ASEAN centrality in trade and investment
ASEAN centrality
in trade and investment
WRITTEN BY ONG KIAN MING
25 May 2021
In a widely shared op-ed published a few weeks ago, Rohan Mukherjee noted the “fundamental divide between the Quad and ASEAN” over the notion of “ASEAN centrality”, which “would include China as a key participant in regional multilateralism”.
I agree — ASEAN should not be a mere pawn in the battle between the great powers but take the initiative to set its own agenda for the region. The question is whether the ASEAN leadership is willing and able to take this path?
ASEAN centrality in Free Trade Agreements (FTAs)
Although ASEAN has taken some leadership roles in the area of trade and investment, there is scope for much more. The conclusion and signing of the Regional and Comprehensive Economic Partnership (RCEP) agreement in November 2020, after nine years of tough negotiations, showed ASEAN’s ability to bring together various regional powers and players to the negotiating table.
ASEAN must also be willing to push the envelope when it comes to economic diplomacy in a manner that would strengthen the unity of the grouping and safeguard the interests of its members.
India’s inability to overcome domestic hurdles and concerns — most notably the fear of being overwhelmed by Chinese manufacturers and perhaps driving too hard of a bargain on freedom of movement for its IT professionals and firms — is regrettable. Nonetheless, the RCEP is a significant agreement in that it brought together China, Japan, and South Korea together for the first time under a single Free Trade Agreement (FTA). The next step in this process is for individual ASEAN countries to ratify this FTA so that it comes into effect as soon as possible.
ASEAN has long been an attractive destination for Foreign Direct Investment (FDI) from all over the world. Indeed, taken as a whole, FDI inflows into ASEAN are even larger than China, as the US-ASEAN Business Council reminded me, many times over. With increasing FDI inflows coming into ASEAN, especially from China, it is high time that ASEAN comes up with a framework for some basic rules and regulations regarding FDI into the region.
For example, the EU established a framework for the screening of FDI that became fully operational on 11 October 2020. As the Executive Vice President of the European Commission for an Economy that Works for People and the European Commissioner for Trade explained, the EU’s openness to foreign investment “is not unconditional” and “an efficient EU-wide investment screening cooperation is essential” for strategic autonomy.
An ASEAN framework for Foreign Direct Investment?
ASEAN needs a similar framework especially given the increasing complexity of FDI flows, including in critical infrastructure areas such as renewable energy, rail and road infrastructure, power stations, ports, and airports, just to name a few.
This framework can be developed under the first pillar of the ASEAN Economic Blueprint 2025 which involves developing “A Highly Integrated and Cohesive Economy” within ASEAN. Specifically, this would require fleshing out strategy A3 — Investment Environment — within this pillar. The ASEAN 2025 Consolidated Strategic Action Plan (CSAP) can be used to track the progress of various initiatives under the AEC Economic Blueprint 2025 and can be supplemented by analysis from think-tanks in the region including the Institute for Democracy and Economic Affairs (IDEAS) through the ASEAN Prosperity Initiative (API).
ASEAN must also be willing to push the envelope when it comes to economic diplomacy in a manner that would strengthen the unity of the grouping and safeguard the interests of its members. For example, since four ASEAN members — Brunei, Malaysia, Singapore, and Vietnam — are already in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), would other members that are not yet part of the CPTPP be willing and able to join the agreement? Having all 10 members of ASEAN join the CPTPP would most certainly boost the bloc’s economic bargaining power vis-à-vis the FTA especially when countries outside ASEAN such as the United Kingdom have already expressed an interest in joining the CPTPP.
ASEAN centrality in the CPTPP?
To push the envelope further, if all ASEAN member states were also members of the CPTPP, it would give the grouping greater leverage to invite the United States to re-join the CPTPP and also to ask for more favourable terms as part of the conditions for the US to re-join this FTA.
If all member countries of ASEAN are in the CPTPP, it would also make it more attractive to entice India to apply to join the RCEP as part of a process to improve its internal capacity and legislation so that it would one day also apply to join the CPTPP. Finally, with all member countries of ASEAN in the CPTPP, and with the US re-joining the CPTPP, perhaps ASEAN will also be willing and able to accept Taiwan as a member of the CPTPP.
If these bold steps are undertaken in a systematic manner, this would indeed demonstrate ASEAN centrality and leadership in the economic, trade, and investment arenas.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Dr Ong Kian Ming is the former Deputy Minister of International Trade and Industry (MITI) for Malaysia. He can be reached by email here. Image credit: Wikimedia.