ASEAN can accomplish more than in past 50 years

ASEAN, the association of the ten southeast Asian nations, has reached its golden year today. Looking back, what did ASEAN really bring in the past 50 years?

Peter Lundgreen, founding CEO of professional investment advisory firm Lundgreen’s Capital based in Copenhagen which opened recently an ASEAN office in Makati, said that ASEAN is well known to him because “I have an interest in Asia.” But to the ordinary citizens of Europe and perhaps in other countries, the ASEAN brand does not ring a bell.

Lundgreen said there is no extra special in the grouping of ten independent countries. It is but natural thing to happen for countries that are geographically situated to connect and try to make one voice.

“The thinking behind it is good, but homogeneous? Is it really able to deliver on mutual policy,” Lundgreen said.

While ASEAN governments have agreed to implement rules that are rules-based according to the World Trade Organization (WTO) as it integrates their respective economies, it lacks teeth to enforce decisions or push for more meaningful economic integration.

This begs the question as to how the region can really proceed with its economic integration? The ASEAN Economic Community envisions to make the region a one production hub and single market where there is a seamless flow of trade and goods, and people. But the roads do not all lead to that.

Lundgreen said that what ASEAN had accomplished in the past 50 years can easily be done in the next ten years. There is no need to wait for another 50 years to make the ASEAN impact.

“To put it politely, ASEAN can achieve in ten years what it achieved in the past 50 years, to become an important economic region with the Chinese neighbor growing more importance in the global arena,” he said.

“ASEAN countries themselves will define its next journey because nobody will give it for free so it needs to show the muscles,” Lundgreen said.

Lundgreen said investors are looking forward for ASEAN changes by playing a strong economic importance globally noting that various institutions such as the World Bank and IMF forecast that the 2 billion people in the lower middle class would

double in the next 10-12 years.

This means more poor people are moving up from abject poverty to below the middle class as economy improves. Most of this new market will come from Asia like ASEAN and India.

“In the next 10 years, the most important economic power is the continued growth of people. This movement in the next 10 years will make the biggest economic development force for ASEAN, luring investors and companies, which are looking into where they can get the best return,” said Lundgreen.

According to Lundgreen, this new consumer market will be in need of more basic items as they move up the economic ladder.

Thus, he said, investors should concentrate on the more basic kind of investment, not in the more high-tech and fancy products. For instance, he said, fintech investments like TESLA will not sell in this new market. “These are fancy investments, but are not really producing good returns for investors,” he said.

“The new below middle-class people would need the basic goods, perhaps of lower quality, but these are real needs,” he added.

So investors for this market should concentrate on the very basic manufactured goods but not the fancy ones.

“For instance, if you look into the microwave, will you be producing the very basic model or is it the very advanced microwave with lots of functionalities,” said Lundgreen.

“The Philippines should consider positioning in this market because it is in the best position to service this new segment to sell products to the lower middle income class. I would see it as an opportunity for Philippines and other ASEAN countries to focus on the growth in the lower income class segment in the region,” he said.

“The Philippines must have that in its agenda. This new market will be the biggest economic force in the next ten years,” he said.

These people are in the best position to profit from this growth and the biggest chance for ASEAN companies to invest because they are in the best position to understand the need of low mid income earners, he added.

“This is where ASEAN can gain more importance in the next 10 years,” Lundgreen said.

One way to become an economic power is to declare the region as one big free trade zone, said Lundgreen.

“Currency union is way too difficult, there should be no goal to have mutual fiscal policy, but what is more interesting is to become one economic free trade zone,” he said.

An ASEAN Free Trade Zone would be more fantastic in defining the region as one production hub and one single market to be able to negotiate as one voice.

“ASEAN should define it more clearly as a strength to grow more in importance instead of just being a grouping in the past 50 years, ” he said noting that ASEAN has lots of cooperation and processes but does not reflect really as a strong grouping.

“It would be difficult for ASEAN to speak for one political voice, but could be organized maybe and focus more as economic power. It should be economic power today and political voice tomorrow,” he said.

This brings to the idea of businessman Jose Luis Yulo, Jr., president of the Chamber of Commerce of the Philippine Islands, for ASEAN to revisit the complementation program that once put a semblance of an integrated regional economy.

As one of the early purveyors of ASEAN, Yulo has urged for the return of the ASEAN Brand to Brand Complementation program where big industrial firms invested in a particular country for the production of certain parts that will be supply to fellow ASEAN countries for their final assembly.

This is an ideal strategy to ensure fair trade in the region.

“ASEAN should be a voice that could moderate and adjust the adverse impact of free trade and globalization,” Yulo said