Why US should stay engaged with ASEAN

After weathering a tumultuous 2015, the Association of South-east Asian Nations (ASEAN) appears headed into an uncertain 2016 despite the formal establishment of the ASEAN Community, including the ASEAN Economic Community (AEC), at the beginning of the year.

The ASEAN Community remains very much a statement of intention rather than a reality.

Steep declines in commodity prices, falls in most regional currencies against the dollar and weak global demand, including weakening demand from China, have all combined to slow down growth in the ASEAN economies. Some countries in the region have grappled with internal problems. These include, among others, economic restructuring woes for middle-income economies such as Malaysia, high household debt in Malaysia and Thailand, Thailand’s weakening economy under military rule and the emergence of protectionist sentiments in Indonesia.

The new US-ASEAN Connect initiative announced by United States President Barack Obama at the historic summit with ASEAN leaders in Sunnylands to coordinate US economic engagement in the region is therefore welcome.

According to Mr Obama, Washington plans to set up a network of three hubs across South-east Asia —in Singapore, Jakarta and Bangkok — to connect entrepreneurs, investors and businesses from both sides.

While details are still scarce, the initiative will focus on four main areas, dubbed Business Connect, Energy Connect, Innovation Connect and Policy Connect.

The first part aims to facilitate regional trade and economic integration under the AEC framework and boost US and ASEAN business ties in sectors such as information and communications technology and infrastructure. The second pillar seeks to support the connectivity, clean energy and energy security goals set out by ASEAN, while the third provides technical support for various programmes related to innovation, science and entrepreneurship. Finally, Policy Connect seeks to support ASEAN in creating policies conducive to trade and investment, digitally enabled innovation, and sustainable and equitable economic growth.

CLOSER US-ASEAN TIES

The geopolitical rationale for the US’ deeper economic engagement with ASEAN can be attributed to the rise of China and the increasingly close economic links between ASEAN and China, which is currently ASEAN’s largest trading partner outside the region; Beijing also has a free trade agreement with ASEAN while the US does not.

The US-ASEAN Connect initiative is probably a calculated move to show that besides contributing to regional security, America has still much more to offer South-east Asia on the economic development front.

Tellingly, the US has indicated that as part of the initiative, it will also be conducting a series of workshops to help ASEAN members such as Indonesia, the Philippines and Thailand become members of the Trans-Pacific Partnership (TPP).

Currently, Brunei, Malaysia, Singapore and Vietnam are the only ASEAN members that are parties to the 12-nation TPP, which does not include China.

ASEAN has little to lose and much to gain with greater economic links with the US. For one, the ongoing economic recovery in America can serve to counterbalance slowing demand from China as it grapples with its own economic transition from an export base to domestic consumption and from manufacturing to services as new drivers of growth.

The US can benefit from deeper economic engagement with ASEAN as well.

ASEAN is America’s fourth-largest trading partner. Two-way investments are also growing and the US is now the fourth-largest investor in ASEAN. Accelerating economic integration within ASEAN will offer a growing consumer market for American companies, driven by the expanding the middle classes of Vietnam and Indonesia.

According to the ASEAN Business Outlook Survey 2015, US companies are upbeat about the region’s potential as a large market, and this is not surprising as almost 60 per cent of ASEAN’s population is under 35 years of age.

The choice of the three Connect centres in ASEAN — Jakarta, Singapore and Bangkok — to coordinate US resources is well suited. The ASEAN Secretariat is in Jakarta while Singapore hosts a large number of US companies. Bangkok, on the other hand, hosts a few important regional offices for the US government.

It is important for US and ASEAN to ride on the momentum of the Sunnyland summit to kick-start the US-ASEAN Connect initiative as soon as possible, starting with more detailed information on the specific plans and programmes to be implemented.

Translating these into concrete actions will enhance the positive signals of the US’ continued interest in ASEAN.

ABOUT THE AUTHOR:

Dr Tham Siew Yean is senior fellow at ISEAS – Yusof Ishak Institute.