Ong Bo Yang
ASEAN+3 Macroeconomic Research Office predicts that Southeast Asia will attain 4.9% economic growth in 2023.
There are challenges that Southeast Asian nations are facing, from inflationary pressures, to the Covid-19 pandemic, and supply chain disruptions.
John Woods, Credit Suisse’s Chief Investment Officer for Asia Pacific, warned of high currency volatility and interest rate hikes.
There are also divisions across the world that have had an impact on the regional and global economy, from the Russia-Ukraine crisis, to the volatile US-China relations.
At the 17th East Asia Summit in November 2022, Vietnamese Prime Minister Pham Minh Chinh reiterated the paramount importance of economic recovery that revolves around fluid supply chains, sustainability, and open economic markets.
Tourism and digitalisation are also key components that will boost Southeast Asia’s economy.
Tesla is looking to establish its electric-vehicle production capabilities in Indonesia, leveraging the Southeast Asian nation’s vast nickel ore reserves.
Sustainability a key driver of economic recovery
At the 14th Indonesia-Malaysia-Thailand Growth Triangle Summit held in November 2022, Indonesian President Joko Widodo highlighted sustainability as one of the key drivers of economic recovery in Southeast Asia.
Currently, Asean nations are heavily dependent on traditional sources of energy.
Nevertheless, the Indonesian President urged Asean nations to expedite the adoption of the 2019-2036 Green City Development Framework and utilise clean and renewable energy, which is predicted to hit 35% of all energy sources by 2025.
Not long ago, Laos and Singapore had signed a Memorandum of Understanding to collaborate on renewable energy distribution and measurement in Laos.
In June 2022, Singapore had imported hydropower from Laos, a type of renewable energy.
Thailand’s economic recovery is reliant on overseas tourism as it contributes approximately 12% to its Gross Domestic Product.
Thailand’s National Economic and Social Development Council predicts that foreign tourism revenues will increase to 1.2 trillion baht this year, with a more than doubling of tourism visits to 23.5 million arrivals.
The increase in foreign tourist arrivals would be significantly galvanised by the cheaper baht and China’s rapid reopening of its borders.
Cross-border digital payments
Southeast Asia’s digital transformationwould be crucial in aiding its economic recovery.
In November 2022, central banks of Indonesia, Malaysia, Philippines, Singapore, and Thailand signed a Memorandum of Understanding on regional cross border payment connectivity.
Improving regional payment integration will ensure inclusiveness and enable cross-border transactions amongst these Southeast Asian nations to be less expensive, quicker and more transparent.
The cross-border payment integration, which includes funds transfer mechanisms such as QR code and fast payment, would also boost economic integration and activities by stimulating investment, tourism, and trade.
In the future, this digital initiative could involve other Southeast Asian nations.
China remains biggest trading partners
It is also noteworthy that bilateral relations with major trading partners such as China and the European Union are of paramount importance.
China and Asean are one another’s biggest trading partners. During the first 10 months of last year, bilateral trade amongst Asean and China has totalled US$798.4 billion.
Both parties can further leverage on their close ties and cooperate closely in several areas to expedite economic recovery.
At the ASEAN summit held in Cambodia in November 2022, outgoing Chinese Premier Li Keqiang reiterated that China will cooperate closely with Asean in digitalisation, energy transition and trade.
The Chinese Premier also appealed for further macroeconomic policy coordination with Asean nations.
At the 29th APEC Economic Leaders’ Meeting, China President Xi Jinping reiterated that China will work closely with Asean nations on sustainable development.
China has invested in the Phnom Penh-Sihanoukville Expressway and China-Laos Railway, which have both opened in recent years.
As part of China’s Belt and Road initiative, China is also currently constructing the Malaysia East Coast Rail Link and the China-Laos-Thailand Railway.
Importance of developing ASEAN – EU economic ties
During the 10th ASEAN-EU Business Summit held in December 2022, Philippines President Ferdinand Marcos Jr. reiterated the paramount importance of close economic ties between Asean and the European Union.
Currently, there are several initiatives to boost economic competitiveness between the two blocs.
For instance, the ASEAN-EU Trade and Investment Work Programme 2022-2023 provides a plan that will help to solve economic challenges and seize new business opportunities.
At the EU-ASEAN Commemorative Summit held in December 2022, Indonesian President Joko Widodo emboldened both blocs to focus on inclusiveness, value-added economic activities, and sustainability.
The Indonesian President also emphasised that both parties can collaborate by developing green technologies and renewable energy.
Standard Chartered economists predicted earlier this month that in 2023, Southeast Asia would have one of the fastest-growing economies globally. This is higher than the global average.
Ong Bo Yang is a Masters student, majoring in Master of Science in Programme and Project Management at the University of Warwick.