Urgency for Asean to realise the vision of the AEC and trade more with itself is greater than ever: EU-ABC
Underneath its rosy headline figures, Asean’s foreign direct investment (FDI) numbers suggest cause for concern, as the region continues to miss its own targets for regional economic integration and intra-Asean trade continues to lag warns the EU-Asean Business Council in its latest report.
According to figures from the Asean Investment Report 2019, Asean attracted an all-time high inflow of FDI in 2018, the third consecutive year of rising investment. "FDI rose from US$147 in 2017 to US$155 billion, with four member states reaching new records (Cambodia, Indonesia, Singapore and Vietnam). The region's share of global FDI inflows rose from 9.6 per cent in 2017 to 11.5 per cent last year."
But the headline numbers mask underlying concerns, said the business council in its report.
Specifically, the 2018 numbers have been boosted by very high numbers from an “unspecified country source for reinvested earning in the Philippines”, and the intra-Asean FDI numbers include an element of double-counting as they “include[s] some investment originating outside Asean that was channelled through Singapore”, noted the report.
"There has also been a decline in the level of FDI from key Asean dialogue partners, with the numbers falling in 2017 and 2018 and now at levels similar to where they were in 2010.
"Intra-Asean FDI has been relatively flat since 2010 (despite record absolute amounts in recent years) and has fallen by nearly 10 per cent since its peak in 2016."
“Over the past decade GDP growth and FDI have been strong. For the region to maintain its strong position in the global economy, and achieve sustainable and equitable economic development, it must attract quality investment, technology and skills and more actively remove non-tariff barriers to trade and investment," said EU-ABC Chairman Donald Kanak.
On non-tariff barriers, the very credibility of the Asean Economic Community (AEC) rests on the Asean leadership earnestly and honestly identifying and removing them, noted the report.
Since 2015, non-tariff measures have increased by 60 per cent to almost 9,500, of which over 1,257 are either Quantity Control Measures (or quotas on imports), Price Control Measures, or Contingent Trade Protective Measures, that for the most part are distorting markets and limiting competition.
Meanwhile, 2020 should see the implementation of the Asean Single Window, the Asean Customs Transit System, and the single Self-Certification Programme for Certificates of Origin. These initiatives need to be followed through and expanded, said the report, adding that other substantive elements under the AEC that remain work-in-progress, or remain to be started, need to be moved forward.
Without the removal of NTBs, and advances on other trade facilitative measures, intra-Asean trade will continue to lag and Asean will risk being no more than the sum of its parts warned the report.
Chris Humphrey, executive director of the EU-ABC added that while the region has taken concrete measures toward its own economic integration agenda, more needs to be done to strengthen its position in global supply chains.
"At times like these, Asean can act collectively to advance development for the benefit of its talented citizens, and improve competitiveness," he said.