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How ASEAN Is Adapting To A Changing World

ASEAN, a regional block of 10 very diverse countries, was created to support economic growth, good governance, and human rights in Southeast Asia. After decades of rapid growth, these 10 countries now face changing global dynamics, internal divisions, and economic uncertainty.

This week, the Altamar team of Peter Schechter and Muni Jensen is joined by Niharika Mandhana, the Southeast Asia bureau chief for The Wall Street Journal. She leads a team of correspondents covering politics, economics, and business and technology trends across the region.

The Export-Led Model May No Longer Be Working

Impressive economic growth and development made ASEAN an increasingly important geopolitical block. In the past few decades, China invested heavily in Southeast Asia through its Belt and Road Initiative and strengthened its ties with the 10 countries. The result has been widespread economic growth, greater trade and investment flows, and growth in education and technology.

“However,” says Mandhana, “it’s unclear that the path that a lot of Asian countries took in the last half-century, starting with Japan, Korea, the Asian tigers, China most recently, and Southeast Asian countries — this kind of export-led growth of manufactured goods — that that is still open to countries that are late industrializers, that want to now embark on this process. And the reason is that several things have changed. Wages are increasing everywhere, quite rapidly, countries are becoming old before they get rich.
“You’re seeing already premature deindustrialization in several countries, where manufacturing as a share of GDP is peaking at much lower levels of development than what you saw with Western industrialization or Asian industrialization in the last half-century.”

How Will ASEAN Balance Conflicting Global Interests?

ASEAN has survived for decades despite the linguistic, political, economic, and cultural diversity in the region. Mandhana notes two major successes. The first is free trade.

“From 1992 onward, there’s been an intra-ASEAN FTA and then a lot of free trade agreements with other big powers in the region, including China, Korea, India, and other countries. That has facilitated and promoted this manufacturing ecosystem that Southeast Asian countries have developed,” she details. Secondly, it “provided a forum for dialogue, including through the ASEAN regional forum, the East Asia Summit. These are important opportunities for global leaders to come together, get some face time to talk about issues at the highest levels, and try to achieve breakthroughs with difficult and prickly questions of which there are many.”

ASEAN’s Relationship With China Is Fraught

According to Mandhana, “there has been a great degree of economic integration, as you say, between China and Southeast Asia’s rapid growth in trade. China is a massive economy that is geographically proximate to Southeast Asia, and Southeast Asia wants to plug into that economic boom and that economic story. Southeast Asia wants to benefit from that.
“But also there are very difficult issues to navigate with China. There’s a South China Sea issue where countries like the Philippines and Vietnam are finding that their oil and gas exploration projects or their fishing grounds and fishing rights are coming under stress from China’s activities in the South China Sea. As I said, the island-building and militarization have been a big cause for concern.”
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