ASEAN and the Long Term Economy

World confidence in ASEAN's economic potential is high. Therefore, ASEAN really must be able to become the epicenter of growth and reverse market confidence that is declining.

The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in ASEAN dan Perekonomian Jangka Panjang

HERYUNANTO

Illustration

”The long run is a misleading guide to current affairs. In the long run we are all dead.”

Classical economist John Maynard Keynes delivered that important message in 1923. The long term is a misleading guide to current affairs. In the long run, we are all dead.

We deliberately highlight this message to remind us of the great challenges we are currently facing. Geopolitical tensions add further difficulties to the post-Covid-19 economic recovery. The 1.5-year ongoing war in Ukraine continues to disrupt global energy and food supplies.

Amidst heightened tensions between the United States (US) and China in the South China Sea and the Taiwan Strait, uncertainty continues to mount. The repercussions of all this are further squeezing the livelihoods of people around the world.

This is no exception in China, a country that has been said to never be affected by an economic recession. The New York Times report stated that the decline in consumer confidence was making China's post-pandemic economic recovery slow.

David Yang, a perfume entrepreneur in eastern China, hopes that his business will bounce back post-pandemic. Last March, he increased his investment by $60,000 USD. However, his perfume sales have not been as good as before the pandemic.

After the financial crisis that hit the real estate Evergrande company, public confidence in China declined sharply. People are holding back spending because they are worried about the threat of losing their jobs.

On the other hand, business circles are considering holding back on expanding their businesses. As a result, businesses like David Yang's are heading towards bankruptcy.

Geopolitical tensions are making the post-Covid-19 economic recovery more difficult. The 1.5 year war in Ukraine continues to disrupt global energy and food supplies.

The downward spiral of the economy is also inevitable in China. A few weeks ago, at least 10 billion US dollars were withdrawn from the Chinese capital market due to concerns over losses.

The overcast shadows of the global economy will be the main theme of discussion at the 43rd ASEAN Summit which will take place 5-7 September 2023 in Jakarta.

Eleven ASEAN leaders will meet with partner countries, such as the US, China, Japan, South Korea, India, Russia, Canada, and Australia. Nine international organizations, including the United Nations and World Bank, will also participate in the meeting.

Short term problems

The current short-term issue needs to be resolved. Collaboration from all countries is required to prevent this deterioration from continuing. The spiral must be reversed in order to bring improvement to the lives of all global communities.

It's just that, like the theme of last year's G20 meeting to “recover together, recover stronger”, it's not easy to do. After eight months of meetings that resulted in the Bali Declaration, economic conditions did not get better, but instead got worse.

If this situation is not improved, the concerns as warned by Keynes could happen. Our failure to mitigate short-term issues will render long-term meaningless. In fact, we could all die if we make mistakes.

ASEAN, as a massive market with 600 million people and an economic power reaching 3 trillion US dollars, can take the initiative in resolving short-term problems. ASEAN truly must be capable of becoming the epicenter of growth and reversing the market's currently declining confidence.

The world's confidence in the potential of the ASEAN economy is currently high. ASEAN is the region with the highest economic growth and the most rapid development in the world. The eleven ASEAN countries are competing to prepare themselves to attract investment into their countries, in accordance with their respective advantages.

Economic cooperation between ASEAN countries is also running closely. Singapore's investment in Indonesia in the first semester of 2023 reached 7.7 billion US dollars. Like last year, it is estimated that Singapore investment will return double digits this year.

Translation: Similarly, Singapore's investment in Vietnam is also noteworthy. During the visit of Singapore's Prime Minister Lee Hsien Loong to Vietnam last week, it was agreed to develop 17 industrial zones as a collaboration between both countries.

Singapore's Minister for Trade and Industry, Gan Kim Yong, stated at the ASEAN Conference 2023 in Singapore that his country is utilizing its strength, one of which is being a global financial center. Singapore has a long-term vision and does not want to get caught up in short-term issues, as it believes that the ASEAN economy has good long-term prospects.

ASEAN must truly be able to become the epicenter of growth and reverse the market's declining confidence.

Digital economy

One of the strengths of the ASEAN economy lies in the digital economy. ASEAN trade ministers agreed to open the potential 3 trillion US dollar digital economy market at their meeting in Jakarta last week. However, it is understood that there are obstacles, such as uneven understanding of the digital economy among ASEAN countries.

Therefore, in addition to preparing basic infrastructure and regulations related to trade through digital economy, another action is to prepare the ASEAN community to have a better understanding of digital issues. Digital literacy must be encouraged, including by private entities. Employees working in companies must be given early understanding about digital issues, and even their way of thinking must also be digitally oriented.

During the transition period, there will certainly be challenges to face. Therefore, communication and collaboration between the government and the private sector must continue to run smoothly. The government must listen to input from the private sector because the government's task is only to make regulations and policies, while the implementation in the field is entirely in the hands of business actors.

Indonesia, which has a large young workforce and a high internet penetration rate, can become one of the digital economic powerhouses. Moreover, the government has already launched Satria-1 satellite to accelerate internet connection for the public.

So far Indonesia has given birth to two decacorns, seven unicorns and around 2,000 start ups. With economic potential reaching 125 billion US dollars in 2025, of course more digital players will be born. Especially if strengthening digital literacy, especially to spur creativity and innovation, continues to be developed.

Sustainability

One other area where ASEAN can become a force is in sustainability. Nowadays, the demand for products that do not emit exhaust gases is increasingly high. The products being sold must show environmental-friendly certification.

The impact of the demand is even very drastic. In Europe, farmers are required to reduce the number of cows they raise. The reason is that the nitrogen released from cow manure has an impact on global warming and climate change.

Several states in the US have even started banning the sale of meat and milk. If livestock, which has been a source of human sustenance, is being questioned, what about fossil energy?

Green energy has become the focus and pillar of future energy supply. However, building green energy requires strong technology and funding. Not to mention the time it takes to build it.

President Joko Widodo has stated that Indonesia's potential for green energy is as high as 434,000 GW. However, the amount that has been realized is still very limited, including solar energy.

Indonesia lags even behind Singapore, which solely relies on panels installed on rooftops of buildings and houses. Singapore is the most densely populated country utilizing solar panels in housing and is already capable of producing up to 600 MWh of electricity.

Indonesia must accelerate the execution of green energy development. We cannot continue to just theorize and end up missing the train. Other countries are already talking about the ASEAN Power Grid, with the first phase starting in 2024, where 100 MW of hydroelectric power will be transmitted through Laos, Thailand, Malaysia, and Singapore. Furthermore, solar energy will also be transmitted from Vietnam.

Indonesia's need for electricity from green energy sources certainly won't reach 440 GW. The excess production can be offered as part of ASEAN's joint efforts to build a gas emissions-free zone.

Also read: Half of Indo-China Present Without Minister of Foreign Affairs at the ASEAN Summit

Also read: Indonesia's Leadership in ASEAN Tested by the Crisis of Myanmar and the South China Sea

ARSIP KEMLU/KEMLU.GO.ID/SINGAPORE

Suryopratomo

Suryopratomo, Indonesian Ambassador to Singapore