Asean should boost intra-regional trade

RECENTLY in Jakarta, President Ferdinand Marcos Jr. said that Southeast Asia should resist foreign powers with hegemonic ambition. For that, the Philippines should work with its neighbors to bolster intra-regional trade, which has been stagnant since 2008, and deepen economic cooperation.

“History will ultimately judge whether the supremacy of the rule of law prevails, ushering in an era where all nations truly stand as equals, independent and unswayed by any single power,” Mr. Marcos said at the recent Asean Summit Retreat. Asean is the Association of Southeast Asian Nations, a bloc of 10 countries that includes the Philippines.

Philippines’ President Ferdinand Marcos Jr. attends the plenary session of the ASEAN Summit in Jakarta on September 5, 2023. (Photo by WILLY KURNIAWAN / POOL / AFP)

He added, “The challenge for us remains, that we should never allow the international order to be subjected to the forces of might applied for a hegemonic ambition.” To be clear, Mr. Marcos did not refer to anyone in particular, and his recommendation was for Asean defense cooperation in maritime.

We agree with Mr. Marcos, and as many have observed, rival superpowers have been pulling Asean in different directions. During the summits in Indonesia, many spoke about maintaining and strengthening Asean unity, which could also be achieved by strengthening trade among the bloc members. In other words, Asean has a better chance of staying together by deepening economic cooperation and working together to attract foreign investments.

That will not be easy. Reports citing data from the Organization for Economic Cooperation and Development, or OECD, said that intra-Asean trade accounted for only 22.5 percent of the bloc's total trade in 2019. That was lower than in 2018, when it was 23 percent. And according to Indonesian government research, intra-regional trade has been hovering between 21 percent and 25 percent for more than a decade.

Meanwhile, Asean trade with China and the United States has been growing rapidly. As many know, China has become Asean's largest export market, followed by the US, the European Union and Japan.

Also, foreign direct investments (FDIs) within the region could also improve. Investments among countries in the bloc account for only 19.4 percent of all FDIs in Asean, based on reports.

United

If Asean were a country, it would be the fifth largest in the world in terms of gross domestic product, or GDP, at $3.2 trillion. And in terms of population size, the bloc would be third in the world if Asean was one nation. Asean has 666.19 million people as of 2021. Those figures suggest that Asean can be a global power if its members focus more on cooperation than on competing against one another.

Based on discussions at the Asean summits, there are at least two opportunities to strengthen unity. First, the bloc has been promoting the Asean QR Code, which is a type of e-wallet designed to facilitate cross-border payments.

The Philippines is among the five countries that initially agreed to participate in the Asean QR Code. The authorities here should promote it and convince more local merchants to use that system. The QR code will not only be more convenient for Asean residents traveling in the region, but it could also boost tourism and trade in the country.

Second, Asean governments and business leaders should work together to develop electric vehicles and parts. The raw materials for building batteries are abundant in the region, particularly in Indonesia and the Philippines. Additionally, the Philippines leads the world in supplying wire harnesses for cars.

Thailand has the infrastructure for vehicle manufacturing, and Vietnam has started marketing its electric cars in the US. Instead of copying and replicating what the Thais and Vietnamese are doing, others in Asean should work with them. There should be a regionwide production system that could supply the world with electric cars and components.

To achieve that, Asean will still need FDIs from outside the region. And in this regard, the bloc could also join forces and do investment promotions together. Doing so will likely attract more interest from investors and others looking for economic opportunities.

As they say, there is strength in numbers. By pulling together on the economic front, Asean can stand up to anyone with hegemonic designs.