ASEAN has continued to implement its economic integration agenda and maintain its role as a stalwart of multilateralism amidst rising geopolitics tensions, according to the 11th edition of the ASEAN Economic Integration Brief (AEIB).
Produced by the ASEAN Integration Monitoring Directorate of the ASEAN Secretariat, the AEIB presents an overview of the regional economic outlook, along with the latest updates on the ASEAN Economic Community (AEC) and key economic indicators relevant to the region.
In its economic outlook, the AEIB stated that “robust consumption and trade shaped ASEAN’s recovery path in 2021, which saw the economy grow by 3.0 per cent, from a 3.2 per cent contraction in 2020”.
It added that the region is expected to grow by 4.9 per cent in 2022 and 5.2 per cent in 2023.
“The effectiveness of vaccination programmes across the region enabled member states to re-open their borders, which accelerated economic activities and supported recovery in the job market,” said the report. “Unemployment rates, which spiked during the pandemic, started to wind down in 2021. ASEAN continues to work towards fully re-opening the region for tourism and travel.”
“As of May 2022, full dose vaccination rate in ASEAN has reached 65.9 per cent, while 25.2 per cent of the population has received booster shots. All member states are expected to fully re-open by the second half of the year.”
“Trade expanded by 25.1 per cent to USD3,340.6 billion in 2021, surpassing pre-pandemic levels. This was led by Singapore, Viet Nam, Indonesia, and Malaysia. Growth in machinery and electricals, minerals, metals, and chemicals were particularly strong, as demand for consumer electronics surged with the remote work and learning arrangements.”
Investments recorded a 42.3 per cent growth to USD 174.1 billion in 2021, mainly in manufacturing, financial and insurance services, and information and communication.
“Optimism continues into 2022, with a strong rebound in manufacturing. The Purchasing Managers Index (PMI) for manufacturing shows expansionary modes across member states, despite risks of COVID variants and spikes in commodity prices in the first half of 2022.”
The tourism and transport sectors are also mentioned as being seen to contribute to growth, and are expected to strengthen as the region further reopens. Tourist arrivals have accelerated since the last quarter of 2021, particularly in Thailand and Singapore, it was shared.
The report proceeds to note that “the conflict in Eastern Europe is a setback to economic recovery, globally and in the region”.
“Disruptions in global value chains have led to price volatilities in global markets, especially of energy and food commodities. The persistent inflation pressures could erode consumers’ purchasing ability and also affect industrial production. This adds to the risks arising from policy normalisation in major economies as they gradually exit from accommodative policies during the pandemic. Tighter policy rates in major countries, especially the United States (US), could trigger capital outflows in emerging economies and exacerbate external vulnerabilities.”
“Most ASEAN member states saw their exchange rates depreciated against US dollar, markedly since the Federal Reserve took progressive raise of interest rates since March 2022,” said the AEIB. “While most economic and financial conditions in the ASEAN member states have remained manageable for the first half of the year, few members have started to tighten policies, such as Lao PDR, Malaysia and Philippines. Central banks in the region need to stay alert and cooperate to enhance resilience toward future shocks, including financial vulnerability from both within and outside the region.”
The report added that, at the onset of the pandemic, ASEAN has affirmed commitment to work together to overcome the crisis.
“The region has continued to implement its economic integration agenda and maintain its role as a stalwart of multilateralism amidst rising geopolitics tensions. Taking advantage of the disruption presented by the pandemic, ASEAN has ramped up efforts on sustainability and digitalisation. The transition towards circular economy, carbon neutrality, and digital economy will drive the region’s development in the years to come.”
Meanwhile, with regards to the AEC, the AEIB stated that “ASEAN continues to make significant progress in the implementation of the AEC Blueprint 2025, riding on the recovery wave that the region is currently experiencing”.
The report noted that, under the theme ‘ASEAN ACT: Addressing Challenges Together’, Cambodia’s Chairmanship in 2022 has identified 19 Priority Economic Deliverables (PEDs) across four strategic thrusts, namely: enhanced digital connectivity, science and technology; narrowing the development gap for ASEAN’s competitiveness; promoting a more integrated, inclusive, resilient and competitive ASEAN; and strengthening global ASEAN for growth and development.
“One PED has been completed, namely, ‘Launching of the ASEAN Trade in Goods Agreement (ATIGA) Upgrade Negotiation (Strategic Thrust 3)’, that was launched at the 28th ASEAN Economic Ministers (AEM) Retreat on March 16, 2022. The upgraded ATIGA aims to increase the efficient utilisation of benefits resulting from regional economic integration and make the Agreement modern, forwardlooking and more responsive to regional and global developments for the benefit of the private sector.”
Another PED, “the Expansion of ASEAN Customs Declaration Document (ACDD) Exchange through ASEAN Single Window (Strategic Thrust 3)” has been partially completed, where to date, eight ASEAN member states have already joined the ACDD live operations, while the remaining two member states are scheduled to join in July 2022.
The AEIB added that the rest of the PEDs are currently being implemented by various sectors, from trade in goods, financial integration, competition, IPR, transport, ICT, food and agriculture, tourism, science and technology, MSMEs, and sustainable economic development.
“Beyond the implementation of PEDs, ASEAN continues to make significant progress in the implementation of the second phase of the AEC Blueprint 2025 through the accomplishment of 2022 Annual Priorities (APs),” said the report.
“This year, the APs include a significant number of activities spread across different sectors, including supporting the ASEAN digital transformation agenda (across ICT, e-commerce, competition, consumer protection, standards and conformance, and trade facilitation) and to promote sustainable development (across economic, finance, energy, minerals, agriculture, science and technology, transport, and tourism).”
“On the other hand, these initiatives also highlight the increasingly cross-sectoral/pillar nature of the works in ASEAN. As such, there is an urgent need to enhance Cross-Sectoral/Pillar Coordination to ensure more effective implementation of these initiatives. Undertaking reforms in ASEAN’s processes and mechanisms to improve sectoral coordination to achieve more synchronised and integrated policy responses/actions should therefore remain a priority.”