Economic integration

ASEAN must act more boldly on economic integration – Universities

Kevin Chen and Quah Say Jye

Singapore ●
Fri, May 27, 2022

2022-05-27
01:35
11
02c2f042c5018a82e8094ec752eb6ed3
2
Academia
digital transformation, ASEAN, economic, community, political, action, globalization, master plan, regional
Free

Just over a year ago, ASEAN released its mid-term review of the 2025 ASEAN Economic Community (AEC) Master Plan. The review indicated that 54.1% of the elements of the document had been completed, and 34.2% in progress. The grouping was hailed for making “significant strides” towards economic integration, although it also urged to “accelerate [its] pace of implementation.

On reading the May 2022 balance sheet, this finding appears more like a warning. Amid geopolitical competition between the United States and China, the economic fallout from COVID-19, and the Russian invasion of Ukraine, some observers have argued that the post-1990 era of globalization was over. The global share of trade in gross domestic product, a key indicator for measuring global integration, has been steadily declining since 2008 and may well continue to decline.

The extent and nature of this de-globalization remains to be determined. Nevertheless, ASEAN can leverage its internal economic potential to weather this storm. Regional policymakers have long recognized the region’s market potential, and ongoing plans such as the Comprehensive ASEAN Recovery Framework seek to capitalize on intra-regional economic activity.

The inconvenient truth, however, is that the group’s normal methods of policy-making could get in the way of such aspirations. ASEAN’s loosely prioritized policy network creates a heavy political landscape that arguably favors discussion over action.

For ASEAN to emerge strengthened from this turbulence, it must act faster and bolder to realize its potential.

For ASEAN, de-globalization is neither a new nor totally negative issue. Member states such as Vietnam have benefited from manufacturing outsourcing spurred by the US-China trade war and will continue to implement domestic policies to take advantage of future opportunities.

However, de-globalization still poses a threat to ASEAN as a region due to its implications for supply chains. There is therefore a growing need for ASEAN to support intra-regional trade as an insurance plan, by improving trade mechanisms such as the ASEAN Single Window and the Trade in Goods Agreement of ASEAN (ATIGA) while pursuing efforts to support the digital economy.

The typical ASEAN approach to such challenges is paved with political documents. Ministerial meetings approve broad themes in overarching documents such as the Digital Inclusion Framework Action Plan (DIFAP). Subsequent meetings at ministerial and senior official levels produce blueprints and strategies to provide more concrete implementation plans. Intermittent roadmaps, such as Bandar Seri Begawan’s Digital Transformation Roadmap (BSBR), identify key initiatives to accelerate.

In theory, this suggests a complexly crafted political landscape. In practice, however, things are more complicated.

First, ASEAN strategy documents tend to paint in broad strokes and not specify the relative importance of their themes. This lack of prioritization can result in documents that look more like laundry lists than coherent strategies. As noted in the ASEAN Digital Masterplan 2025 (ADM 2025), for example, such a “gunshot approach” taken by earlier documents has dissipated the attention and energy of policy makers.

Second, ASEAN strategies tend to focus on low-hanging fruit such as education. Later actions, such as complicated reforms, are often avoided or delayed indefinitely. Certainly, the intergovernmental nature of ASEAN prevents it from calling for drastic political changes, and it is necessary to establish basic agreements between decision-makers. Yet these efforts take up too much of ASEAN’s efforts. As the mid-term review of the ACS Master Plan observes, ASEAN needs to focus less on studies and more on tangible policy reforms.

Recent documents such as the BSBR have included priority implementation timelines and higher ambitions, including a comprehensive ASEAN Digital Economy Framework Agreement. However, this raises a third problem: willpower. The mid-term review criticized the uneven implementation of the ACS blueprint, with “easier” initiatives prioritizing difficult commitments such as tackling non-tariff measures. Best practices must be enshrined in both policy and practice.

ASEAN’s organizational structure, which emphasizes consensus and conversation, limits the speed with which it can develop policy. Nevertheless, this can be solved by moderating ASEAN’s expectations. For example, policymakers could facilitate implementation by using subnational policy sandboxes, which are already part of the ASEAN Smart Cities Network.

With smaller-scale implementation, such an approach could offer a useful exercise in building confidence and expertise for policymakers as they prepare for more ambitious efforts.

In the longer term, ASEAN needs to update key policy documents to reflect emerging issues. When ATIGA was signed in 2010, the digital economy was barely on the political radar. Now, as an important engine of growth, it is increasingly necessary to include digital issues in the agreement.

Ideally, this inclusion should involve a special chapter for digital trade, in line with the Digital Economic Partnership Agreement between Singapore, New Zealand and Chile. ASEAN’s emphasis on consensus makes a few lines on the importance of the digital economy a more likely outcome, with an open door for future annexes dealing with digitalization.

Still, ASEAN should resist the urge to kick the box. While regional integration remains a work in progress, some ASEAN members have already signed trade deals with digital economy chapters, including the Comprehensive and Progressive Trans-Pacific Partnership. A gold standard for action is already there – ASEAN policymakers have yet to recognize it.

ASEAN can still protect its member states against the alarming trend of de-globalization, but it must find the strength to pursue regionalism with renewed force.

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The authors are researchers from the Asia Competitiveness Institute, Lee Kuan Yew School of Public Policy, National University of Singapore.