Illustrative photo. (Source: dreamstime.com)
In his article published on the UK’s Financial Times, he wrote that the gross domestic product of 10 ASEAN members now totals more than USD2.5 trillion, about 25 percent more than India’s, and not far short of the UK’s.
If ASEAN were one economy, and current growth trends continue, it could be the world’s fourth largest economy by 2050 . Last year, the region attracted a combined USD136 billion in foreign direct investment, topping China’s USD128 billion.
The AEC is aimed at liberalising the flow of goods, services, capital and, ultimately, skilled labour within the region in a bid to raise its competitiveness and facilitate investment into infrastructure.
It builds on decades of incremental work done since ASEAN’s inception in 1967. Free trade in goods, for example, has already been effectively established.
But more needs to be done to remove the many obstacles, including non-tariff barriers such as language or safety requirements that still hamper the flow in services, for example, and to reduce cross-border financial transaction costs.
According to him, while there are years of work ahead to complete the integration envisaged by the AEC, the stars are aligned for a promising long-term growth story, thanks to a trio of factors.
First, the region is increasingly attractive as a manufacturing location. China – long the “factory floor of the world” – is shifting its economic model towards more value-added, higher-tech manufacturing and services. This means more of the traditional, labour-intensive manufacturing that was once based in China is moving to ASEAN nations. Meanwhile, Southeast Asia’s demographics mean an ample supply of affordable labour.
Second, consumer spending power is growing rapidly. ASEAN’s population numbers less than half that of either China or India, but 15 years from now, the region will have added another 120 million inhabitants. Regional members also aim to raise GDP per capita to more than USD9,000 by 2030.
Third, ASEAN is home to an established and trusted international financial centre, in Singapore. Increasing financial liberalisation could help lower transaction costs and facilitate investment flows into ASEAN, aiding economies like Singapore, Malaysia and Thailand, in particular.
Concluding his article, Rikhye wrote that the region’s economic assets, combined with extra lubricant from the AEC efforts, will make it ever more important as a location to manufacture in, source from, and sell to. To ignore it would be a mistake, he confirmed./.
(CPV/VNA)