Asean moves centrestage
The Asean countries are by no means the largest trading and investment partners for New Zealand. But given their geographical proximity to us, and the Asean Australia New Zealand Free Trade Agreement, which has been in place for a few years now, Asean presents a natural option for New Zealand trade and investment.
The Asean Economic Community was established on December 31, 2015, making the countries more integrated.
As a region, Asean’s nominal gross domestic product comes to US$2.76 trillion (NZ$4.08T) Its collective economy is larger than that of the UK, India, France, and Brazil.
While we know that there’s a global trend towards tightening bilateral trade agreements, Asean as a group can be an attractive partner.
The Comprehensive and Progressive Trans-pacific Partnership splits the region in terms of involvement in the partnership – only Brunei, Malaysia, Singapore, and Vietnam are involved in this multilateral free trade agreement.
Singapore and Malaysia are only the third and fourth largest economies in the region – Indonesia (US$1.02T) and Thailand (US$460 billion) are the top two.
The Asean region leads the way in the negotiations around the Regional Comprehensive Economic Partnership (RCEP).
The latest meeting, two weeks ago, has left all parties confident that the countries involved in the RCEP (including New Zealand) will have broad agreement by year’s end.
The jury is out on the RCEP agreement. But there is a sense that the Asean countries are ready to work as a group to engage.
The United States-china trade battles have also pushed other countries to hedge their bets. Trade dependencies between Asean and China and also between Asean and the US are a factor.
Nonetheless, rising intra-asean trade and Asean’s relatively strong economic relationships with India, Japan, and South Korea will help to see it through this tough period.
And it is also hard to see how China will let its Asian neighbours become collateral damage in their own duel with the US.
Reports in Indonesia suggest that the US might be taking aim at the trade surpluses between the two countries.
Should the US finally arrive at Indonesia’s doorsteps, a likely result will be more intra-asia trade for Indonesia.
This is yet another force that will shift attention to Asean. Another is its ballooning middle class.
Amazon will today run its largest sales events, Prime Day, in Singapore for the first time – testimony to the spending power of Singapore consumers.
Asean is home to 638 million people and has great growth potential. It is certainly attracting more attention and no longer playing a peripheral role to the economic superpowers that we are accustomed to.
Siah Hwee Ang holds the BNZ chair in business in Asia and is the director of the Southeast Asia Centre of AsiaPacific Excellence at Victoria University of Wellington.