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ASEAN’s potential

Published on 5 November 2014 Southeast Asia

By the end of next year, the ten-nation Association of Southeast Asian Nations (ASEAN) should become a single market. Integration will create an additional 14 million jobs, mostly of the skilled type.

ASEAN will become a major economic bloc.  It is now home to 620 million people, has a nominal Gross Domestic Product or total economic output of $2.32 trillion (3.3 percent of the world’s total GDP), total exports of $1.2 trillion (almost 7 percent of the global total), and total GDP in  purchasing power parity (ppp) of $3.6 trillion.

In terms of population or size of domestic market, the Philippines is the second biggest, with 100 million people.  It is second only to Indonesia which has 245 million people.   Vietnam is third with 89 million, Thailand fourth with 68 million, Myanmar fifth with 64 million, Malaysia sixth with 30 million, Cambodia seventh with 15 million, Laos eighth with 6.6 million, Singapore ninth with 5.3 million, and Brunei tenth, with 400,000.

In terms of size of economy, GDP in PPP, the richest is Indonesia with $1,203 billion, followed by Thailand $645 billion, and Malaysia $495 billion.  Fourth richest is the Philippines with GDP (in ppp) of $420 billion, fifth is Vietnam $336 billion, sixth is Singapore $323 billion, seventh is Myanmar $103 billion, eighth is Cambodia $36.5 billion, ninth is Brunei $21.6 billion, and tenth is Laos $18.9 billion.

In terms of land area, the rankings are: Indonesia 1,812 thousand sq kms, Myanmar 653.5; Thailand 510.9; Malaysia 328.6; Vietnam 310.1; Philippines 298.2; Laos 230.8; Cambodia 176.5; Brunei 5.3; and Singapore .7 thousand sqkm.

In terms of per capita income, ASEAN is rich; each of its 620 million citizens has an income of $3,603.

In terms of economic growth, the fastest growing this year is Myanmar with 7.8 percent GDP growth.  It is followed by Laos 7.3 percent, Cambodia 7.0 percent, and the Philippines 6.4 percent. 

So it is not true that the Philippines is the fastest growing economy in Asia, after China.  Indonesia is behind the Philippines with 2014 GDP growth of 5.6 percent, followed by Vietnam 5.6 percent, Malaysia 5.1 percent, Singapore 3.9 percent, Thailand 2.9 percent, and Brunei 1.1 percent.

In 15 years, the Asian Development Bank has projected a tripling of ASEAN’s GDP per capita to $9,000.  ASEAN nationals will join the ranks of the world’s upper income or rich class.

A study done by ADB expects ASEAN to be resilient, inclusive, competitive, and harmonious – aside from being rich.  There is no doubt ASEAN will be rich.  That is a given.

As for the four other attributes – resilient, inclusive, competitive and harmonious – they can be quite a stretch as a goal.

Resilient? ASEAN remains vulnerable to any adverse development outside its boundaries.

Ebola broke out in Liberia.  By next year, ebola is expected in Southeast Asia. The worst financial and economic crisis the world has ever known in 80 years broke out in 2008, and ASEAN is still suffering for it.

The Soviet Union invaded Afghanistan. The United States organized a resistance and funded Muslim fighters from Southeast Asia and dispatched them to Afghanistan.  The Soviet Union was defeated.  But the Muslim fighters, having experienced how to defeat a world power, turned their wrath on the greatest power of them all—the US.  Thus was born the al-Qaeda which melted the twin towers of the World Trade Center with jet fuel from two jumbos. 

The al-Qaeda has methamorphosed into what is now the Islamic State of Iraq and Syria.  Extreme fundamentalism has made the world even more dangerous to live in than it was in 2001 with 9/11.

Resilience refers to the capacity to handle volatilities and shocks, from within or outside the region, reducing the likelihood of economic crises. It requires strong institutions and solid macroeconomic policies run by effective managers, capable of assessing risks and taking action. It also needs a regional framework for macroeconomic cooperation and management.

Inclusiveness refers to the need for ASEAN to achieve equitable economic development, providing opportunities through cooperation strategies that reduce income gaps within and across countries, and promoting citizen welfare.

Competitiveness requires a business environment where successful firms operate in efficient markets under effective national and regional regulations, as ASEAN products compete globally with improved productivity and more indigenous innovation.

Harmony stems from environmentally sustainable development and growth, with proper consideration of the need to mitigate and adapt to climate change.

It requires growing acceptance of ASEAN as a family of nations, where member countries live in peace, working together to resolve common problems.

GDP to triple in 15 years

“Average incomes are expected to grow faster in the least developed ASEAN economies (especially CLMV countries, Cambodia, Laos, Myanmar, Vietnam) than in those more advanced, narrowing income and other development gaps,” says ADB.

However, the Manila-based bank warns, “if ASEAN members are unable to work together beyond the AEC toward creating a truly borderless economic community, if a major external shock hits the region, or if countries get stuck in the middle- income trap, growth will slow and aspiration targets will not be met.”

The bank adds: “Achieving a ‘rich’ ASEAN by 2030 implies further lowering intraregional economic barriers and more effective resource pooling.”

To realize a seamless regional economic community, ADB suggests, “ASEAN needs to introduce innovative systems to manage its labor and capital markets as it progressively liberalizes them.”

ADB says “the group needs stronger institutional frameworks and policy coordination mechanisms on intraregional and external matters. Proper schemes for mutual recognition of standards and regulatory harmonization are required to shift responsibilities from national agencies to regional bodies, while strengthening functional institutions. And ASEAN needs to build an efficient regional civil service, requiring substantial amounts of additional financial resources.” (Tony Lopez)

Source: Manila Standard Today | 17 October 2014