KUALA LUMPUR: One key lesson about economic integration that Asean can take away from the European Union is perseverance.
World Bank vice-president for East Asia and Pacific Victoria Kwakwa said Asean members would need to reinforce their commitment towards the common goal in order to achieve real integration which could help the region do well in the current economic environment and in the face of emerging megatrends.
“The political will (to deepen and broaden economic integration) is paramount and fundamental... there has to be the commitment and political will to stay the course,” Kwakwa told StarBiz in an interview.
Kwakwa noted that while Asean countries had done a lot in reducing tariffs and promoting intra-regional trade, member countries should now focus on non-tariff barriers to achieve real integration.
“If the region really wants to have an economic community, which has come into being on paper, what it needs to do now is address issues beyond (trade) tariffs such as free movement of labour, harmonising policies across the region and doing more to really integrate,” she explained.
The establishment of the Asean Economic Community (AEC) in 2015 is a major initiative to integrate 10 member countries – namely, Malaysia, Indonesia, Singapore, Thailand, the Philippines, Vietnam, Myanmar, Cambodia, Laos and Brunei – as a single market and production base, with free movement of goods, services, investments, skilled labour and flow of capital.
But when the AEC was established not all measures under the initial plan had been implemented.
So, the new AEC Blueprint 2025, agreed upon in 2015 in Malaysia, was created. The aim was to achieve the vision of having an AEC by 2025, in which all 10 Asean member states, would be both economically integrated and fully integrated in the global economy. The AEC, however, stopped short of advocating a single currency.
Kwakwa said in today’s world, countries had to all depend on one another and work together to do well.
The Washington DC-based economist was in Kuala Lumpur to deliver a keynote address at the recently held 42nd Conference of the Federation of Asean Economic Associations.
In her speech, Kwakwa stressed: “Broad regional and global perspectives, integration, and inclusion are key for sustained growth and improvements in people’s lives.”
She said countries in the region were facing new collective challenges, which included a sluggish global economic growth, some tendency towards protectionist policies in the world market, declining productivity and rising inequality.
She also noted emerging megatrends that would shape the world’s future prospects, including in Asean nations. These included changing demographics, whereby a number Asean countries are facing an ageing society; climate change; and digital revolution and the unprecedented pace of technological change.
Amid the prevailing challenging global conditions and emerging megatrends, Kwakwa listed three pressing issues that needed to be addressed by Asean countries.
“First, it is so critical for us to keep our eye on the trade integration agenda... a second pressing issue is the productivity agenda... and the third pressing issue – and where collective voice and action is perhaps most needed – is that of environmentally-friendly policies that can help the region transition towards sustainable and resilient ‘green growth’,” Kwakwa said.
On trade integration, she said it was about getting both the hardware and the software right.
“So far, we have seen commendable progress in reducing tariffs and facilitating the trade of goods within Asean. This is good news. However, much more can be done to address non-tariff measures and open up services,” Kwakwa said.
“Investors are practical in that they will look at the size of the whole market that their businesses will reach. In that sense, an Asean-wide market is a lucrative sight to behold,” she added.
She stressed one important step towards trade integration was moving towards a truly seamless transport of goods across borders. This would involve the harmonisation of domestic transport regulations and standards, country-by-country insurance requirements, and import-export paperwork for vehicles, among others.
On productivity, Kwakwa conceded that the root causes of stagnating productivity growth differed across Asean. However, the region could make use of comparative analysis, and share lessons across members.
“One key driver of productivity is human capital, which is not only about the ever-important need for strong education and skills development policies, but also about tackling malnutrition and its longer term impact,” she said, noting that there was room for much more investment in physical and human capital to boost productivity and assure economic growth in some countries in the region.
On addressing the climate-change issue, Kwakwa said moving towards low-carbon technology, identifying climate-resilient projects, and having functional early warning systems should be collective priorities and actions.
“Countries’ readiness to deal with climate impacts and their willingness to promote and implement green growth policies are increasingly critical in ensuring a sustainable path,” she said.
“Each country will have to execute these projects with equal rigour and under a wider agenda and set of standards. Not surprisingly, the process itself can also promote regional unity, and ensure infrastructure investments which withstand climatic stress tests,” she explained.
She said as the sixth-largest economy in the world collectively as a region, Asean’s unified initiatives in addressing pressing issues could have a clear global impact.