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Economic megatrends in the spotlight

Danial Norjidi

As ASEAN navigates through major global forces, emerging trends are expected to further influence the dynamics of the region’s economy, said ASEAN Secretary-General Dato Paduka Lim Jock Hoi in his keynote address during the Economy Week as part of the Brunei Mid-Year Conference and Exhibition 2022 (Brunei MYCE 2022) recently.

In his speech, the secretary-general spoke on megatrends which “will likely shape the future, presenting both opportunities and challenges”.

The first megatrend was that of demographic shift and urbanisation, where he noted that by 2050, the number of people in Southeast Asia aged 65 or older is expected to grow to 132 million people, almost treble of the current number.

“The region, therefore, needs to be ready in crafting appropriate policy to care for our elders while ensuring that our economy remains productive and competitive,” he said, adding that urbanisation has changed cities at an accelerated pace.

“Around half of the ASEAN population already live in urban areas, but a further 70 million in the region will be city dwellers by 2035. This will put more pressure on our cities, most of which may not be adequately equipped to deal with a growing range of potential threats such as environmental issues, resources scarcity and growing inequality.”

On its part, ASEAN has been active in preparing the region to address the challenges of demographic shift facing the region, shared Dato Paduka Lim Jock Hoi.

ASEAN member states’ flags line up during the ASEAN Summit at the International Convention Centre. PHOTO: INFOFOTO
ASEAN Secretary-General Dato Paduka Lim Jock Hoi speaks in a pre-recorded video during the Economy Week of the Brunei Mid-Year Conference and Exhibition 2022. PHOTO: DANIAL NORJIDI

“The ASEAN Comprehensive Framework on Economy, which was spearheaded by Brunei Darussalam during the ASEAN chairmanship last year, was developed as a guide that would allow the region to address complex crisis and challenges, including changing demographics.”

He also noted that ASEAN has put in place sustainable urbanisation initiatives, such as ASEAN Smart Cities Network. However, he said more needs to be done to help cities recover from the current challenges and better prepare for future problems.

Digital transformation is another megatrend that changes the global landscape in an unparalleled manner as it permeates all economic and social activities.

He said, “In 2020, the average proportion of cash transactions declined from 48 per cent in 2019 to 37 per cent in 2020. By 2021, ASEAN recorded 440 million active Internet users.

During this time, the COVID-19 pandemic played a vital role in increasing digital activities, particularly in the utilisation of financial health and education technology to overcome physical distancing requirements.

“Nevertheless, the digital transformation and the fourth industrial revolution (IR 4.0) technologies have also brought about a range of risks such as impact on employment, inequality and cybersecurity issues.”

He said that ASEAN has placed multiple initiatives spanning across the three pillars of the ASEAN Community to advance its digital transformation agenda.

“While digitalisation related initiatives under ASEAN’s political security pillar have also been emphasised on enhancing the region’s cybersecurity cooperation, those undertaken within the ambit of ASEAN’s socio cultural pillar have also been focussed on including human capital development, digital literacy and the role of technologies in addressing the region’s sustainability concern.

“Likewise, several initiatives have been launched to propel the region’s digital economy, such as the ASEAN Digital MasterPlan 2025 and the ASEAN Digital Integration Framework and its action plan.

“More recently, ASEAN has adopted the Bandar Seri Begawan Roadmap on ASEAN Digital Transformation highlighting key action for existing initiatives in supporting ASEAN’s ongoing digital integration. The roadmap underscores ASEAN’s commitment to commence negotiation for the ASEAN Digital Economy Framework agreement by 2025.”

ASEAN is also committed to maximising opportunity arisen from the development.

“We have launched the consolidated strategy on the IR 4.0 for ASEAN last year to provide a clear narrative on how the region intends to progress digital transformation in a comprehensive manner.”

Another megatrend is climate change, which the secretary-general sees ASEAN as one of the most vulnerable regions to its impact.

“This is in line with ASEAN’s rapid economic growth in the past three decades, whereby the growing sources of greenhouse gas emissions are concentrated in energy, agriculture, land use and forestry, as well as manufacturing processing,” he said.

“Consequently, the region is increasingly subjected to extreme and unpredictable weather events and disasters.”

To address this long-term challenge, the secretary-general said the region is pursuing a net zero carbon emission as soon as possible in the latter half of the 21st Century, as per ASEAN’s objective reflected in the State of Climate Change report.

ASEAN has various initiatives in place such as the Framework of Circular Economy for the ASEAN Economic Community (AEC), adopted last year, which aims to support sustainable development by making effective use of materials and energy.

Other initiatives include the launch of the ASEAN Taxonomy for Sustainable Finance, which the secretary-general said serves as one of the key building blocks in guiding investment and financial flow towards the region’s sustainable activities.

The ongoing development of the ASEAN Carbon Neutrality Plan, he said, is expected to outline practical actions by consolidating all decarbonisation efforts in the region, thereby complementing the transition towards a low carbon economy.

“I would also like to highlight that ASEAN’s commitment to achieving sustainability in all dimensions by taking a cross-pillar strategy approach to meet its objective. While ASEAN Socio Cultural Community (ASCC) works towards advancing environmental agenda that promotes sustainable climate biodiversity management and sustainable livelihood, the AEC integrates relevant sectoral sustainability objectives including economic development, food, agriculture and forestry as well as energy efficiency and renewable energy in its work streams.”

The COVID-19 pandemic has accelerated ASEAN’s sustainability agenda. The ASEAN Comprehensive Recovery Framework, which is the region’s exit strategy from the ongoing health crisis internalises climate-related initiatives, including through the adoption of high value industries and climate smart agriculture.

Touching on the AEC, the secretary-general said initiatives have been pursued across various sectors to further advance the region’s climate and sustainable goals. Regional initiatives such as ASEAN Green Bond Standards are among the key initiatives complementing ASEAN member states’ efforts to implement their nationally determined commitments under the Paris Agreement.

The secretary-general also called for a more inclusive approach to trade and economic globalisation, highlighting that the region “has a strong constituency base that would benefit from a more inclusive economy, including women-owned firms, the young population, micro, small and medium enterprises (MSMEs) as well as informal workers”.

A recent study by the ASEAN Secretariat revealed that the rate of informal employment ranges widely, from 37 per cent in Thailand to 90 per cent in Cambodia.

The rate of women’s participation in the informal sector is also generally higher compared to men, and informal employment trends to be higher in rural compared to the urban area, it showed.

“This indicates the importance of inclusivity for the region, with an objective of providing improved access and capabilities for women-owned business, youth entrepreneurs and MSMEs. They also underscore the significance of ensuring significant protection for workers to enable them to take advantage of trade and economic opportunities in the region,” he said, adding that the ASEAN has worked on promoting equal access to social protection, employment and decent work in complementing the region’s economic integration efforts, under the ASCC pillar.

He added that the AEC promotes the strengthening of MSMEs and improved the integration into the region’s economy by promoting productivity and innovation, increasing access to finance, enhancing market access, strengthening the regulatory framework and promoting human capital development.

The secretary-general believed “the shift in major power dynamic is another important megatrend that merits out attention”.

“In a world of uncertain geopolitical and geostrategic shift, ASEAN cannot be complacent. To remain relevant, it will need to exercise more than convening power, project leadership and pursue initiatives to maintain its centrality,” he said, highlighting its relevance to the region’s external economic engagement,” he said.

“For ASEAN to realise its goals and vision for the people in a highly interconnected global economy, ASEAN must continue to be competitive and keep the momentum it has gained by being the central figure in many cooperation.

Dato Paduka Lim Jock Hoi said ASEAN’s global economic engagement needs to be viewed from a broader strategic lens rather than only from economic consideration alone amid increasing interest from global economies to forge closer partnership.

“We will need to develop more relevant criteria to our global economic engagement to enable use to forge meaningful relations with these potential economic partners.”