With a 600-million strong population which is twice that of the United States, more than 3,000 public listed companies and a gross domestic product (GDP) growing faster than the global average, it is a given that the Asean region is a force to be reckoned with and offers much growth potential.
Prof Kishore Mahbubani puts it well when he says that overall the Asean glass may be “half full but it is going to become more full in the days to come.”
“Asean moves like a crab … it takes two steps forward, one step backwards, one step sideways … and if you watch it in slow motion, you won’t know where it is going,” says Kishore, dean and professor in the practice of public policy from the Lee Kuan Yew School of Public Policy at the National University of Singapore.
“But if you slice it decade by decade, for each decade, Asean is far ahead after every 10 years – that’s the magic of Asean.”
“And that’s they way I see it moving ahead.”
Kishore was giving his views on the Asean economy as one of the guest speakers at a panel discussion held in conjunction with the Invest Asean 2014 conference organised by Maybank Kim Eng in Singapore recently.
He says inter-Asean trade has remained at 25% (of total Asean trade with the world) since decades ago but the difference is this.
“Total Asean trade with the world was roughly US$400bil (RM1.31 trillion) in 1990, so 25% of that was US$100bil, now it is around US$2.2 trillion, so 25% of that is over US$500bil which means it has gone up five times eventhough it has remained at 25%.”
This shows inter-Asean trade has grown significantly and will continue to grow in terms of volume, Kishore opines.
Stronger CLMV nations
Citing data from reports, he says the amount of trade of CLMV countries (made of Cambodia, Laos, Myanmar and Vietnam) with the other Asean countries has grown faster than the original six Asean countries with each other, which suggest that they have become more integrated into Asean relatively speaking, to their positions. The original six are Malaysia, Singapore, Indonesia, the Philippines, Brunei and Thailand.
While Cambodia and Laos are small and vulnerable, Vietnam has gone through a bad patch and is coming out of it and Myanmar, if the political situation resolves itself, is by far the most resource-rich country in South-East Asia, Kishore, points out.
Indeed, many companies have taken advantage of this and have been looking at Myanmar to invest in , calling it “the last frontier.”
But many have also been discouraged as its rich natural resource environment coupled with a young vibrant population is accompanied by poor financial, legal and infrastructure systems.
In his report released in conjunction with the conference, Maybank Investment Bank’s chief economist Suhaimi Ilias points out as a whole Asean possesses ample resources to “catalyse and sustain” its growth and development.
It has the “human resources” with its huge population, natural resources that range from agriculture, plantation, oil & gas as well as minerals and readily accessible “financial resources”– namely the large pool of domestic savings, he notes.
While some argue that the difference in economic levels among the 10 countries is a challenge in creating a common marketplace for the region, Suhaimi opines that diversity, rather than being a hindrance actually creates opportunities for its members to complement each other via specialisation, instead of competing with each other.
By 2015, the Asean Economic Community or better known as the AEC, which will incorporate a single market and production base for all Asean countries is supposed to come into force.
Former secretary-general of the United Nations Conference on Trade and Development Dr Supachai Panitchpakdi feels the AEC has to move quickly into Asean and that priority should not be given to the Trans-Pacific Partnership (TPP) instead.
“I’m saying this with a lot of criticism from the Westerners because they would like the TPP to emerge so that they can maintain a stake in the Pacific region.”
The TPP is a free-trade agreement currently being negotiated between 12 countries namely Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, US, Vietnam, Japan, Canada and Mexico.
“We have to be Asean-centric.
“We used to be Japan and US-centric, now we are China-centric, we need to be Asean-centric,” Supachai reiterates.
In the same panel discussion, the issue of China’s position in Asean was also brought up.
“Asean for China is very much on top of the agenda,” according to Supachai, also a key speaker in the panel discussion.
China, he says has a lot of issues – there is a lot of inequality there but they don’t want political issues to cloud over economic issues.
Supachai, who is also a former banker and ex-Thai deputy prime minister says China wants economic development in Asean and Asia as a whole to “help it” maintain its pace of economic growth because the country, he says simply cannot afford to grow less than 7% a year.
Malaysia is China’s number one trading partner among Asean countries and its sixth largest globally.
Kishore offers an explanation on why China is courting the Asean region.
“Let’s be clear about why this is happening,” he says.
“The Chinese have shrewdly calculated for geopolitical reasons that the day might come when the United States might launch a containment policy against China.
“This is conceivable … so in a pre-emptive strike, against an American containment policy, China has decided to make all its neighbours dependant on trade with it, that’s the reason why Asean-China trade is shooting through the roof.”
Founder of North Yard Economics, Daniel Altman in his talk at the conference entitled, “Setting the Stage for Asean”, notes matter-of-factly that China is a major partner for Asean but not the only one.
Altman highlights some of the key issues that some Asean countries may face over the next three to five years, which include financing constraints, especially those at the early stages of financial development.
Economic integration within the AEC will be challenging, the American economist says but it will be worthwhile.
“Services and labour migration are often sticking points.”
Datuk Paul Low, Minister in the Prime Minister’s Department who was also part of the discussions touched on the area of governance and sustainable development.
“If you want to rationalise your fiscal policy then you must rationalise your governance as well,” he says.
The challenge is for governments to bridge the gap between urban and rural, the rich and poor and to see that opportunities are available for all.
“I think this is the challenge that every single government must face even more so for the governments that come from the socialist type of system.”
“The challenge is also for governments to bring into the less developed nations a system of governance that encourages sustainable growth.”
Invest Asean 2014 saw the participation of representatives from 17 countries including companies with a total of close to US$135bil market capitalisation and funds totalling more than US$14 trillion in assets under managament.
A believer in the Asean story itself, Maybank Kim Eng, which is the investment banking arm of Malayan Banking Bhd (Maybank), is present in six Asean markets and has a combined sales force of 1,800 to service these markets.
It has more than 170 touchpoints in the six markets.
Maybank completed the acquitision of Singapore-based Maybank Kim Eng in 2011, giving the former an immediate platform for investment banking activities in the region.