As countries around the globe look for ways to deliver growth in the post-pandemic world, ASEAN is well-positioned to leverage its unique strengths to thrive in the new landscape. The full economic impact of COVID is still difficult to ascertain, but what is beyond doubt is that there are major implications for almost every business sector, every country, as well as for the way we live. What is crucial now is how countries and businesses, both as individual entities and just as importantly in cooperation with each other, respond to this unprecedented crisis.
How the 10-nation ASEAN bloc can navigate the challenging path ahead was the theme of two online panels on August 25 of the Standard Chartered ASEAN Business Forum 2020, hosted in cooperation with Reuters, titled ‘Unlocking the Region’s Potential’.
“ASEAN boasts a combined GDP of nearly $3 trillion and a population of more than 630 million,” noted the Prime Minister of Vietnam Nguyen Xuan Phuc, in his opening remarks, going on to emphasise that, “ASEAN upholds the rule of law and has put in place stable and durable cooperation frameworks.”
The need for ASEAN to continue its drive towards openness, cooperation and multilateral approaches, in contrast to some of the more inward-looking tendencies that have emerged in some quarters, was a recurring theme of the discussions.
“We have now the opportunity to build a more resilient and integrated Asian supply chain, an Asian production region, as well as Asian markets, that are open to the world and become an example of how through openness, integration and risk management of supply chains, we can really have a win-win,” said Tharman Shanmugaratnam, Singapore’s Senior Minister and Coordinating Minister for Social Policies and chairman of the Monetary Authority of Singapore.
Shanmugaratnam also pointed out that ASEAN is set to benefit from a realignment of global supply chains that has been accelerated by the pandemic, particularly the shift to ‘China Plus One’ as companies diversify their production sites and China itself moves up the value chain.
Indonesia is one of the nations in a position to reap the rewards, suggested the country’s Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan. The minister hailed Indonesia’s new Omnibus Law, which aims to reduce bureaucracy, reform the labour market, streamline tax regulations and ease restrictions on foreign investment, as a major step towards making the country a more attractive business destination. Luhut also explained that Indonesia was aiming to move up the economic value chain and move away from its current dependence on raw material exports.
Navigating the shifting currents
The shift of production out of China “was well underway before the US-China tensions picked up,” noted Bill Winters, Group Chief Executive of Standard Chartered, but added he believed there is still an “underlying desire to continue to reap the benefits of globalisation.”
Shanmugaratnam agreed, saying, “If you look at the general trend within Asia, within Africa, the general trend is not looking inward, but looking outward.”
And there may help on its way for developing nations, which make up a majority of ASEAN, in the form of pandemic-related financial measures from the industrialised world.
“There has been a massive surge in fiscal spending, domestically, in many markets,” said Bill. “I think we’ve lagged a little in what will inevitably be some form of transfer of value into the developing world from the developed world in the form of debt restructuring or payment holidays or things of that nature.”
In terms of how to navigate the current tensions between the two global superpowers, Shanmugaratnam suggested ASEAN could forge its own path and not be squeezed between the interests of China and the United States, a view echoed by other panellists. The desire not to choose one side or the other, with all the risks that entails, is an approach ASEAN shares with much of the global business community.
“…what we mustn’t overlook is that ASEAN is not without its own leverage as an economic bloc, as a strategic bloc, and as a region that both the US and China would like to get along well with,” said Shanmugaratnam.
While nobody doubts the enormity of the challenges now facing the global economy, the crisis caused by the pandemic is creating shifts and opportunities that ASEAN has the potential to benefit from.