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ASEAN Economic Community in Uncertain Times: Can the Indonesian Chair Lead in a Challenging World?

Julia Tijaja highlights several initiatives and Indonesia’s role in re-energising the ASEAN Economic Community.

The post-COVID world looks very different in 2023 from just a year ago, as the world’s second-largest economy, China, reopened. The Russia-Ukraine war that started in February 2022, resulted in the food, energy, and cost-of-living crises, along with increasing and intensifying climate-related events, and provided a glimpse of today’s post-COVID polycrisis world.

Geopolitics is increasingly shaping global economic governance, far beyond simple tariff wars. Policy-driven fragmentation will lead to a new noodle bowl — this time not of free trade agreements (FTAs) but of supply chain governance, leading to inefficiencies and higher producer and consumer costs, at least in the short term. Currently, the multilateral trading system is ill-equipped to respond.

This is not good news for ASEAN, whose economies have been growing, albeit unevenly, by participating in international production sharing. The region is not big enough to undo this trend, but — along with other middle powers — can influence its trajectory enough to avoid hitting the iceberg.

Accounting for 36% of ASEAN’s gross domestic product (GDP) and 41% of its population, Indonesia is the natural leader of ASEAN. After a successful G20 presidency, Indonesia is now in charge of steering ASEAN through another challenging year. Its chairmanship year coincides with the finalisation of the core elements of the ASEAN Post-2025 Vision and the acceleration of the Post-2025 visioning process — a momentous task for the Chair.

Indonesia’s Chairmanship theme of ASEAN Matters: Epicentrum of Growth puts the ASEAN Economic Community (AEC) at its centre. ASEAN sceptics implied that the theme is a diversion from ASEAN’s political issues that are unlikely to be resolved, whilst ASEAN’s relatively robust growth is a given, but this view seems myopic. The AEC’s growth prospect is indeed guaranteed by ASEAN’s continued relevance, internally and externally. However, recovery and growth prospects may be at risk of being stunted by geopolitical power struggles, if multilateral rules are being disregarded, and ASEAN matters little more than as proxies.

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