President Joko Widodo (center) walking accompanied by Minister of State-Owned Enterprises Erick Thohir (left), Minister of Foreign Affairs Retno Marsudi (second from left), and ambassadors of ASEAN member countries and friendly countries in the 2023 ASEAN Indonesia Chairperson Kick Off parade on Jalan MH Thamrin, Jakarta, Sunday (29/1/2023).
JAKARTA, KOMPAS – Indonesia’s ASEAN chairmanship for 2023 is a good opportunity to maximize the ASEAN Economic Community (AEC), which has been operating since 2015. Though the AEC has fostered regional economic integration, trade and investment between ASEAN countries still remain at a standstill.
President Joko “Jokowi” Widodo kicked off Indonesia’s ASEAN chairmanship at the ASEAN Indonesia 2023 Kick Off event at the Hotel Indonesia traffic circle in Jakarta on Sunday (29/1/2023). Those who attended included ambassadors and permanent representatives from friendly countries, several ministers and Jakarta acting Governor Heru Budi Hartono.
President Jokowi believes ASEAN is still important and relevant to the people, the region and the world. “ASEAN will continue to contribute to peace and stability in the Asia-Pacific. ASEAN will continue to be able to maintain economic growth and uphold the theme ASEAN Matters: Epicentrum of Growth,” he said.
Furthermore, Foreign Minister Retno L.P. Marsudi explained that the history of ASEAN had always been tied to economic affairs. Thus far, ASEAN growth has typically been higher than global economic growth. While the World Bank predicts world economic growth in 2023 will be 1.7 percent, the Asian Development Bank (ADB) estimates that ASEAN will grow 4.7 percent.
There are two major elements of the theme that Indonesia’s 2023 ASEAN chairmanship will uphold. “The first is Asian matters, namely in how Indonesia and its chairmanship will ensure ASEAN remains relevant and important to not only Indonesians, but also to the people of ASEAN and beyond, as in those outside of ASEAN,” she said.
Indonesia, Retno continued, also wants ASEAN to be a key figure in driving peace and stability in the Asia-Pacific as a strategic area riddled with much rivalry.
In 2019, ASEAN’s GDP through AEC was US$3.2 trillion, placing ASEAN third in Asia and fifth in the world in terms of GDP that year.
The first is Asian matters, namely in how Indonesia and its chairmanship will ensure ASEAN remains relevant and important.
Based on data from the Organization for Economic Cooperation and Development (OECD), intra-ASEAN trade in 2019 accounted for 22.5 percent of total trade in the region. This figure, however, is lower than the figure recorded in 2018, at 23 percent.
The portion of trade with ASEAN trading partners also decreased slightly in 2019 compared to previous years. The exceptions include China, which rose from 17.1 percent in 2018 to 18 percent in 2019, and the United States, which rose from 9.3 percent in 2018 to 10.5 percent in 2019.
In 2019, the largest external market for ASEAN exports was China (14.2 percent), followed by the US (12.9 percent), the European Union (10.8 percent) and Japan (7.7 percent).
In terms of foreign direct investment (FDI), intra-ASEAN member countries ranked first with a portion of 19.4 percent of total FDI within the region. This is followed by investment from the EU (9.6 percent) and China (8.2 percent).
MIS FRANSISKA DEWI
President Joko Widodo gave a statement to the media after participating in the 2023 ASEAN Kick Off activity at the Sarinah Building, Central Jakarta, Sunday (29/1/2023).
Stagnant since 2006
Zamroni Salim, head of the National Research and Innovation Agency’s (BRIN) macroeconomics and finance research center, explained that intra-ASEAN trade had been stagnant since 2008. Until now, the figure remained at around 21-25 percent. Upstream issues include the lack of intra-ASEAN investment, while downstream issues concern inadequate logistics in ASEAN countries.
Singapore is the top investor among ASEAN countries despite being a service-based economy. Indonesia, Thailand, Vietnam, Malaysia and the Philippines must boost investment as major manufacturing countries in the region.
“If investments can’t be made amongst members, then investments can be made among industries. For example, by having Thailand open a factory in Indonesia and vice-versa. This develops a new trade of industrial raw materials,” said Zamroni, who is also a senior researcher at The Habibie Center.
According to him, the EU’s intra-member market is able to attain 66-75 percent per year because it does not only depend on state investment. This achievement is also due to the active investment of companies in fellow member countries.
The University of Indonesia ASEAN study center secretary, Shofwan Al Banna Choiruzzad, explained that the economic structure of ASEAN member countries has not yet allowed them to produce large and dynamic intramember markets like the EU.
“The economies of ASEAN member countries cannot support each other because the products being made are relatively the same, such as extractive, agricultural and manufacturing products with low added values, like textiles. These products cannot be exported to fellow ASEAN countries, so they are instead sold to Europe, Japan, China and others,” he said.
ASEAN is still based on developmental regionalism built through regional and international agreements.
According to Shofwan, the AEC cannot become a single integrated market like the EU as each EU member has more advanced and unique economies. First, the AEC must discuss production bases. This means turning ASEAN into an integrated region for producing certain types of products and facilitating their entry into global supply chains. Thus, ASEAN must adopt an economic principle based on complementarity.
“ASEAN is still based on developmental regionalism built through regional and international agreements,” he added. In this case, ASEAN is viewed as a market or a source of production where commodities are calculated based on the type of quantity and not specificity of each member country.
He is of the opinion that the US rivalry with China can get in the way of stability in the region and the world. However, it may also serve as an economic opportunity because if both the US and China are looking to become more independent of each other, then they both need other countries to become investment areas and to relocate their factories. Both of these aspects can be used to build different commodity production in each ASEAN country which, at the same time, can also be integrated.
