Chairpersons of the 24th World Economic Forum on East Asia ended the three-day event on Tuesday with a fresh sense of optimism and trust on Indonesia and the Association of Southeast Asian Nations (ASEAN). Malaysia was picked as the next host.
About 800 people participated in the forum, held at the Shangri-La Hotel in Jakarta, participating in discussions on a range of topics such as under the theme “Anchoring Trust on East Asia’s New Regionalism”.
“President [Joko Widodo] spoke of the optimism that he has, and this confirms the belief that through all the major global challenges the world is facing today, Indonesia has a lot to contribute,” said John Riady, executive director of Lippo Group and one of the five co-chairs of the WEF on East Asia, during the closing session, Jakarta Globe online reported.
Joko spoke at the WEF on Monday night, saying that Indonesia is an “incredible” place to invest and is ready to change to adapt to global development and to the challenges the nation faces.
Southeast Asia is currently the fastest-growing region in the world. The ten countries of the region want to set up their own economic union, the ASEAN Economic Community (AEC), by the end of this year. A free market for goods and services is planned that would see tariffs and other barriers gradually phased out. The club includes ten ASEAN member states, including Indonesia, Thailand, Malaysia, Singapore and Vietnam, among others, Joko said.
Many have high hopes on the prospects of this union. “We will have 600 million people, like we have 600 million in Europe and 600 million in Latin America,” said Hans-Paul Burkner of Boston Consulting Group. “So I think there is a huge potential, the region is fast growing, there are many talented people, we have good natural resources and an improving infrastructure. South East Asia is the place to be.”
Budi Gunadi Sadikin, chief executive of Bank Mandiri and another co-chair, expressed the same sentiment — highlighting the pool of opportunities available for the region’s businesses and governments through the international forum. “The World Economic Forum is a great platform of marketing,” he said.
Single Market
The Malaysian Minister for International Trade and Industry, Mustapa Mohamed, told the BBC that the single market that the 10 nations of South East Asia are forming by the end of the year will not include a single currency in their deliberations.
Mohamed said that a single monetary policy was out of the question in the near future, as we discussed lessons from the European experience that could apply to the ASEAN Economic Community (AEC) that is due to launch at the end of year.
He pointed to the vastly different levels of income in ASEAN which would make sharing a currency – and therefore monetary policy – infeasible. He said that there would not be the equivalent of the European Central Bank in the AEC in the foreseeable future.
Rival to EU
Mohamed is confident that the AEC will soon rival the EU and could overtake it by 2025. He cited the 5%-plus economic growth rate of ASEAN, as compared to the 1-2% growth of the EU.
Still, there are numerous challenges facing the formation of the AEC. There aren’t many pan-regional institutions, for one.
Tony Fernandes, the chief executive of AirAsia, one of the few pan-ASEAN companies, called for a strong commission for the AEC. Instead of going to 10 different governments, he would like to see the equivalent of the European Commission in the AEC.
Others, such as the Asian Forum for Human Rights and Development, have called for institutions to protect human rights and workers, including a court like the European Court of Justice.
Challenges
Besides institutions, the region also faces challenges in terms of what economists call “deep” integration. There are many trade links in the region, but intra-regional trade in ASEAN is only about a quarter of total trade as compared with the EU or, in particular, the eurozone, where the biggest trade partners are the other economies in Europe.
Trade has increased in the past few decades, but it is non-tariff barriers protecting some home industries that remain barriers.
