience. Such a plan shall be robust, credible, and pragmatic. It needs to articulate clearly on how the region will work together across different areas affected by COVID-19,” said Dato Lim Jock Hoi.

The ASEAN Secretary-General expressed his appreciation to the private sector, particularly the ASEAN Business Advisory Council, and the joint business councils, who have helped to further distil the prioritised recommendations including the idea of an ASEAN Special High-Level Commission (AHLSC) and Special Business Advisory Body (SBAB).

The prioritised recommendations will be directed to the appropriate channels and ASEAN will continue to work on its recovery through dialogue with other external partners.. When asked by Tan Sri Dr. Munir for an update on the AHLSC proposal, Dato Lim Jock Hoi said that it is a work-in-progress. “We are working with the ACC on how we can best address this issue.”

b) Continuation of ASEAN community-building and market integration initiatives

Even with the many pressing issues that ASEAN has to deal with currently, the region must continue its work towards achieving its vision.

“Progress in ASEAN community-building and regional integration efforts is more important now than ever. The global economy will significantly slump and the recovery will be long. Neither the external economy nor the domestic/regional economy can act as the automatic engine for recovery,” Dato Lim Jock Hoi pointed out.

“The region must be prepared to seize the opportunities presented by the post-pandemic world. To this end, enforcement of the implementation of AEC commitments will be key. Commitments and initiatives that are critical for market integration and regional competitiveness must forge ahead,” he said.

He highlighted the current initiatives important for ASEAN:

ASEAN Single Window (ASW): More effort should be directed to expand documentation to be exchanged on the ASEAN Single Window. Similarly, the feasibility of expansion to other partners should be explored,
ASEAN-Wide Self-Certification (AWSC): The operationalisation of the ASEAN-Wide Self Certification (AWSC) is expected by 1 September, but remaining countries must accelerate the domestic process to ratify the relevant protocol in time,
ASEAN Trade in Goods Agreement (ATIGA): The general review of ATIGA will need to be sufficiently ambitious to help the seamless flow of goods in the region and address past implementation challenges,
ASEAN Trade in Services Agreement (ATISA): The signing and ratification of ATISA need to be accelerated so as not to lose out the competitiveness rendered by our services sector,
Investment facilitation: Much more needs to be done to promote and facilitate investment into the region, particularly those that are sustainable, environmentally and socially, and that can better prepare the region for the new digital era,
ASEAN Agreement on Electronic Commerce: Remaining ASEAN member states should also complete the ratification of the ASEAN Agreement on Electronic Commerce to allow for its entry into force, so that work in this area can be reinvigorated,
Regional Comprehensive Economic Partnership (RCEP): The signing of the RCEP in 2020, as mandated by ASEAN leaders, will boost the confidence needed for a faster and more resilient recovery,
Mid-term Reviews: ASEAN is undertaking the important exercise of the mid-term review of the ASEAN Community Blueprints, the Master Plan of ASEAN Connectivity 2025, and the review of the Initiative for ASEAN Integration (IAI) Work Plan III 2016-2020.

c) ASEAN needs to build a stronger, more resilient, inclusive and sustainable future

According to Dato Lim Jock Hoi, the post-pandemic world will not be a return to business-as-usual. “The onus is on us to make sure we take this period as an opportunity to be even stronger after the pandemic,” he said.

To achieve this, he presented the following areas for consideration:

Mid-term review to modernise ASEAN’s market
Internally, ASEAN should use the mid-term review and the pandemic as an opportunity to really modernise its market and business/investment environment, and thus realise the full potential of the intra-ASEAN market.
ASEAN must push forward its digital agenda
ASEAN must now forge ahead with its digital agenda that will also underpin the region’s future growth potential. Digital transformation is not a standalone sector in ASEAN’s work; the development of a consolidated strategy on the fourth industrial revolution and the ASEAN Digital Master Plan will contribute to this effort.
Human capital development that would create a more inclusive ASEAN
Human capital development must, therefore, play a key part of the ASEAN agenda, and the focus must be to expand opportunities for all segments of society, particularly the vulnerable groups. Similarly, more effective and participatory stakeholder engagement is needed for a more inclusive ASEAN.
Comprehensive sustainability agenda to ensure long-term resilience
As ASEAN looks forward to a post-pandemic world, we need to address the region’s long-term resilience by promoting sustainability in all aspects. We need to re-think our existing approaches to sustainability, which cannot be tackled from the environmental perspective alone, but also from the perspectives of financing, production, consumption, energy, standards, and so on.
Commitment to an open, rules-based and non-discriminatory multilateral system
ASEAN shall continue to advance the interest and priorities of its people while contributing to an open, rules-based, and non-discriminatory multilateral system, which will best benefit small and medium-sized economies like ASEAN. The region should participate in relevant reform efforts, to ensure that the multilateral system remains effective, relevant, fair, and inclusive.

3) Questions and Answers

During the ensuing questions and answers session, the following topics were discussed. Dato Lim Jock Hoi was joined by his colleagues, Deputy Secretary-General for the ASEAN Economic Community Dr. Aladdin D. Rillo; External Economic Relations Division Assistant Director, Anna Robeniol; and ASEAN Integration Monitoring Directorate (AIMD) Director, Julia Puspadewi Tijaja.

a) The effectiveness of ASEAN mechanisms in addressing COVID-19

In dealing with the repercussions of the COVID-19 pandemic, Tan Sri Dr. Munir pondered if ASEAN mechanisms were fit-for-purpose, particularly how the decision-making process is for the ASEAN Coordinating Council.

According to Dato Lim Jock Hoi, the ASEAN Coordinating Council (ACC) is the highest body before the ASEAN leaders. The three community councils (political-security, economic, socio-cultural) are required to pass their reports to the ACC which acts as the gatekeeper for the ASEAN Leaders’ Summit. “This is where the COVID-19 is being handled by the ACC and the ACC created another working group called ASEAN Coordinating Council Working Group on Public Health Emergencies,” he explained.

He said that the public health emergencies working group is represented by the senior officials of all the three community councils and therefore will address cross-pillar and cross-sectoral issues. “It is important that we should utilise the mechanism because this mechanism will address the cross-pillar, sectoral and issues.

b) Private sector’s role in ASEAN’s economic recovery still important

The private sector in ASEAN has been anxious to see significant progress in ASEAN’s efforts to promote trade facilitation and market integration. A question was put forth on what more could be done by the private sector to help ASEAN achieve economic integration.

Dato Lim Jock Hoi noted that trade facilitation was an important area in the region’s post-pandemic recovery plan and would require the support of the private sector. On what more the private sector can do to further assist ASEAN, Dr. Aladdin provided some suggestions.

“In my view, one important area where the private sector can assist is in terms of how we can restore the supply chain connectivity in the region. There are two possibilities where businesses can help: one is in terms of the ability of the private sector to enhance information sharing among the people associated with the supply chain. Secondly, the private sector can invest in [technology such as Big Data and AI] for ASEAN to restore the supply chain connectivity,” he said.

c) RCEP will be signed in 2020 but may not enter into force in 2021

The signing of RCEP is obviously very important for the region, particularly since it sends a signal that ASEAN is moving towards regional integration and freeing the flow of trade and investment in other sectors, said Dato Lim Jock Hoi. However, he opines that the ratification will take some time.

“We are working very hard now to prepare the RCEP agreement for signing, hopefully by November when Vietnam hosts the next ASEAN Summit,” said ASEAN External Economic Relations Division Assistant Director, Anna Robeniol.

According to her, due to the different domestic processes for each signatory to ratify the agreement, the agreement may not enter into force next year. Under current arrangements, the agreement has to be ratified by at least six ASEAN member states and four ASEAN FTA partners for it to enter into force.

4) Conclusion

ASEAN currently needs to address challenges on many fronts. In terms of the COVID-19 pandemic, it needs to balance between measures to control the number of infections and reopening the economy to protect the livelihoods of its people.

In the regional context, while the bloc needs to attend to the urgent issue of the pandemic, it should remain steadfast towards achieving its goals of community-building and economic integration. ASEAN’s institutional arrangements must be fast-tracked. The challenges posed by the current COVID-19 crisis require swift decisions that are workable and can be executed with speed. The proposal to set up the ASEAN High-Level Special Commission is a potential pathway that can execute quick decisions since it would comprise leaders who are second only to the ASEAN leaders.

ASEAN must also strive to strengthen its cooperation amongst member states in order to deepen social and economic integration. Commitments have been made at the regional level to address the economic impact of the pandemic on hard-hit sectors such as tourism, both at the national and regional level. ASEAN must not waste a crisis and truly work as a united group to emerge from this crisis stronger and more resilient.

As mentioned by Dato Lim Jock Hoi during the webinar, commitment alone is insufficient and the mechanisms are in place to drive effective implementation of the measures. The regional bloc will also work on its post-pandemic economic recovery through dialogue with external partners. He said, “The world is facing a collective hardship, and there’s never a better time for cooperation and partnership.”