Asean needs closer integration to offset slowdown

US President Donald Trump’s imposition of a slew of tariffs and measures to protect the country’s economy from competition has led to uncertainty and a slowing world economy. As a result, the outlook for countries such as Singapore appears cloudy.

“There is very little Singapore can do,” says Vishnu Varathan, head of economics and strategy at Mizuho Bank, adding that the city state’s small domestic economy makes it vulnerable to external shocks.

In his Nov 2 address at the Asean summit in Bangkok, Prime Minister Lee Hsien Loong urged member countries to “come together, to deepen cooperation among ourselves”.

Vishnu agrees that this is the way to go. Singapore can only benefit from closer cooperation with its neighbours. With Asean boasting a combined population of 650 million and a GDP of close to US$3 trillion ($4.06 trillion), it is considered one of the largest domestic markets in the world. If

Asean were a country, it would be No 8 in the world, based on the total GDP of its member nations.

Despite the Asean countries’ long-standing ties, intra-Asean trade is just 25% of the region’s total trade compared with the 60% of total trade among the EU countries. PM Lee said he hoped the Asean Economic Community (AEC), which was mooted in 2003 and set up in 2015, could accelerate economic growth and facilitate the region’s trade development through a more seamless movement of goods, services, skilled labour and capital.

Toshinori Doi, director of the Asean + 3 Macroeconomic Research Office (AMRO), says the integration of banking in the Asean region and the Asian Bond Markets Initiative will lead to greater financial stability in the region and reduce its vulnerability to sudden reversals of capital flows.

To complement its regional partnerships, Michael Spencer, chief economist and head of research for Asia-Pacific at Deutsche Bank, says Singapore can ride on the coat tails of its expertise in project management to become a facilitating hub. “One thing that Singapore can do better than anyone else is managing a city,” he says. He believes the city state’s comparative advantage lies in the exporting of its know-how in the realms of finance, infrastructure and technology.

With Asia-Pacific slated to have the highest middle-class population in the world by 2030, AMRO’s Doi says there will be higher demand for “new segments” such as infrastructure, including transportation networks, waste management systems, healthcare systems and eldercare facilities.

With its experience gained from advising on the development of cities in China’s Chongqing, Suzhou and Guangzhou, Spencer believes Singapore has an edge that will help it ride out the uncertainty and the slowing economy.