ASEAN Today: Economics and AEC 2015

Countries in the ASEAN region that have been over-dependent on export-led growth in the past are now rebalancing their economies towards domestic demand as part of a deliberately engineered shift in their growth and development strategies. Indeed, many ASEAN economies continue to post impressive growth, and the region’s investment prospects look strong.

ASEAN itself is already a trade driven block and we anticipate the momentum will continue in the decades ahead, given the rich stores of resources and an established manufacturing base which will be further boosted by AEC. 

This will be the key to further drive both intra and extra ASEAN trade as the promises of a single production platform and a unified market further strengthen trade activities.

Yet there are several downside risks and concern is growing that the region cannot continue forging ahead heedless of fluctuations in global demand. Economic destabilisation is also to be feared if inflows from the quantitative easing programmes of the US Federal Reserve turn into outflows, exposing hidden flaws in regional economies. The management of capital flows will therefore be an important policy challenge. 

In addition, ASEAN needs to foster deeper integration: the development gaps between members remain substantial and more rigorous policies are needed to narrow them and reduce poverty.

In particular, the further development of institutional capacities must be central to development strategies. Growing regional integration both amongst ASEAN countries and with the broader Asian region would be a major asset in ASEAN’s efforts to get its member states into the high income ranks. 

As ASEAN member states move towards a more advanced stage of development, ASEAN economies will need to strengthen their institutional capacities in human capital, infrastructure and innovation, in order to support the transformation to increasingly sophisticated industries. 

Markets and competition must also be enhanced to encourage a more favourable climate for investment and business. Services should also be developed due to their critical role in moving countries up the value chain as well as achieving broader goals such as reducing poverty and meeting the needs of the growing middle classes. 

It is of particular importance to underline the increasingly strong emphasis that ASEAN countries are placing on quality and sustainable economic growth as part of their medium-term development plans.