CIMB ASEAN Research Institute (CARI) hosted a CARI Briefings webinar under its COVID-19 Economic Recovery Plan Series, titled ‘How Can ASEAN Bounce Back: A US Perspective’. The session featured Ambassador Michael W. Michalak, Senior Vice President and Regional Managing Director of the US-ASEAN Business Council, and Kawal Preet, President of the Asia Pacific, Middle East, and Africa (AMEA) region at FedEx Express.
Moderated by Tan Sri Dr. Munir Majid, Chairman of CARI, the discussion was centred on ASEAN’s post-COVID economic recovery through building upon the present bilateral trade ties between ASEAN and the United States, how American global supply chains are expected to shift post-COVID-19 and how ASEAN can leverage upon this for its own 4IR transformation, and ultimately how US interests coincide with ASEAN integration efforts and how both partners can collaborate in this regard.
During the discussion Tan Sri Dr. Munir emphasized that ASEAN must expedite its institutional decision-making process if it is to save lives and to come out of the COVID-19 pandemic faster and stronger. The speakers commended Pathway 225 proposals (A Pathway Towards Recovery and Hope for Asean) particularly on setting up the High-Level Special Commission, precisely to improve decision-making at this most challenging of times.
The discussion also centred around supporting MSME recovery to increase their competitiveness. MSMEs have been hardest hit and need all the help available to them. Financial assistance from governments gave MSMEs a lifeline, but those who embraced digital tools thrived. The panelists also discussed how the pandemic is an opportunity for ASEAN governments to encourage and facilitate e-commerce to support the MSMEs.
ASEAN and the US should strengthen bilateral trade ties as part of post-COVID-19 recovery
Tan Sri Dr. Munir opened the session by observing that the ASEAN region enters a new decade defined primarily by uncertainty, as the world continues to grapple with the global pandemic which has exacerbated global trade frictions.
According to the World Bank’s projection in April 2020, Vietnam, Laos, the Philippines, Indonesia, and Myanmar are expected to register economic growth of between 2.1%-4.9%, while Malaysia and Thailand would experience contractions of between 4.6% and 5.0% respectively. Separately, the UNCTAD projected that foreign direct investments (FDI) into developing Asia would decline by up to 45% in 2020.1
Tan Sri Dr. Munir pointed that for the open economies of ASEAN, strengthening trade relations with its key partners; including the United States, will play a key role in the region’s recovery. For context, he observes that US merchandise trade with ASEAN between 2009 and 2019 jumped from US$149 billion to US$295 billion.2
“The power of American businesses should not be neglected even if the general feel about the US is of a country in decline. Those businesses – their financial, technological and entrepreneurial strength – are not. They have to be engaged. They have to demonstrate they are not damaged goods and continue to have a global outlook,” said Tan Sri Dr. Munir.
US private sector is committed to supporting ASEAN’s recovery in short-term health outcomes; restoring consumer confidence and recovering sustainably
Ambassador Michalak concurred with Tan Sri Dr. Munir that greater collaboration with the United States will be crucial for ASEAN to ‘bounce forward’ from the pandemic-induced slump.
“American firms can be strong partners in ASEAN’s Recovery and as ASEAN develops its post-pandemic recovery plan, the U.S. private sector is committed to ensuring the success of these comprehensive recovery efforts. We believe in the region’s future as a preferred trade and investment destination. Furthermore, by approaching recovery strategically, ASEAN can position itself to not only bounce back from its current economic slump, but bounce ‘forward’ from the COVID-19 pandemic,” Ambassador Michalak pointed out.
● Improving short-term health outcomes
In terms of the sort of strategic recovery ASEAN should undertake, Ambassador Michalak suggests that one focus area would be strengthening the region’s public health infrastructure. For instance, Ambassador Michalak suggests that in the short-term ASEAN should set up the necessary full-service delivery system to ensure its efficient distribution. In the longer term, ASEAN should consider setting up a sort of stockpiling system to create more regional resilience to future outbreaks. Investment in logistics capabilities is also critical in ensuring uninterrupted access to essential medical supplies and much needed food supplies during times of need.
1World Bank, ‘East Asia and Pacific Economic Update’, April 2020, UNCTAD, ‘World Investment Report 2020’, 2020
2 ASEAN Secretariat
● Restoring confidence in the consumer economy and support for the MSMEs
Panelists further stressed the importance of restoring consumer confidence so that the markets can rebound in the near term. This can be achieved by accelerating digital transformation by supporting SMEs transition onto e-commerce platforms. COVID-19 has exposed the need for business digitalisation to ensure economic sustainability in times of pandemic. With many ASEAN states still struggling to get back on their feet and governments enforcing social distancing in their efforts to control the spread of COVID-19, e-commerce is the perfect platform for trade facilitation as it enables economic activities to continue amid social control.
In order to capture the accelerating e-commerce growth, modern infrastructure and regulatory support from ASEAN member states is vital to ensure the SME sector not only survives the pandemic but also thrives beyond these challenging times.
● Recovering sustainably
Panellists also agree that any sort of ASEAN recovery should be done sustainably, and that one avenue would be through accelerating green and sustainability-related financing within regional markets. The combination of a lasting infrastructure and the use of a circular economy will ensure sustainable management of resources and the ability for ASEAN economies to recover sustainably.
Tan Sri Dr. Munir, in his closing remarks, makes a forceful argument about the continued relevance of openness and free trade. Despite political tensions which have affected the region over the last few years, he says the severe economic ramifications brought about by COVID-19 and the subsequent need to protect livelihoods and tackling poverty should take precedence over political disagreements. For this to happen, he posits, ASEAN and the US should uphold the global rules-based order which would facilitate bilateral and multilateral negotiations.