Report card on ASEAN economic integration

Report card on ASEAN economic integration
Dutch scientists have developed a revolutionary system that could one day help isolated villages around the world steadily generate electricity from mundane water-logged plants such as rice growing in paddy fields.

Is ASEAN's economic integration encouraging the region to become a more distinctive collective entity in the global economy? The answer is yes, although with important reservations.

South-east Asia is an area of extreme economic diversity. The gap in living standards between the richest and poorest countries (Singapore and Myanmar respectively) is 40 to 1. But this is only one dimension.

Singapore is a services-based economy; Brunei is oil-based; Malaysia and Thailand are fast industrialisers; Thailand and Vietnam are big agricultural exporters; Indonesia and the Philippines are net food importers; and Cambodia, Laos and Myanmar are still agrarian societies.

Government economic policies also vary widely. Singapore is a free port in which the total value of trade is equal to 400 per cent of gross domestic product. At the other extreme, Myanmar has only recently started to open up its borders. The value of trade in the latter is equal to only 31 per cent of GDP.

Then there are huge gaps in the quality of regulation, institutions and the business climate. According to the World Bank, Singapore ranks first in the world for "ease of doing business"; Malaysia and Thailand are in the top 20; but the others are way behind.

Compounding such economic diversity are wide differences in history, culture, geography, population, population density and - not least - political systems.

Nevertheless, there are also increasingly important elements of convergence across ASEAN countries.

Integration with the global economy stands out: Since the 1980s, all ASEAN countries have liberalised trade and foreign direct investment.

Average import-weighted tariffs are around 5 per cent for most ASEAN countries. And all except Indonesia, Philippines, Laos and Myanmar have trade-to-GDP ratios of about 100 per cent or higher.

ASEAN has also become a regional production hub for parts and components in global manufacturing supply chains. This has knitted ASEAN and North-east Asia - including China - together in ever-tighter trade and production linkages.

Now turn to the regional economic outlook. The International Monetary Fund forecasts growth at 5 per cent this year for the ASEAN-5, which consists of the Philippines, Indonesia, Malaysia, Thailand and Vietnam - a figure that is in line with growth in the last few years.

A slightly stronger recovery in advanced economies, particularly in the United States, should also give a marginal boost to ASEAN's growth through exports.

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