Coordinated COVID-19 pandemic response efforts, along with the ASEAN-led Regional Comprehensive Economic Partnership (RCEP) Agreement that came into force on January 1 for Australia, Brunei Darussalam, Cambodia, China, Japan, Laos, New Zealand, Singapore, Thailand and Vietnam, and digital transformation will drive inclusive growth and development in the region.
This was highlighted by Head of Asia-Pacific Regional Agenda at World Economic Forum (WEF) Joo-ok Lee and Community Lead, Regional and Global Cooperation at the WEF Shaun Adam at the recent WEF in Davos, Switzerland.
The report said with the RCEP, ASEAN resolves to keep markets open while strengthening regional economic integration towards post-pandemic inclusive recovery.
RCEP is the biggest regional free trade agreement in existence and will cover 30 per cent of global GDP and 30 per cent of the world population in addition to accounting for over one quarter of global trade in goods and services.
Key provisions address liberalising and promoting of intra-RCEP trade, investment and services as well as developing e-commerce, which is highly relevant for regional value chains and market- and efficiency-seeking investment.
Furthermore, non-RCEP companies can also take advantage of RCEP benefits by locating and operating in the region.
Considering that 40 per cent of investment in ASEAN come from RCEP members – of which 24 per cent comes from non-ASEAN RCEP member countries – opportunities exist to boost more sustainable foreign direct investment (FDI) in the region, particularly value chain-linked FDI taking into account the benefits of RCEP and the recently concluded ASEAN Investment Facilitation Framework (AIFF).
The COVID-19 pandemic has caused global investment activities to fall due to economic uncertainties, lockdowns, supply chain disruptions and postponement of investment by multinational enterprises. ASEAN also recorded a decline in FDI in 2020 to USD137 billion, down from its highest-ever inflow of USD182 billion in 2019 when it was the largest recipient of FDI in the developing world.
Despite the decline, ASEAN has remained an attractive investment destination. The region’s share of global FDI rose from 11.9 per cent in 2019 to 13.7 per cent in 2020, while the intra-ASEAN share of FDI in the region increased from 12 per cent to 17 per cent. Additionally, the longer-term trend shows that the value of international project finance in ASEAN has doubled from an annual average of USD37 billion in 2015–2017 to an annual average of USD74 billion in 2018–2020.
And the future looks bright, adding that according to the first-of-its-kind ASEAN Development Outlook (ADO) report, the total combined GDP of 10 ASEAN member countries in 2019 was valued at USD3.2 trillion, making ASEAN the fifth-largest economy in the world, well on track to become the fourth largest by 2030. With a total population of about 700 million people, 61 per cent are under the age of 35 – and the majority of young people are embracing digital technologies in their daily activities.
The outlook remains promising, with coordinated pandemic response efforts and several key developments underway in the region.