ASEAN Economic Community in Unlocking the Export Potential
The ASEAN is celebrating its 50th anniversary since it was founded and it has been expanding to other countries. Its GDP has grown from 1% to 3.4% of global output. If ASEAN was a country, it would have been the seventh largest economy with a GDP of $2.7 trillion with one of the most populated areas in the world with 635 million with 430 people of working age.
The ASEAN Economic Community (AEC) launched and adopted the Blueprint 2025 in 2015; the Blueprint has outlined a plan of achieving an extremely put together and highly organized economy with a single market that allows free movement of goods as well as people. In 2016, 96% of tariff lines on intra-regional trade reduced to zero meaning that this strategy has already started showing progress. The Philippines held the 31st ASEAN summit in November 2018 that is meant to increase the regional corporation is one of the main objectives.
Additionally, service exports have been growing significantly among countries, research shows that intra-regional services exports have been increasing at the rate of 4pp annually, which is faster when compared to goods since the occurrence of the global financial crisis in 2010-2016. There has also been an intra-regional increase in exports for countries that have not developed so much such as Myanmar as well as Vietnam.
Sturdy and vibrant ASEAN economies will profit the regional trade
Apart from the problem of planning ahead, business people who want to export their products also have a problem of planning for fluctuations of business cycles in foreign countries that are capable of interfering with profit. Since 2000, the standard growth rate GDP has been 5.2% yearly for the ASEAN community, compared to other economies, it shows how stable and fast the ASEAN economy is growing. Comparing the standard deviations of ASEAN and other developed economies since 2000 show the ASEAN doing really well, with Sub-Saharan Africa being second, with others in close pursuit such as China, the Middle East and North Africa.
Additionally, the PwC report showed there is not much difference in the growth of output from 2000-2009 as well as 2010-2016 in a period that the world was going through financial crisis. This clearly shows how stable its economy is, so how will its economy have grown by 2025?
Intra-ASEAN trade has the potential of reaching between $375 and $410 billion by 2025
Although the ASEAN economies are developing, they cannot be compared to the GDP growth rate, they have a 2.9% and 4.9% since 2010. Its exports in 2016 were worth $1.1 trillion or rather 7% of the world exports, while European Union had 24%, US had 13% and lastly China with 9%. International trade was different from the intra-regional trade since it is smaller and is estimated to be worth $330 billion, which differs from European Union which had $3.4 trillion in exports in a single market.
If the present rate of growth continues, the intra-ASEAN exports have a possibility of exceeding $375 billion by 2025 according to the PwC. Nonetheless, other studies show that accessing a single market is beneficial to intra-trade volumes and it could go up to 115% in the long-run. Therefore, if there was an acceleration of say 1% annually because of the implementation of Blueprint 2025 and thus the volume will increase up to $410 billion.
For benefits to be equally distributed, there is need for diversification
Combining all ASEAN countries makes them a net exporter with the main exports being goods, however, breaking down the ASEAN total exports by individual countries show that Philippines and Cambodia are the only countries where only 30% was of their exports was services with travel and business the main service exports.
The PwC report also showed that there has been change regarding service exports since 2010, with more countries moving from mainly supplying goods and transitioning to services. Myanmar was able to grow by 4% and Thailand grew by 15% making them export 25% and 23% in that order. In general, ASEAN has been able to increase the percentage of services export by 5% to 22%, if the countries continue focusing on increasing service exports, ASEAN will be well placed in the global economy in the future.
Moreover, ASEAN region has seen a development in culture, linguistics as well as diverse politics. It is important that the integration gets highly customized in addition to recognizing and exploiting similar interests. The integration might be limited when compared to EU; however, it is definitely a work in progress. Implementing the Blueprint 2025 by policymakers will play an important role of making ASEAN more significant worldwide.