Amid improving intra-regional flows to offset global trade slowdown, ASEAN economies could partly offset any trade downturns if supply chain diversion to Southeast Asia materialises, but increasing the ease in which goods and services flow across ASEAN will make the transition more widespread, it said.
However, more needs to be done to smooth the flow of goods and services across the bloc. This includes rolling out the ASEAN one-stop shop mechanism to all ASEAN countries, standardising the cost and time of customs clearance across Southeast Asia and enabling more free movement of professionals across the region.
On the other hand, foreign direct investment into Southeast Asia has softened post-global financial crisis, but more need to be directed to countries like Thailand, Indonesia or the Philippines where supply chains are expected to grow in future.
The levers to attract investment to ASEAN more widely are clear, including reasonable production costs, stable institutions, improved technological innovation, lowering tariffs and import barriers for production inputs, and better labour skills.
Improving digital connectivity, and investment into ASEAN’s digital space to support its burgeoning consumer base, could be another game-changer – both to shore up regional supply chain potential and to increase the gravitational pull for multi-nationals and companies.
The biggest challenge for ASEAN is believed to come in the form of natural events rather than man-made ones as Southeast Asia is one of the most natural disaster-prone regions in the world. This has only been exacerbated by climate change in recent years. Weather aside, urbanisation will mean that by 2030, more than 100 million people in the region will migrate to urban areas, thus placing massive strains on resources such as food, health, and infrastructure.
Areas of focus to drive a more sustainable ASEAN include developing regional incentive frameworks and standards such as subsidies on the legal and banking advisory costs linked to generating green loans and bonds which will increase the cost effectiveness and, therefore, attractiveness of these financial instruments for corporates.
At the same time, it is necessary to embark on the ASEAN Smart Cities Network, and push for transparent infrastructure projects that will generate sustainable debts.
Continued integration of the region is described as crucial in the face of 2019’s challenging global backdrop. Businesses are crying out for tangible developments that will smooth intra-regional trade, encourage international investment and create a sustainable future. So achieving more reform, integration and openness in 2019 will help the region both capitalise and shield itself from global events that are likely to play out over the coming years, the report said.