Does ASEAN Matter?
How the summit tackles current challenges
Krisna Gupta
June 24, 2023
Krisna Gupta
Full-time lecturer at Politeknik APP
Part-time lecturer at Universitas Indonesia
PhD in economics at The Australian National University
- thesis about trade and industry in Indonesia.
Associate researcher at Center for Indonesian Policy Studies.
My latest policy paper is on GVC in the food industry
Our latest project with Prospera was to advice The Indonesian government on RCEP Action Plan.
More about me at imedkrisna.github.io
- Blog: krisna.or.id
- twitter: @imedkrisna
- linkedin: linkedin.com/in/imedkrisna
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Today
Does ASEAN Matter?
RCEP
EV
Food security
The ASEAN Summit
The ASEAN 42nd Summit produces several declarations like the AEC post-2025, regional development of electric vehicle (EV) ecosystem, and regional payment connectivity.
The theme is “ASEAN Matters: Epicentrum of Growth”
ASEAN is aspired to be a stable region in the midst of global uncertainty
Remains committed to regionalism & multilateralism
but does ASEAN really matter?
ASEAN: some facts in 2021
ASEAN: some Facts in 2021
ASEAN’s trade and investment with itself remain strong.
China still dominates trade, while USA in FDI inflow.
ASEAN matters?
Challenges going forward remains:
a weaker global growth, with growth estimated to be just 2.3% in 2023
inward-lookingness & geopolitical rivalry, with EU, China, and the US are trying to reduce their interdependence.
Climate change devastate food security & requires resources to tackle
Opportunities are there: RCEP & the region’s commitment to multilateralism.
RCEP
ASEAN+5 FTA (sort of)
Enacted in 2020. The Philippines ratified RCEP in June 2nd 2023.
Covers trade in goods, services, investment and movement of natural persons.
Also covers development cooperation.
About RCEP
The impact from tariff is negligible: about 0.07% higher real income from World Bank’s estimate.
Outside tariff, the agreement seems watered down:
not enough immediate commitment in the agreement on issues such as non-tariff measures, investment, government procurement, and competition.
many of the issues will be depending on the future RCEP secretariat & each countries’ commitment.
Rules of Origin
The gain will come from the new Rules of Origin (RoO): The one region RoO rules.
Single region RoO means a good that uses components from various RCEP countries will be counted as originated from RCEP.
This rules streamlined previous “spaghetti bowl” created by ASEAN+1 FTAs.
This is a perfect environment for Regional Value Chain (RVC) industries.
Can RCEP works?
The RoO can only be utilised by also streamlining various non-tariff measures (NTMs) like standards & import/export control.
However, the region is increasingly more protective:
in ASEAN, NTMs has risen from 1,634 to 5,975 between 2000 to 2015.
domestic policies
Geopolitically, RCEP may push ASEAN more towards China. Can the region still be independent?
- We’ll see how IPEF change the equation.
Climate change
Climate change is real, and EV adoption has been dubbed as one of the most efficient way to deal with it.
The region hops the EV train: ASEAN Leader’s Declaration on Developing Regional Electric Vehicle Ecosystem..
Not only good for the climate, EV is so different compared to conventional car, the advantage of the incumbent matter less.
Vehicle trade
ASEAN’s vehicles are quite competitive (7th largest).
BYD, Wuling, Hyundai already has presence, VinFast is promising.
Indonesia, Malaysia and Thailand’s incentives rolled in: USD 465, 560, 2032 per vehicle respectively.
Challenges
EV, despite subsidies, are still relatively expensive in the region.
production may require the global market to benefit from economies of scale
turning inward & global rivalry, again.
regional rivalry vs multilateralism. Case in point: Latin America in the 80s.
Don’t forget about infrastructure!
Greening the grid?
Food Security
Climate change reduces the productivity of the agriculture sector, while Russia’s aggresion leads to a wheat and fertilizer crisis.
The region remains relatively in the middle according to The Economist’s Global Food Security Index (GFSI):
| Country | SGP | MYS | VNM | IDN | THA | PHL | MMR | KHM | LAO |
|---|---|---|---|---|---|---|---|---|---|
| Rank | 28 | 41 | 46 | 63 | 64 | 67 | 72 | 78 | 81 |
| Score | 73.1 | 69.1 | 67.9 | 60.2 | 60.1 | 59.3 | 57.6 | 55.7 | 53.1 |
Food security
The ASEAN Integrated Food Security (AIFS) Framework was crucial in helping to solve food crisis during the Global Financial Crisis (GFC) and COVID Crisis.
The framework helps with monitoring, reacting to crisis, and keeping trade open.
There is no way around increasing productivity: rice & palm oil yield are reducing amid climate change and limited land.
Thankfully, commitment in food security is strong.
Closing
Economy-wise, ASEAN remains relatively small, but an important region nonetheless in the midst of global rivalry.
The summit remains committed to multilateralism, seems like.
RCEP, commitment to regional EV development and food security will determine whether ASEAN really does matter: to become the epicentrum of growth!
Thank you
Does ASEAN Matter? How the summit tackles current challenges Krisna Gupta June 24, 2023