Will ASEAN become a global economic power?

Dr Naser Al-Tamimi

The Association of Southeast Asian Nations (ASEAN) is celebrating its 50th anniversary this year, under the theme “Partnering for Change, Engaging the World.” The anniversary of this important economic bloc comes two years after the launch of the ASEAN Economic Community (AEC), amid high hopes to establish a global economic powerhouse.
ASEAN was founded in 1967 by Indonesia, Malaysia, the Philippines, Singapore and Thailand to promote political and economic cooperation, and regional stability. It expanded to comprise 10 countries by 1999, including Brunei, Cambodia, Laos, Myanmar and Vietnam. These countries differ in terms of population, area, economic size, stages of development and challenges, but they share immense economic growth potential.
Today, ASEAN countries, with a total land area of 4.5 million square kilometers, is home to nearly 640 million people — around 10 percent of the world’s population, and double that of the US. If ASEAN was a single entity, it would be the fifth-largest economy in the world by gross domestic product (GDP), behind the US, EU, China and Japan.
Emerging economic power ASEAN is emerging as a global economic powerhouse, with an aggregate economic size of almost $2.6 trillion. It is one of the fastest-growing economies in Asia, with annual GDP growth averaging more than 5.5 percent between 2005 and 2015, a rate the bloc is expected to sustain over the next decade, according to the latest International Monetary Fund (IMF) data.
The World Trade Organization (WTO) says ASEAN is rapidly becoming a global trading powerhouse, with total merchandise trade of nearly $2.3 trillion in 2015 (almost 6.8 percent of world trade), making it the fourth-largest trade group behind the EU, China and US.
The IMF forecasts that by the end of 2022, ASEAN’s economy may grow by a third of its current size to nearly $4 trillion, maintaining its position as the fifth-largest economy in the world behind the US, EU, China and Japan.
In the long run, US-based global information company IHS Inc. is even more optimistic about ASEAN’s trajectory, projecting the combined GDP of its members reaching $8 trillion by 2030 to become the fourth-largest economy behind China, the US and EU.
Indonesia, the Philippines, Thailand and Malaysia may witness their economic status grow steadily in the coming years. Indonesia’s economy could emerge as one of the world’s top 10 by the end of the next decade. The Philippines is likely to emerge as one of the top 20 economies, while Thailand and Malaysia will be among the top 30 by 2030, based on the World Economic League Table 2017, published by the Centre for Economics and Business Research (CEBR). IHS Inc. expects Malaysia, the Philippines and Thailand to join the trillion-dollar GDP club within the next decade.
Investment magnet
ASEAN has become a magnet for foreign direct investment (FDI). A recent report by the Singapore-based United Overseas Bank (UOB) showed that ASEAN markets have been a far better bet than China for portfolio investors. The bank foresees FDI inflows into ASEAN surpassing China for the first time this year.
The stock of FDI accumulation in ASEAN has been rising at a steady annual rate of 15 percent since 1980, and the UOB expects the stock of investment in the region to nearly triple to $5.2 trillion in 2030, from $1.8 trillion in 2015.
Meanwhile, ASEAN countries are undertaking an aggressive tourism marketing campaign to mark the bloc’s 50th anniversary this year. It is called “Visit ASEAN@50: Golden Celebration,” and aims to increase the number of tourists by 10 percent to 121 million, from 109 million in 2015.
Challenges ahead
Despite this optimistic background, several issues could pose a challenge. Increasing economic dependence on the Chinese market could have a negative impact on ASEAN countries should China’s economy experience an acute slowdown.
The prospect of growing disputes with Beijing over maritime borders in the South China Sea may affect economic relations between the two sides, and could lead to sharp divisions within ASEAN over how to deal with Beijing.
Another major challenge is to provide the required investment for infrastructure. According to Asian Development Bank (ADP) estimates, ASEAN will need to spend up to $184-$210 billion a year, or $2.76-$3.15 trillion through 2030, to meet infrastructure needs and maintain growth momentum.
Religious and ethnic divisions may also contribute to rising tensions within ASEAN. Violence against Muslim minorities in Myanmar and Thailand are prime examples. More importantly, uncertainty over the future of US policy under President Donald Trump overshadows relations with ASEAN countries.
—Dr. Naser Al-Tamimi is a UK-based Middle East researcher, political analyst and commentator with interests in energy politics and Gulf-Asia relations.