ASEAN and Indonesia
The kick-off event of Indonesia’s presidency in ASEAN on Sunday, Jakarta, truly blooms joy in the hearts of Indonesian ASEAN supporters. The event shows how enthusiastic the government, business world, and the people are, to finally welcome back the post after more than a decade. The last time Indonesia helmed ASEAN was in 2011, two years before the country assumed the APEC chairmanship. It was also the host of WTO’s 9th Ministerial Level Conference in 2013.
If we take a look at ASEAN’s long journey since its founding in 1967, and the changes in the strategic sphere the bloc has faced for the past two to three years, ASEAN’s existence at the moment becomes crucial compared to how it was before, at least from an economic standpoint.
The consolidated data by the ASEAN Secretariat showed that from 2020 to 2021 —when Covid-19 jeopardized the global supply chain before the Russia-Ukraine war made it worse in 2022— the Southeast Asian bloc recorded robust growth. For instance, ASEAN’s GDP growth climbed from 3 percent to 3.3 percent. The bloc’s GDP per capita also increased from $4,536 to $7,458; its economy grew from minus 3.2 percent in 2020 to 3.4 percent in the following year; trade in services went up from $695.2 billion to $745.8 billion. The growth of investment across the region rebounded from minus 29.7 percent to 42.3 percent.
The same source also reported that the trade of goods in ASEAN was not doing as well as the others from 2020 to 2021. However, what is interesting is while ASEAN’s trade with Non-ASEAN countries (extra-ASEAN) spiraled down sharply from $2.10 trillion to only $566.93 billion, intra-ASEAN trade also slightly dropped from $566.93 billion to $528.23 billion.
The statistics provide good reasoning for the theme of Indonesia’s current ASEAN presidency: “ASEAN Matters: Epicenter of Growth”. There is a strong message in it: ASEAN is ready to take a historical role in contributing to the global economic recovery. This aligns with the transition of many economic observers’ opinions, that what we are witnessing is no longer the New Normal, but the New Next. In the economic context, this can be seen as the rise of East Asia to lead the global economy.
While China may still need to address the high mortality rate post-Covid, other East Asia economies such as Japan, South Korea, and Taiwan, are still unable to recover fully from the downturn triggered by the global chain disruption in the past one or two years. Because of this, at least in the short term, East Asia’s growth may be centered in ASEAN which has proved its internal economy’s resilience.
In the long term, ASEAN is hoped to continue honing its position as the regional economic growth epicenter, especially with the implementation of the Regional Comprehensive Economic Partnership (RCEP).
Indonesia helped ASEAN conceive the RCEP in 2011 as ASEAN’s response to pressures from China to negotiate the ASEAN+3 FTA, as well as Japan’s push to negotiate the Comprehensive Economic Partnership for East Asia between ASEAN and six FTA ASEAN partners. Indonesia earned the trust to coordinate 10 ASEAN member countries, and to lead RCEP negotiations with its partners from 2013, until the signing by the 10 member states, plus five partner countries in November 2020. The experts believe that RCEP is a regional game changer and places ASEAN as the epicenter of trade in East Asia.
Source: IMF, World Bank, ASEAN Secretariat, processed: pre- Covid-19 data, December 2019
Indonesia’s leadership in ASEAN covers not only the economic sector but also political security and social-cultural partnerships. However, louder calls for more "quality growth" than "mere growth" make the focus on the ASEAN economic collaboration more urgent than before.
In the 55 years of its journey, ASEAN has recorded many agreements in the economy, trade, and investment. Starting with the ASEAN Preferential Trading Agreement (ASEAN-PTA) in 1977, countries agreed to the ASEAN Free Trade Area (AFTA) in 1992. It doesn’t stop there, in the span of 1995 – 2015, ASEAN struck many deals in service, investment, customs, goods standard, single window and trade repository, e-commerce, professional service standard, etc, until finally, all the agreements in economic pillar lead to the formation of the 2025 ASEAN Economic Community (AEC).
On the ambitious economic agenda, the Asian Development Bank recommended that ASEAN should focus first on some homework so that AEC agendas can be realized effectively. Some of the recommendations are (1) strengthening the leadership of the highest decision-making organs, especially the AEC Board and the ministerial level body under it; (2) honing the technical organs’ function to implement existing agreements or deals; (3) prioritizing AEC key programs; and (4) establishing an effective monitoring system to lower policy variations at the national level that does not align with AEC’s agreements and spirit.
The Indonesian government has established 16 priority economic deliverables (PED) this year, which fall into three deliverable groups, namely: (1) recovery/rebuilding; (2) digital economy; and (3) sustainability. This has become a tradition in ASEAN: the leading country will set the deliverables targeted during its year of presidency. Words also get around that during Indonesia’s ASEAN chairmanship, Indonesia will follow up on priority issues in G20.
In the past, it would have opened a door for new ideas to be marked in the history of the journey of the led organization or forum. However, in this tough year, with a long note of agreements reached thus far, Indonesia should pay extra attention to increasing the coordination of ASEAN regional economic policy implementation. If this can be done, the words that AFTA is short for ‘Agree First, Think After’ will go away. As the founder and the critical mass of ASEAN, Indonesia sure can!
Iman Pambagyo is a former Director General of International Trade Negotiation of the Trade Ministry and a former Indonesian Ambassador to the World Trade Organization. The views expressed in this article are those of the author.Tags: