Media Release: ASEAN Secretary-General: ASEAN remains committed to multilateral cooperation and recognises the critical role of the private sector in the bloc’s COVID-19 economic recovery plan

ASEAN Secretary-General: ASEAN remains committed to multilateral cooperation and recognises the critical role of the private sector in the bloc’s COVID-19 economic recovery plan

From top: H.E. Dato Lim Jock Hoi, Secretary-General of ASEAN; and
Tan Sri Dr. Munir Majid, Chairman of CIMB ASEAN Research Institute


Kuala Lumpur, 3 July 2020 – CIMB ASEAN Research Institute (“CARI”) hosted the CARI Briefings webinar under its COVID-19 Economic Recovery Plan Series, titled “How Can ASEAN Bounce Back: Can the ASEAN Economic Community Retain its Vision in a Post-Pandemic World?” The session featured H.E. Dato Lim Jock Hoi, Secretary-General of ASEAN. Moderated by Tan Sri Dr. Munir Majid, Chairman of CARI, the discussion centred on what ASEAN is doing to sustain the economies of member countries, its regional response and coordination towards a robust post-pandemic recovery and efforts to sustain momentum to achieve its vision.

1. ASEAN remains committed to its community-building agenda and multilateral cooperation amid the pandemic

H.E. Dato Lim Jock Hoi began his session by stressing the significance of the region’s early commitment to cooperate instead of turning inward amid the pandemic. “ASEAN will continue to work together, including with external partners and partner institutions. This demonstrates ASEAN’s commitment to multilateral cooperation to effectively address the expansive implications of this unprecedented threat,” he said.

The spread and impact of the pandemic knows no boundaries, hence a coordinated response and closer cooperation is required even more. ASEAN has taken steps to work together, among member states as well as dialogue partners. The bloc just held its 36th ASEAN Summit virtually and adopted a vision statement, which recognises the social and economic repercussions of the COVID-19 pandemic and reaffirmed ASEAN Leaders’ strong commitment to sustain the momentum of ASEAN community building. ASEAN leaders also announced the establishment of a COVID-19 ASEAN Response Fund and the development of a comprehensive recovery plan.

2. Private sector’s role is indispensable in post-pandemic economic recovery

“Coordination for reopening and post-pandemic recovery is critical given the region’s high level of economic integration and interconnectedness. The private sector will play an integral role in these efforts, to restore employment, business confidence, and in working towards a swift and strong recovery,” commented Dato Lim Jock Hoi.

At the 36th Summit recently, ASEAN recognised the crucial role of the private sector in post-pandemic economic recovery, and aimed to foster cross-pillar and cross-sectoral collaboration within ASEAN as well as with relevant stakeholders to ensure a coordinated response to the pandemic.

Earlier, the ASEAN Business Advisory Council has proposed for the regional bloc to set up an ASEAN High-Level Special Commission (AHLSC) to expedite the decision-making process with regards to the region’s post-pandemic recovery plan. The mechanism on how to move forward with the proposal is under discussion to avoid overlaps with the existing ASEAN mechanism.

H.E. Dato Lim Jock Hoi

3. Post-pandemic recovery an opportunity to reassess ASEAN’s growth trajectory

Dato Lim Jock Hoi noted the unprecedented health and socio-economic impact of the COVID-19 pandemic but highlighted the opportunity presented for the region to reassess its path.

“ASEAN post-pandemic recovery is an opportunity for the region to recalibrate its growth trajectory to one that is more resilient, digitally-enabled, inclusive, and sustainable,” said Dato Lim Jock Hoi.

Among the most striking trend is the acceleration of digital technology adoption during the pandemic, which offered added impetus and urgency for ASEAN to embrace new technologies and address the digital divide across and within ASEAN member states.

The opportunity to recalibrate growth comes at the midway point of the second ASEAN Economic Community (AEC) Blueprint 2025 as ASEAN goes through the Mid-term Review this year to evaluate its past progress and plan for the future. The region is also at a critical period given the commencement of the development of a consolidated strategy for the Fourth Industrial Revolution and the final preparation stage of the Regional Comprehensive Economic Partnership (RCEP) towards its signing.

Tan Sri Munir Majid


In summing up the session, Tan Sri Dr. Munir expressed confidence in Dato Lim Jock Hoi’s leadership and conveyed the hopes of the private sector of an effective ASEAN response towards the economic challenges posed by the COVID-19 pandemic.

“Secretary-General Dato Lim Jock Hoi is in many ways in the hot seat of ASEAN response to the COVID-19 health and economic crisis. ASEAN is fortunate to have him heading the secretariat at this time. Well experienced particularly on the economy at the highest levels he can well handle the pressures and challenges ASEAN faces. The business sector, particularly, looks forward to working with him to fashion rapid ASEAN responses in these unprecedented times in global history,” he remarked.

Dr. Aladdin D. Rillo

(In picture) Dr. Aladdin D. Rillo, Deputy Secretary-General for the ASEAN Economic Community, responds to a question from the audience

CARI Captures 461: Malaysia leads mobile wallet usage in Southeast Asia



Malaysia leads mobile wallet usage in Southeast Asia
(24 June 2020) Malaysia has the highest mobile/digital wallet usage in Southeast Asia at 40%, ahead of the Philippines (36%), Thailand (27%) and Singapore (26%), according to the Mastercard Impact Study 2020. Malaysian consumers also shifted to other payment methods, such as contactless debit cards (26%) and contactless credit cards (22%), while cash usage declined 64% since the beginning of the pandemic. Singapore, the Philippines and Thailand also reduced their cash usage by 67%, 64% and 59% respectively, with a similar increase seen in use among all contactless payment methods. The report noted that even as countries in the region start to ease the restrictions and prepare for the “new normal,” some of the trends and habits formed in response to the pandemic would likely remain.


ASEAN leaders reaffirm commitment to mitigate impact of COVID-19 at 36th Summit
(26 June 2020) ASEAN leaders adopted the “ASEAN Leaders’ Vision Statement on A Cohesive and Responsive ASEAN: Rising Above Challenges And Sustaining Growth,” which, among others, recognised the social and economic repercussions of the COVID-19 pandemic. The 36th ASEAN Summit was held virtually and hosted by the 2020 ASEAN Chair, Vietnam, from Hanoi. In the document, the leaders reaffirmed strong commitment to alleviating the adverse impact of the pandemic on people’s livelihood, societies and economies, among others, through the implementation of a comprehensive recovery plan. The leaders of the regional grouping also agreed to sustain the momentum of ASEAN community-building and be forward-looking in charting the continuing development of ASEAN beyond 2025.


Malaysia’s exports suffer worst decline in 11 years
(29 June 2020) Malaysia’s exports suffered a sharp decrease by 25.5% year-on-year to US$14.6 billion (RM62.7 billion) in May 2020. This was its biggest fall since May 2009. It was the second consecutive month with a double-digit decline for exports after a 23.8% year-on-year decrease in April to US$15.1 billion (RM64.9 billion). According to the Department Of Statistics Malaysia (DOSM), the country’s imports similarly suffered a worst drop since January 2009. Imports fell 30% to US$12.2 billion (RM52.3 billion) year-on-year. Although the country’s trade balance returned to a surplus of US$2.4 billion (RM10.4 billion) in May, after registering its first monthly deficit in over 22 years in April, Malaysia’s exports recorded a decrease at a slower pace than that of imports, said the DOSM.


VN-Index rebounds, propped up by PMI data and interest cuts
(2 July 2020) Vietnam’s benchmark VN-Index surged on 1 July after a six-day losing streak as investor sentiment improved following solid data of PMI in June 2020 and steep cuts in interest rates of some banks. The VN-Index recouped 2.23% to close at 843.49 points on 1 July after losing 5.4% in the previous six sessions. IHS Markit data released on 1 July showed that Vietnam Manufacturing Purchasing Managers’ Index (PMI) posted 51.1 in June, up from 42.7 in May and above the 50.0 no-change mark for the first time in five months. The reading represented a continuation of the recovery seen since the PMI hit a record low in April. According to an analyst, the business results in the first quarter of 2020 were pessimistic, but opines that the market has recovered recently thanks to investors’ confidence in the economic support packages by the government and that businesses will soon return to normal and resume activities.


Home prices fall by most in three years in 2Q20 due to city-wide shutdown
(2 July 2020) Home prices in Singapore fell the most in three years in the second quarter of 2020, due to the city-wide shutdown caused by COVID-19. Property prices declined by 1.1% quarter-on-quarter in the second quarter, a slight increase from the 1% decrease in the first quarter of 2020. Singapore’s shutdown, which only started easing on 19 June, sent housing sales plunging to a near six-year low in April 2020, after which sales rebounded in May. Analysts forecast that housing prices may fall by between 3% to 6% in 2020 due to macroeconomic uncertainties.


World Bank classifies Indonesia as an upper-middle income country
(2 July 2020) Indonesia has been officially classified as an upper-middle income country according to the World Bank’s latest countries classifications by income level, released on 1 July. The classification is based on gross national income (GNI) per capita, and Indonesia’s economy saw its GNI per capita rise to US$4,050 in 2019, surpassing the income threshold for upper-middle income (US$4,046 to US$12,535) from US$3,840 in 2018. The World Bank uses the classification as a way of determining whether a country can use a bank’s facilities, such as loan pricing. The Indonesian economy has come under stress due to the COVID-19 pandemic, with the World Bank projecting zero growth for the country in 2020.


Indonesia mulling the return of banking regulatory authority to central bank
(2 July 2020) Indonesian President Joko Widodo is considering issuing an emergency decree which would transfer regulatory authority over the banking system from the Financial Services Authority (OJK) back to Bank Indonesia, amidst concerns that the COVID-19 pandemic is exposing strains in the financial system. The Indonesian government is considering adopting the French model of having an independent administrative authority under the central bank which would oversee the banking system. In early 2020, Indonesia’s supreme audit board had referred to the OJK’s supervisory role over the financial system as “weak,” pointing to loopholes in its oversight of seven banks. However, on aggregate, the banking system has been referred to as “secure” by the OJK.


Japan to possibly discuss with Brunei to ease COVID-19-related travel restrictions
(2 July 2020) Japan might open talks with Brunei as early as July 2020 to ease COVID-19-related travel restrictions between both countries. Business travellers are to be given priority, followed by students and then tourists. Travel to and fro Japan has virtually stopped since restrictions were imposed, with a 99.9% drop year-on-year in foreign arrivals in May 2020. A total of 129 countries and regions are currently on Japan’s entry ban list, with foreign travelers who have been to any of the areas within 14 days being turned away. Travel between Japan and Vietnam was partially resumed on 25 June, with a chartered flight to Vietnam carrying 150 passengers, mainly business people.


Japan extends US$464 million loan to the Philippines to help fight COVID-19
(1 July 2020) Japan will extend a US$464 million loan to the Philippine government to help finance the country’s emergency measures to fight COVID-19. This makes the Philippines the first recipient of the highly concessional COVID-19 Crisis Response Emergency Support Loan designed by Japan to help ease the global health crisis. The loan is co-financed by the Asian Development Bank, and adds to the US$18 million Japanese grant aimed at providing Philippine hospitals and institutions with advanced medical equipment. The Philippines government has raised a further US$4.83 billion in concessional loans for its COVID-19 response from the World Bank, Asian Infrastructure Investment Bank, and the Agence Française de Développement.


Thailand prepares for haze
(30 June 2020) Thai authorities have warned that seasonal haze in the southern parts of the country is expected to be worse in 2020 due to droughts in neighbouring countries. The ASEAN Specialised Meteorological Centre (ASMC) said that temperatures in the lower parts of the region are expected to rise from July to September, leading to a possibility of intense transboundary haze pollution in the south. According to a local news outlet, this has prompted the Environment Ministry to call on agencies to prepare measures to limit the damage. Minister of Natural Resources and Environment Varawut Silpa-archa said the Pollution Control Department will be the main agency to invoke the ASEAN Agreement on Transboundary Haze Pollution and ask for cooperation from related countries to address the issue.

Mekong Monitor: Thailand implements third extension of coronavirus emergency until 31 July

Photo Credit: Nikkei Asian Review





Thailand implements third extension of coronavirus emergency until 31 July
(30 June 2020) Thailand will remain under a state of coronavirus emergency until 31 July, making it the third extension of the emergency decree. Originally imposed on 26 March, the emergency decree was supposed to end on 30 April. With no local transmission of the virus for over a month, Thailand will start easing restrictions from 1 July, with bars and pubs allowed to reopen, shopping malls and department stores allowed to extend their operations until 10pm, and schools restarting. While tourists will still be barred from entering Thailand, work-permit holders and their spouses, foreign spouses, and foreigners with permanent residence status, will be allowed in. Special arrangements are being negotiated with Japan, South Korea, Singapore, China and Hong Kong for short term business trips.
Read more>>


Tourism industry expected to lose US$47 billion under worst case scenario
(2 July 2020) Thailand’s tourism industry is expected to lose US$47 billion in 2020 in a worst case scenario, according to a recently published report by the United Nations Conference on Trade and Development (UNCTAD). The report laid out three scenarios for the global tourism industry, with lockdown measures lasting four, eight, and 12 months, respectively. Global tourism revenues under these scenarios would fall by US$1.17 trillion, US$2.22 trillion and US$3.3 trillion respectively, or between 1.5%-4.2% of the world’s GDP. The UNCTAD report called for governments to boost social protections for affected workers in the industry.
Read more>>


Myanmar imposes 15-day extension of travel bans and curfews to combat COVID-19
(28 June 2020) Myanmar is imposing a 15-day extension of its travel restrictions and curfews until 15 July to combat the spread of COVID-19. The restrictions include the suspension of international flights and a ban on the issuance of all visas and visa-exemption services, as well as a nightly curfew and a ban on the gathering of more than five peoples. United Nations officials, diplomats and foreign nationals who need to enter Myanmar must obtain exemptions from a Myanmar mission.
Read more>>


Vietnam economy expected to grow 3.5% in 2020
(1 July 2020) UOB Group has trimmed Vietnam’s 2020 growth forecast to 3.5% year-on-year from its earlier projections of 5.2%. This projection was based on the expectation of a rebound of 5.5% to 7.0% in the second half of 2020, which is possible given the country’s exit from a lockdown earlier than many of its neighbours and the dynamism of its economy. Vietnam’s economy expanded by 0.36% y-o-y in the second quarter of 2020, a significant drop from the 3.68% y-o-y growth in the first quarter of 2020. Activities across the board decelerated sharply in 2Q20, with the services sector bearing the worst of the brunt and expanding by only 0.57% y-o-y in 1H20 (as compared to 7.30% growth seen at the end of 2019).
Read more>>


Around 400 garments, footwear and travel goods factories suspend operations due to COVID-19
(1 July 2020) Around 400 garments, footwear and travel goods factories in Cambodia have suspended operations due to COVID-19, leaving some 150,000 workers jobless. This was according to a joint statement released on 1 July by the Garment Manufacturers Association in Cambodia, the Cambodia Footwear Association and the European Chamber of Commerce in Cambodia. The associations warned that the numbers are likely to rise in the coming weeks as numerous brands and retailers in Europe and North America cancel or delay orders due to falling demand. The statement called on the European Union to postpone the effective date on 12 August of the partial withdrawal of Cambodia’s Everything But Arms (EBA) trade benefits for a year due to the pandemic.
Read more>>



About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.

China-ASEAN Monitor: ASEAN commodity purchasing centre opens in Chongqing

Photo Credit: Malaysian Reserve




ASEAN commodity purchasing centre opens in Chongqing
(29 June 2020) An ASEAN commodity purchasing centre opened in southwest China’s Chongqing Municipality on 28 June. Operated by the ASEAN international logistics park of Chongqing, and with a total investment of US$1.41 million, the 14,000-square-meter purchasing centre aims to become a new platform for the exchange of goods between the western Chinese inland regions and the ASEAN member countries. Customers can buy various products ranging from silver products to seafood at the centre located at the Chongqing Highway Logistics Base. According to an official at the logistics base, the purchasing centre will work with the traditional commercial and e-commerce enterprises at the base to further promote the integration of transportation, logistics, commerce, and industry.
Read more>>

Chinese expo to act as platform for Cambodian farmers
(29 June 2020) The China International Import Expo (CIIE), scheduled to be held from 5-10 November 2020, can act as a platform for Cambodian farmers to showcase their products, according to the Cambodian Rural Development Agency. The third CIIE opened registration on 24 June. Professional visitors, including buyers, industry insiders and experts from enterprises, social organisations, public institutions and government organs, can register on its official website. On 16 June, China and Cambodia initiated a “fast track” for the transfer of people and a “green corridor” for the flow of goods between the two countries amid the COVID-19 pandemic.
Read more>>

Myanmar negotiates with China for soybean export
(29 June 2020) China, through the General Administration of Customs of China (GACC), has sent questions related to food safety and import procedures to Myanmar’s Ministry of Agriculture, Livestock and Irrigation, in order to import Myanmar’s soybeans through a legitimate channel. China imports around 90 million tonnes of soybeans annually but following the trade war with the US, China has reduced importation of soybean from the US and turned to Asian markets. Myanmar farmers from the northern Shan State have started to cultivate soybeans of American origin on a trial basis. If the legal channel materialises, the growers in Shan State will see an increase in income. The related ministries in Myanmar are endeavouring to export soybeans to a larger market like China, coordinating closely with GACC, according to a statement released online by the Commerce Ministry.
Read more>>

Hong Kong welcomes Thailand’s relaxation of inbound passenger control
(29 June 2020) The Hong Kong Special Administrative Region (HKSAR) government welcomed Thailand’s decision to set up a special travel arrangement for cross-border control with five economies including Hong Kong as a first step in relaxing its inbound passenger control. Thailand’s special arrangement was announced by Deputy Secretary General to the Prime Minister for Political Affairs Kobsak Pootrakool at a webinar organised by the Commerce and Economic Development Bureau of the Hong Kong government and the Thailand Board of Investment on 29 June. Secretary for Commerce and Economic Development of the HKSAR government Edward Yau said if cross-boundary business exchange can be gradually resumed for Hong Kong, it would give a tremendous boost to its economic recovery.
Read more>>

Vietnam’s Dong Nai prepares to welcome FDI moving out of China
(26 June 2020) Vietnam’s southern province of Dong Nai plans to build industrial parks and expand existing ones to be ready for the shift in foreign direct investment flows from China to Vietnam because of the COVID-19 pandemic, which has hit that country hard. According to Vietnam’s Statistics Office, in the first five months of 2020, Dong Nai attracted a total of US$612 million in FDI. Deputy general director of the Dau Giay Industrial Zone Joint Stock Company Nguyen Thị Cam Hong said South Korean and Japanese investors came to survey the industrial zone in May 2020. To welcome new FDI inflows, Dong Nai plans to build industrial parks at Long Thanh, Cam My, Thong Nhat, Trang Bom, and Nhơn Trạch districts and Long Khanh Town, each between 200ha and 900ha in size. So far, 1,700 companies have invested in Dong Nai, including over 1,200 foreign firms from 43 countries and territories, and have brought in US$24 billion.
Read more>>

CARI Briefings on How can ASEAN bounce back: An EU perspective

Published on 1 July 2020

CARI Viewpoint: ASEAN cannot rely on external trade to sustain growth post-COVID, and must foster greater internal trade through regulatory transparency, stronger enforcement, and stakeholder engagement

CIMB ASEAN Research Institute (CARI) hosted a CARI Briefings webinar under its COVID-19 Economic Recovery Plan Series, titled ‘How Can ASEAN Bounce Back: An EU Perspective’, on 23 June 2020. The session featured Paolo R. Vergano, Senior Fellow of CARI and Partner at FratiniVergano – European Lawyers, and key expert for trade facilitation in the ARISE Plus project of the ASEAN Regional Integration Support by the EU.

The COVID-19 global pandemic has had major ramifications for the global trading system, with supply chains disrupted and protectionism on the rise. For trade-dependent ASEAN, 2020 will prove to be a painful year economically as the Member States seek to find ways of returning to pre-pandemic growth levels. Paolo sought to provide an answer to this conundrum through a trade and institutional perspective; arguing in favour of greater economic integration within the region and pointing to the EU experience as providing a possible path forward for ASEAN policymakers.

During the briefing, among the key insights shared were:

1) ASEAN can no longer depend on external trade as its main driver

Paolo observed that with world trade expected to contract by between 13% to 32% in 2020 due to COVID19, ASEAN will no longer be able to depend on external trade as its main economic driver, and should instead foster greater ASEAN economic integration. ASEAN integration should be pushed in favor of what he describes as the present ‘emotional’ response to the pandemic, which was to restrict trade and ban exports. He noted that the European Union encountered the same emotional response, and reacted by placing bans on the exports on foodstuffs. With bans now being lifted, Paolo stresses that policymakers should start to think rationally about how to respond to these challenges.

Stressing the importance of comparing intra-ASEAN and intra-EU trade stats to help facilitate the larger discussion, Paolo first points to the share of intra-ASEAN trade vis-a-vis ASEAN’s total trade. Despite eight years of implementations of various agreements meant to increase intra-regional trade, the percentage share of intra-ASEAN trade actually decreased by 10% between 2010 and 2018. Within the same period, overall ASEAN exports actually increased by 30%. Within the same time period, intra-EU trade increased by roughly 10%.

As Paolo stresses, these numbers indicate not just a problem for ASEAN, but also an opportunity. If ASEAN were to lift all restrictions and simplify its trading regime, it has the potential of significantly expanding its economic gains. This has been the objective of most agreements and legal instruments in ASEAN (e.g. ASEAN Trading Goods Agreement, ASEAN Economic Community Blueprint 2025).

So what has been impairing greater intra-regional trade?

2) Regulatory Transparency

Paolo notes that traders and producers need to know about trade-related regulations, legislations, and procedures in place in order to be able to produce and sell their products within ASEAN. As he observes, this transparency is ‘claimed, proclaimed, and sought after in abundance’ in almost every single ASEAN legal instrument. For instance, according to Articles 11 and 40 of the ATIGA, for NTMs and NTMBs, as well as the NTM Guidelines, countries are obliged to notify relevant parties of the implementation of new NTMs. However, between 2013 and 2018, only 180 notifications were made and none within the 60 days of advance notice.

By comparison, the European Union has a number of systems to ensure regulatory transparency. The Technical Regulation Information System (TRIS) requires EU Member States to notify the European Commission of all draft technical regulations (TBTs), with an average of over 700 notifications made every year.

As Paolo notes, ultimately both the EU and ASEAN have different institutional setups. However, regulatory transparency needs to remain a fundamental bedrock upon which everything else builds upon.

3) Stronger Enforcement

While ASEAN rules and commitments tend to be very ambitious, what is less ambitious is the appetite among member states to implement the commitments they have undertaken. The ASEAN Solutions for Investment, Services, and Trade (ASSIST) for B2G solutions to cross-border intra-ASEAN trade issues has seen only 10 cases since 2016, with just one arguably resolved.

By comparison, the EU’s SOLVIT mechanism (the EU’s equivalent of ASEAN’s ASSIST) has dealt with some 10,000 cases within the same period as ASSIST. Over 70% of SOLVIT’s business cases are resolved within an average of 10 weeks.

4) Stakeholder Engagement

As Paolo argues, the reason why many rules in ASEAN tend to be cumbersome and difficult to comply with by operators is due to the fact that said rules are implemented in a vacuum, with little to no input from the private sector. Recently, ASEAN has launched the e-Platform for Consultations with Private Sector, a mechanism for ASEAN business action councils (ABACs) and joint business councils (JBCs) of ASEAN to engage with ASEAN sectoral bodies to help improve the process of developing regulations. However, only five consultations have been held so far.

By comparison, the EU has very transparent process where every piece of legislation at regional level is subject to legislative roadmaps, inception and detailed impact assessments (where private sector and civil society groups can interact with the regulators to discuss new pieces of legislation), public hearings before parliaments and the European Commission, stakeholders consultations, expert groups, etc.

5) Conclusion

In his closing remarks, Paolo made a few observations:

  • Importance of regulatory transparency: not just proclaimed in a current plethora of agreements but actually delivered by Member States. Paolo urges the private sector to start demanding transparency from their respective governments.
  • Greater compliance and enforcement of existing rules: while ASEAN tends to be very ambitious with regards to agreements, protocols, MOUs, etc, compliance and enforcement of said rules tends to be wanting. As Paolo stresses, ASEAN ultimately doesn’t need more rules but the implementation of the existing ones.
  • More engagement with private sector and civil society.
  • Consider updating certain provisions and mechanisms under the ATIGA and other key ASEAN legal frameworks: Paolo observes that ASEAN will soon be conducting a mid-term review of ATIGA. He stresses that trade in goods remains the bedrock of economic activity in the region, and will be important for the region’s post-COVID bounce.

6) Questions and Answers

During the ensuing questions and answers session, the following topics were discussed:

Elimination of NTMs and minimizing NTBs

Paolo believes that a few relatively simple policies could be implemented at the high level to help eliminate NTMs and minimize NTBs, thus giving ‘teeth’ to ASEAN in terms of enforcing regulatory transparency. For example, when it comes to the notification of new measures, ASEAN could shift the burden of proof to the individual ASEAN Member State that failed to comply with the advance notification of a new measure. In such cases, the burden to prove that such measure is consistent with the ATIGA should be reversed and fall on the ASEAN Member State that adopted it, not on the ASEAN Member State that may challenge it.

ASEAN’s overdependence on external trade

As Tan Sri Dr. Munir notes, certain ASEAN Member States have been relatively successful in attracting extra-ASEAN investments. For example, Indonesia is currently attracting lots of American investments from US companies relocating from China, while Vietnam recently ratified an FTA with the EU. As such, why should these countries focus on ASEAN then?

Paolo concurs that while all regional blocs, including the EU, will always have an element of inter-state competition between its members, he believes that it is a particular issue in ASEAN. He believes that ASEAN being too dependent on external trade to sustain itself may not be feasible in a post-COVID world. As he points out, the issue of near-shoring may see a lot of foreign production in China simply return home rather than relocate to ASEAN.

Prospects for greater EU-ASEAN collaboration

Paolo believes that the future for EU-ASEAN collaboration will be ‘very rosy’, and that he remains confident the relationship will remain strong. However, he does not see the prospects of an FTA between ASEAN and the EU due to intra-regional competition between ASEAN Member States. ASEAN Member States with current preferential access to EU market such as Vietnam and Singapore may not like their ASEAN competitors getting the same preferences.



CARI Captures 460: Southeast Asia’s FDI inflows increased 5% in 2019



Southeast Asia’s FDI inflows increased 5% in 2019
(16 June 2020) Southeast Asia saw its foreign direct investment (FDI) rise by 5% to a record level of US$156 billion in 2019, according to a report by the United Nations Conference on Trade and Development (UNCTAD). Growth was mainly driven by strong investment in Singapore (US$92 billion), Indonesia (US$23 billion) and Vietnam (US$16 billion), which received more than 80% inflows into the region. Investments into the region came from other Asian economies, the US and ASEAN countries with manufacturing and services making up most of the inflows to Southeast Asia. Cambodia recorded its highest ever FDI, at US$3.7 billion, while FDI inflow to Malaysia was flat at US$8 billion. Investment in Myanmar, Laos, the Philippines and Thailand fell. Due to the impact of COVID-19, UNCTAD forecasts a decline of up to 30%-40% for FDI in Asia and a drop of 40% for global FDI.


Myanmar finalises second Investment Policy Review with OECD’s help
(25 June 2020) Myanmar’s Ministry of Investment and Foreign Economic Relations (MIFER) finalised its second Investment Policy Review (IPR) with help of the Organization for Economic Cooperation and Development (OECD) on 23 June. The report will help identify further policy reforms needed to make the country a more attractive investment destination. The report is expected to be published in the next three months. While the first IPR, conducted in 2014, focused on investment promotion and facilitation, financial sector reform, infrastructure development and responsible business conduct, the second IPR will focus on areas such as connectivity, green growth-focused investment frameworks, secure and well-defined land rights, and enhancing the role of economic zones. Myanmar is reportedly on track to meet its FDI target of US$5.8 billion for the 2019/2020 fiscal year.


Malaysia’s economy projected to contract 3.1% in 2020, grow 6.9% in 2021
(25 June 2020) Malaysia’s economy is expected to contract by 3.1% in 2020 due to the slowdown in economic activity caused by COVID-19 but is projected to grow 6.9% in 2021 as the outbreak eases, according to a World Bank report released on 25 June. In the first quarter of 2020 (Q1 2020), the country’s exports of goods and services declined for a third consecutive quarter by 7.1%, its largest decline since the global financial crisis in 2009. Investment, on the other hand, contracted for the fifth consecutive quarter by 4.6% in Q1 2020 compared to a contraction of 0.7% in Q4 2019. Meanwhile, private consumption moderated to 6.7% in Q1 2020, down from 8.1% in the previous quarter, mainly due to the impact of COVID-19 and the Movement Control Order on retail, travel, leisure and recreational spending and consumption of durable goods.


Myanmar lays out three-phase recovery plan to reinvigorate tourism industry
(26 June 2020) Thailand’s Finance Ministry plans to ramp up its debt sales in an effort to raise a major portion of the US$32 billion it is borrowing for its financial stimulus programme. There seems to be growing concern over the increasing indebtedness of the Thai government, with steepening yield curves and slackening demand seen at the latest sale of five- and 15-year bonds last week. One analyst argued the Thai government should focus on increasing the supply of short-to-medium maturity sovereign bonds and retail savings bonds to mitigate the risks of higher long-tenor bond yields. The bond market may also benefit from the return of foreign investors, with overseas funds buying a net total of US$1.1 billion in Thai bonds in June 2020.


Thailand’s property market strengthening
(25 June 2020) Philippine central bank, Bangko Sentral ng Pilipinas, cut its benchmark interest rate by 50 basis points, as the country braces for its deepest economic slump in more than three decades. On 25 June, the central bank lowered its key rate to 2.25% from 2.75%. As of now, the central bank has cut interest rates by 175 basis points in 2020, as well as cut reserve ratios for banks and pumping liquidity into the financial system. The governor of the central bank, Benjamin Diokno, had previously signalled his preference for keeping real interest rates positive, meaning there may be little scope for further easing.


Philippine-Japan trade fall by more than half in April 2020
(24 June 2020) The Philippines’ Department of Budget and Management (DBM) said it is preparing a 2021 national budget of US$86 billion (P4.3 trillion), which will focus on measures to address unemployment resulting from the COVID-19 pandemic. According to Budget Secretary Wendel E. Avisado, the spending plan for 2021 will be aligned with the government’s priorities by setting a high priority on dealing with the consequences of the outbreak, which wiped out livelihoods and jobs. He said in a briefing that the budget will focus on labour-intensive projects and activities to provide income to the most vulnerable and most affected in both the private and public sectors. A report by the Department of Labor and Employment (DOLE), revealed that 90,215 workers from 3,189 establishments have been displaced nationwide since January 2020.


Garment manufacturers urge government to temporarily suspend minimum wage
(23 June 2020) A group representing garment factories in Cambodia have urged the government to temporarily suspend the minimum wage of US$190 as the sector struggles with the COVID-19 pandemic. Cambodia’s apparel and footwear sector remains vital to the economy, generating US$10 billion in annual exports and employing 800,000 people. Since COVID-19, more than 250 factories employing some 130,000 workers have suspended operations. The Ministry of Labour, however, stated it was not aware of any proposal while Cambodian Alliance of Trade Unions president Yang Sophorn, argued that the proposal was an “excuse” to avoid engaging in serious wage negotiations.


Grab Indonesia contributed US$5.45 billion to the Indonesian economy in 2019
(25 June 2020) Ride-hailing firm Grab Indonesia contributed US$5.45 billion to the Indonesian economy in 2019, according to research conducted by the Centre for Strategic and International Studies (CSIS) and Tenggara Strategics. The largest contributor to the economy was Grab Indonesia’s food delivery service, GrabFood, which contributed US$2.6 billion. The data was calculated through the incomes of more than 5,000 surveyed Grab partners and merchants before and after joining Grab. The executive director of Tenggara Strategics, Riyadi Suparno, said that platforms like Grab and the gig economy can support the country as it recovers from COVID-19. The research also found that the monthly sales of GrabFood merchant partners increased by 35% in 2019 compared to the monthly sales in 2018.


ASEAN and other countries reaffirm commitment to sign RCEP in 2020
(24 June 2020) ASEAN member countries and other stakeholders reiterated their commitment to sign the Regional Comprehensive Economic Partnership (RCEP) trade deal in 2020, despite the challenges from the COVID-19 pandemic. At the 10th Regional Inter-sessional Comprehensive Economic Partnership (RCEP) Ministerial Meeting held virtually on 23 June, ASEAN, Australia, China, Japan, South Korea and New Zealand said the deal’s importance has grown amid the pandemic. They also noted that “the RCEP remains open for India,” which had backed out of talks in November 2019, citing unresolved “significant issues.” Once it comes into effect, the RCEP is estimated to be the biggest trade pact in the world, as it will involve countries that collectively make up one-third of global gross domestic product.


ASEAN leaders to convene at 36th Summit online
(25 June 2020) ASEAN leaders will convene at the 36th ASEAN Summit today via teleconference to discuss on how to further enhance cooperation on public health emergencies and put in place a robust post-pandemic recovery plan. The summit was originally scheduled for 6-9 April, but was postponed to June due to the COVID-19 pandemic. As ASEAN Chair in 2020, Vietnam Prime Minister, Nguyen Xuan Phuc, will preside over the opening ceremony of the summit. During the summit, ASEAN leaders will evaluate ASEAN’s community-building efforts, the challenges ahead, and adopt a number of key documents to improve the lives of the peoples of ASEAN post-COVID-19. The summit is expected to reaffirm the need for a post-pandemic recovery plan which will involve collaboration among industries, the private sector and other stakeholders.

Mekong Monitor: Myanmar to distribute stimulus payments to 5.4 million households

Photo Credit: Myanmar Times





Myanmar to distribute stimulus payments to 5.4 million households
(22 June 2020) Myanmar’s government plans to give stimulus money to 5.4 million households to counter the economic fallout caused by the COVID-19 pandemic. According to a spokesperson from the President’s office, permission from other government agencies will be sought to enable the distribution of US$14 (20,000 kyat) to each household. The pandemic has caused tens of thousands of workers to lose their jobs when factories closed due to raw materials disruption and cancellation of orders. Hundreds of thousands of local farmers were also affected when they were not able to export their produce due to border closures. In an earlier announcement, the government said it would enlist the help of digital payment service providers to deliver the stimulus payments in hard-to-reach areas.
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Agricultural exports increased by US$466 million as of 12 June
(24 June 2020) Myanmar’s exports of agricultural products between 1 October and 12 June in the current fiscal year 2019/2020 increased to over US$2.9 billion from $2.4 billion in the corresponding period of the 2018/2019 fiscal year, according to trade figures released by the Ministry of Commerce. Over the past eight months, the export figures marked an increase of $466 million year-on-year. In the exports sector, agriculture was the top performing sector along with the natural gas sector. The main items of export in the agricultural sector were rice and broken rice, pulses, corn, and rubber. Myanmar’s agricultural products are primarily exported to China, Singapore, Malaysia, the Philippines, Bangladesh, India, Indonesia, and Sri Lanka. The export market, however, remains uncertain due to unsteady global demand.
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Thailand to prepare registration methods for domestic tourism by 1 July
(22 June 2020) Thailand’s Fiscal Policy Office (FPO) plans to propose registration methods for three domestic tourism stimulus packages, Kum Lang Jai (Encouragement), Rao Pai Tiew Gun (Let’s travel together), and Tiew Pan Suk (Trips to share happiness), to the Cabinet on 30 June. The FPO has instructed the Tourism Authority of Thailand (TAT) to reconsider the methods after talks between the TAT and Krung Thai Bank on 19 June on registration methods for the packages ended without any conclusion. The FPO director-general, Lavaron Sangsnit, confirmed that registration methods for the packages would be made as simple as possible for the public and tourism businesses. He believes that these measures will help stimulate the economy and generate revenue for the country.
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Eastern Economic Corridor to push for more foreign businesspersons to be allowed into the country
(23 June 2020) The Eastern Economic Corridor (EEC) Office of Thailand will propose that the Centre for COVID-19 Situation Administration (CCSA) consider allowing groups of foreign business operators to visit EEC provinces. According to EEC Office secretary-general Kanit Sangsubhan, the office will propose that the visitors undergo COVID-19 tests in their respective countries, and again upon arrival in Thailand. They will also be required to purchase medical insurance covering COVID-19 treatment and undergo a 14-day quarantine at “alternative” places in the EEC. The EEC Policy Committee also met on 22 June to discuss the possible relaxation of lockdown measures to allow businesspersons related to EEC investment to enter the zone.
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Businesses strive to reduce inventory after COVID-19 pandemic
(22 June 2020) More than half (57.7%) of enterprises in Vietnam that were affected by the COVID-19 outbreak said their consumption market had sharply decreased, according to a recent survey by the General Statistics Office (GSO). The shrinking consumer market is, therefore, the top concern of most businesses at the moment. Although purchasing power has improved, it is still at a modest level and this results in the large inventory of many businesses. To address purchasing power, large inventory, and domestic consumption, Ho Chi Minh City has launched promotional activities such as the combination of traditional shopping channels with e-commerce and connecting businesses in the city with other provinces in September. The latter aims to form supply chains from production to consumption and delivery, bringing the city’s goods into distribution systems of other provinces and vice versa.
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About Greater Mekong Subregion (GMS)

The Greater Mekong Subregion (GMS) Economic Programme was launched by the Asian Development Bank in 1992 connecting five developing ASEAN countries, namely Cambodia, Laos, Myanmar, Vietnam and Thailand, and Chinese provinces of Yunnan and Guangxi Zhuang Autonomous region. The region has some of the most robust economies sharing the Mekong River Basin thanks to its reform and liberalisation. The subregion is growing at a faster pace than the whole of East Asia and the Asia Pacific as the GDP growth rate for 2017 was at 6.4 percent, according to the World Bank. The population at the subregion as of 2016 is at 340 million while the GDP at PPP is at US$3.1 trillion in 2016. In 2015, trading within the region was at US$444 billion.

China-ASEAN Monitor: Malaysia’s trading capabilities to be boosted through cooperation with China

Photo Credit: Malaysian Reserve


Economy, Investment and Trade


Malaysia’s trading capabilities to be boosted through cooperation with China
(23 June 2020) Malaysia’s exports and imports capabilities are expected to be significantly increased through infrastructure development cooperation with China, a senior Malaysian official said on 23 June. Projects such as the East Coast Rail Link (ECRL) and the Malaysia-China Kuantan Industrial Park (MCKIP) will be part of a larger smart network to enable Malaysia to take advantage of its geographical location to drive trade. The future development of the MCKIP will focus on artificial intelligence to promote more intelligent logistics and the setting up a larger cold chain warehouse to facilitate the exports of agricultural goods to China. The ECRL, for its part, will help the government to promote greater connectivity.
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Malaysia seeks re-examination of BRI-backed projects due to COVID-19
(11 June 2020) A consortium of companies that includes Singapore Telecommunications are building a high-performance submarine cable connecting the country with China (Hong Kong and Guangdong province), Japan, the Philippines, Thailand and Vietnam. Other members of the consortium called the Asia Direct Cable Consortium, include China Telecom, SoftBank, Tata Communications, and Viettel. At 9,400 kilometres long, the cable is designed to carry more than 140 terabits per second of traffic, enabling high-capacity transmission of data across Southeast and East Asia. Construction of the cable is scheduled for completion in the fourth quarter of 2022.
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China’s Maple Leaf to buy one of Singapore’s largest international schools
(22 June 2020) Hong Kong-listed firm China Maple Leaf Educational Systems Ltd agreed to acquire one of Singapore’s largest international schools for US$487 million. Singapore’s Canadian International School is being purchased by China Maple Leaf from Southern Capital Group Pte and HPEF Capital Partners, with the firm agreeing to pay in cash and settle all of the school’s debts. Upon completion of the transaction, the school will become an indirect wholly-owned subsidiary of China Maple Leaf. The Canadian International School has about 3,000 students in Singapore while China Maple Leaf operates 104 schools from preschool to high school in China and overseas, including in Canada and Australia.
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MAS suggests Singapore and China work together to promote green finance in region
(23 June 2020) The Monetary Authority of Singapore (MAS) has suggested that China and Singapore work together to develop frameworks for green and sustainability-linked loans customised for Chinese and Singaporean SMEs. According to MAS managing director Ravi Menon, financial cooperation has been a highlight of Singapore’s 30-year bilateral relationship with China. Highlighting existing partnerships between Chinese and Singapore banks to finance green and sustainable projects, Menon suggested that the two countries work together to create frameworks for green and sustainability-linked loans, customised for Chinese and Singaporean SMEs. He added that such frameworks can help promote cross-border syndications in green loans, reduce the borrowing costs of SMEs, promote economic transformation and upgrading.
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Beijing-backed AIIB approves US$1 billion worth of loans for Indonesia
(23 June 2020) The Asian Infrastructure Investment Bank (AIIB) has approved US$1 billion in two loans to help Indonesia combat the COVID-19 pandemic. The first loan of US$750 million, co-financed by the Asian Development Bank, will finance a project to boost economic support for businesses and vulnerable households, as well as support Indonesia’s healthcare system. The second loan of US$250 million, co-financed by the World Bank, will back the government’s response to the pandemic. Both loans are part of the AIIB’s US$10 billion fund to help the public and private sector fight the pandemic.
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CARI Briefings on How can ASEAN bounce back: China’s economic trajectory and ASEAN

Published on 24 June 2020

CARI Viewpoint: China’s economic recovery likely to take place in 2021 while ASEAN needs to stop selling itself short to gain from its sweet spot

CIMB ASEAN Research Institute (CARI) organised its first edition of “CARI Briefings: COVID-19 Economic Recovery Plan Series – How can ASEAN Bounce Back” titled “China’s Economic trajectory and ASEAN – The New Abnormal: Navigating the Post-Pandemic World” on 16 June 2020 featuring Pauline Loong, Senior Fellow of CARI and Managing Director of Hong Kong-based research consultancy Asia-Analytica and an award-winning policy risk analyst specialising in China’s broader political economy.

Businesses in many countries have started to reopen in the hopes of restarting battered economies amid the COVID-19 pandemic. To add to the uncertainty, political rumblings ranging from anti-racist protests in the US to those protesting against the imposition of security law in Hong Kong threaten to have long-term implications. With the situation looking bleak, many look to China to lead the world back on the economic recovery path.

During the briefing, among the key insights shared were:

1) China will be back in business, just not this year

a. The world talks of de-globalisation but the reality is we are all shackled together

When and by how much the Chinese economy recovers depends on not just what’s happening in China itself but what’s happening in other countries as well. According to Pauline, the talk of de-globalisation exists but the reality is that economies remain tied to each, albeit reluctantly. “We are shackled together,” she said.

“The government of China has started to unwind its measures to contain the pandemic but simply allowing people to go to work does not mean that Chinese growth will automatically get back on track,” Pauline said.

In the GDP projections by both the IMF and the World Bank, China is the only one among major economies to make it into positive growth in 2020 and 2021. However, Pauline cautions that the various forecasts are based on varying levels of assumptions each with their respective butterfly effects.

b. China’s economic numbers paint a bleak picture

Domestic consumption as an engine of growth for China is often misunderstood, Pauline pointed out. There is the argument that because the consumption’s share of the Chinese economy is large and growing, it must, therefore, be replacing investment and productivity as the top engine of growth.

However, size is always just a part of the story. The notion of consumer spending driving growth is the result, and not the cause of a productive, healthy economy. “Efficient investment and productivity generate the wealth that spurs the consumption, that in turn, spurs investment in a virtuous cycle of growth,” she said.

To drive her point, Pauline revealed how Chinese private consumption in 1962 accounted for 71.3% of its economy but did not push growth as the GDP shrank 5.7% that year. She then presented current figures for the Chinese economy.

According to her, the one-stop indicator of a country’s economic pain is the government’s tax receipts, which in China’s case, fell 16.7% year-on-year in the first four months of 2020. The effect was felt throughout China’s 31 provinces and regions: Guangzhou province, normally the nation’s best performer, saw its GDP fall 6.7% while Hubei province suffered a catastrophic 39.2% drop in GDP.

c. No GDP target set for 2020

The International Monetary Fund (IMF) is forecasting a 1.2% growth for China while the World Bank has forecasted 1.0%. “Interestingly, the Chinese government itself was less confident than the IMF or the World Bank that growth could even get back to positive territory by the end of this year,” said Pauline.

During the National People’s Congress meeting on 20 May 2020, part of Chinese premier Li Keqiang’s work report presentation included the announcement that the government would not be setting a GDP target for 2020. This was a departure from a decades-old tradition of setting parameters for lower-level governments in their economic plans for the economy. In a command economy like China, official targets guide decisions on investments, trade and even monetary policies and are also seen by investors as something to strive for.

The reason behind the Chinese government’s decision to not set a GDP target becomes clear when one looks at premier Li’s list of six priorities for 2020. The list on the left hand side (Six Priorities) displays the six areas with the highest policy priorities while the list on the right hand side (Six Kisses) is a list of sectors that would require what the Chinese government calls “stabilising.” According to Pauline, the second list was promptly nicknamed the “six kisses” by the people because the Chinese word for stability is identical in pronunciation to the word “kiss.”

As can be observed from the last item under the Six Kisses list, managing market expectations may have something to do with the way the Chinese government has been acting this year, i.e., not setting a GDP target for 2020 and playing up the economical challenges facing the nation instead of playing them down. “By emphasising the many areas of the economy that needs fixing, Beijing is dampening expectations of a quick rebound. If growth this year chips into the negative, markets will take it in stride. There would be no mad rush for the door by frightened investors,” said Pauline.

“If on the other hand, growth manages to eke into the positive territory, everyone with exposure to China will be congratulating themselves. So dampening expectations is a PR win-win [for China].”

d. Forget 2020, look to 2021

Since it is already halfway through the year, Pauline said businesses should forget 2020 as the chances of a meaningful recovery for the Chinese and global economy is slim. The global economy has been under lockdown for months and only just reopening. People in China, in the US, in Europe, people around the globe are concerned and therefore are not spending or investing. The return of confidence will take time.

“Even though Chinese numbers in the coming months may launch headlines, the real turning point in terms of business opportunities in China is in 2021,” she said.

Reasons to look to 2021 for China’s economic recovery:

  • The centenary of China’s ruling party takes place in 2021
    • 2021 will be the 100th anniversary of the founding of the Chinese Communist Party. Beijing will pull out all the stops to present a successful face of China in the form of a buoyant economy to its people and to the world.
  • China’s position as a command economy
    • The Chinese government will be able to deploy policy tools unique to a command economy such as:
      • Telling banks which sectors to lend to
      • Control capital outflows
      • Releasing a positive and negative sector list for investments and trade

Given the political imperative for a good show in 2021, Pauline is of the opinion that the odds are very good for a robust rebound for the Chinese economy next year.

2) ASEAN is in a sweet spot but it will be for nought if it does not work together

a. ASEAN sells itself short

The many advantages of ASEAN such as a young demographic, third-largest labour force globally and the potential consumer market of 650 million are well-known. The region was also the fifth-largest economy in 2019, with a combined GDP of US$3 trillion.

Pauline reveals that intra-ASEAN numbers remain strong:

  • Exports: Almost a quarter, or 21% of the goods exported in 2019 went to fellow ASEAN nations. China as a market came in a distant second at 13.9%, while the EU and the US tied for third with 11%.
  • Imports: More than a fifth of the goods imported in 2019 or almost 22% were from other ASEAN nations. China was a close second for this at 20.5%.
  • Investment: The bulk of FDI flows to the region comes from other ASEAN nations. In 2018, investment from within ASEAN accounted for 15.2% of the region’s FDI. This compares this with FDI from the EU at 14.2%, Japan 13.7%, and China 6.5%.

b. The region looks set to emerge from the pandemic better than others

Even though ASEAN countries have been badly hit by the COVID-19 pandemic and some are still struggling to contain it, Pauline believes the region is likely to survive this pandemic better than many other parts of the world.

ASEAN as a group entered into the crisis in relatively good economic shape; its banks are mostly well-capitalised, with low levels of non-performing loans and it has adequate levels of foreign exchange reserves. Things are understandably looking a little grim at the moment due to the pandemic.

Pauline reveals that the outlook for ASEAN for 2021 and 2022 is very positive. “ASEAN has hit a sweet spot amid the turmoil rocking the world. The change in risk perceptions worldwide is driving structural shifts in international trade and commerce and the main beneficiaries of these shifts is ASEAN.”

The three reasons behind Pauline’s positive outlook are:

  • Supply chain – diversification, regionalisation
    • The pandemic is giving fresh impetus to supply chain diversification. ASEAN has been and will continue to be the main beneficiary of the growing trend in supply chain diversification and the relocation of manufacturing from China. Pauline noted that although many think of the US-China trade war as driving supply chain diversification, it has been happening long before the trade war.
    • Big multinationals are already moving towards a more regionalised approach to their supply chains, keeping them contained as much as possible in each geographical market. These structural changes will remain long after the pandemic.
    • American companies are not the only ones looking to set up hubs in ASEAN. Japan has earmarked US$2 billion to help its companies shift production and companies from South Korea to Taiwan, are looking to restructure their supply chains.
  • Investment – neutral destination
    • ASEAN’s latest attraction is its perceived neutrality as an investment destination as geopolitical change continues to transform global markets. This perception has helped boost foreign investment into ASEAN; the region attracted a record US$177 billion in FDI in 2019, surpassing China which took in only US$140 billion.
    • All the investment money will be looking for a home as the technology squabble between the US and China heats up and reshapes industries affected by the change, such as the semiconductor sector.
    • If ASEAN as a group plays its cards right, for example, by enhancing its worker training, improving transport links, rapidly adopting technology and automation, and so on, it will see more global investment dollars coming its way.
  • Manufacturing – China Plus One
    • Diversification and relocation do not mean that China will no longer be in the picture. China is still very much in the picture but the China Only model is being replaced by new strategies such as the China Plus One model.
    • The idea is to diversify China operations by adding another location in Asia. For example, it could be China Plus Vietnam, or China Plus Malaysia. This strategy reduces operating cost, diversifies workforces at supply chains and could even increase access to new markets.
    • Vietnam has, for some time, been the “plus one” for multinationals transitioning out of China and this occurred even before the US-China trade war. Low value and labour intensive work in industries such as garments and footwear have been moving quietly over the Chinese border to Vietnam and Cambodia.

c. ASEAN needs to leverage its strength as a group in a multi-polar world

The longer-term challenge for ASEAN would be to successfully deal with the tectonic shifts underway in trade finance and global alliance. “Despite the talk of integration, ASEAN is still seen, at least from the outside, as a loose grouping of 10 nations, each with its own priorities, its own bilateral trade pacts, its own approach to security, its own approach, at least initially, to the pandemic,” said Pauline. “As individual players, ASEAN member nations have very little standing but as a group, it could leverage its combined strength for more advantages in a multi-polar world.”

Tan Sri Dr. Munir Majid, Chairman of CARI, agreed with Pauline that ASEAN sells itself short. He noted that ASEAN businesses and joint business councils are currently trying to get the regional bloc to get its act faster during the post-COVID-19 economic recovery phase. A proposal has been made for the setting up of a High-Level Special Commission to speed up the decision-making process in ASEAN.

3) China and the post-pandemic global economic outlook

a. The outcome of the US-China trade war still has a role to play

The consensus is that the world is facing the worst recession outside of wartime in 100 years. The latest data shows that the two key gauges of global trade and manufacturing activity are deep in recession. The real question is, whether we are in a short, sharp shock, or prolonged economic pain?

The outlook to the global economy, however, can’t be discussed without mentioning US-China relations. Pauline opines that US-China relations are bad and are on the way to getting worse. “The fight is no longer about trade; it is now a full-on competition for global dominance,” she said. How the US-China standoff plays out will be just as important to the outlook for global economic growth.

b. Economic uncertainties should be viewed in the regional, local context

For a question as broad as to how the global economy, comprising 195 countries, will recover, to say “we don’t know” seems quite reasonable. When one looks at the world simply as a market, then all the economic uncertainties should be viewed in context, said Pauline.

“Politics and economics may be global but business is always local. Who trades with 195 countries? The opportunities in Shanghai are very different than that of Beijing and definitely very different from Wuhan,” she further explained.

Those looking to benefit from the Chinese market should focus on the specific risks and opportunities of the city or province they are trading with, or investing in.

c. China will not implode

Markets have a tendency to evaluate China in black and white. One perception is that China is going to rebound quickly from the effects of the lockdown and go on a continuous expansion. Another perception is that China is facing huge structural imbalances and has its economy weight down by debt and will, therefore, implode.

Pauline pointed out that the real world is not quite as simple or tidy. “Truth is often perched precariously on an ever-shifting continuum. I hold a popular view that the Chinese economy is much less robust than die-hard China investors believe. I think that the slowing growth in recent years are due to structural, not cyclical factors. But this does not leave me to conclude that the Chinese economy is about to implode,” she said.

4) Conclusion

China is expected to experience a meaningful economic recovery but no earlier than 2021. Even though its government has already deployed unique policy tools unique to a command economy, the effects will only be seen next year. It should be noted, however, that due to the nature of a globalised world, China’s recovery will also depend upon the opening up of other major economies around the world. ASEAN stands to gain once China and the global economy recovers if it could leverage its strength as a group in relation to supply chain diversification, its advantage as a neutral investment destination and a China Plus One model for manufacturing supply chain.