September 26, 2024
JAKARTA – ASEAN is ramping up efforts to deepen economic partnerships with non-member countries, particularly China, Japan and South Korea, as global trade remains fragmented amid tensions between China and the United States.
Last year, ASEAN countries exported US$485.8 million worth of goods to these three countries, dubbed the Plus Three (+3), while importing $647 million from them. That trade activity represented 32 percent of the region’s total trade value.
The term ASEAN+3 was coined in December 1997 and has since evolved into the main vehicle for promoting East Asian cooperation.
“Our trade and investment links with the Plus Three countries are solid, and we hope to further strengthen these ties with the implementation of our new economic cooperation plans,” said Laos’ Minister of Industry and Commerce Malaythong Kommasith at the 27th ASEAN Economic Ministers (AEM) Plus Three Meeting in Vientiane on Sunday.
Chinese deputy Minister of Commerce Li Fei, Japanese Parliamentary Vice Minister of Economy, Trade and Industry Yoshida Nobuhiro and South Korean Minister for Trade Industry and Energy Inkyo Cheong were present at the meeting.
The discussion centered on deepening economic integration, promoting inclusive and sustainable development and advancing digital technology.
Kommasith highlighted that, aside from being ASEAN’s top trading partners, the Plus Three countries are also the region’s second-largest source of foreign direct investment (FDI), behind the US.
In 2023, investments from these countries amounted to $42.8 billion, a 22.6 percent drop compared to the previous year, but still accounting for 18.6 percent of FDI inflows to the region.
In addition, ASEAN government officials and private-sector representatives engaged in discussions last week about the provisions and potential benefits of the ASEAN-Australia-New Zealand Free Trade Area (AANZFTA).
Kommasith noted that ASEAN had received only $1.6 billion in investment from Australia and $13.5 million from New Zealand last year, representing 0.7 percent and 0.01 percent of total FDI into the region, respectively, but added that he believed these ties would strengthen once a revised trade agreement was in place.
“Last year, trade between ASEAN and Australia was valued at $94.4 billion, accounting for 2.7 percent of the region’s total trade, while trade between ASEAN and New Zealand amounted to $12.7 billion, or 0.4 percent of total trade,” he explained.
ASEAN countries need to actively engage with non-member nations, as trade among the block’s member countries accounted for less than 24 percent of all ASEAN trade activities in the past decade.
Given the intensifying rivalry between the US and China, which are the block’s main trade partners and investors, ASEAN is keen to intensify economic relations with other countries to enhance its resilience in the face of global trade tensions.
Exploring new markets
Despite being the largest country in ASEAN, Indonesia ranks only fourth in exports, trailing behind Singapore, Vietnam and Malaysia. In terms of FDI, Indonesia holds the second spot, after Singapore, but the gap with third-placed Vietnam is narrowing.
Krisna Gupta, a senior fellow at the Center for Indonesian Policy Studies (CIPS), opined that there was still potential for increased trade with and investment from the Plus Three countries.
Companies in those countries had strong manufacturing capabilities and may view Indonesia as a key production hub, particularly with the country’s focus on developing downstream industries for domestic mineral resources.
However, challenges remained, as China, Japan and South Korea traditionally ran trade surpluses, with exports exceeding imports.
“If Indonesia aims to rely on exports for growth, those countries may not be ideal partners. Unless they shift their macroeconomic policies to become more open to imports in the future,” he told The Jakarta Post on Wednesday.
Krisna suggested that Western economies like the US, the European Union and Australia remained the best markets for boosting exports, as there was still significant untapped potential. He pointed out that Indonesia lacked free-trade agreements with the US and the EU and had not fully explored the potential of the Comprehensive Economic Partnership Agreement (CEPA) with Australia.
The Plus Three countries may however be a promising source of capital for ASEAN, according to Krisna, but goods produced through such investment were often meant to be shipped to other markets, which meant the region would need to expand its economic reach, a challenging task.
He highlighted India as an example, noting that its protectionist stance in maintaining a trade surplus had resulted in limitations on imports.
“Their local market seems more attractive to Indian investors, making them hesitant to invest in ASEAN. On the other hand, the Middle East and North Africa (MENA) region could offer a viable alternative market [for ASEAN-made products],” Krisna said.
He also added that ASEAN countries may need to focus more on services, which showed stronger growth potential when compared with the increasingly saturated market for physical goods.
A host of ASEAN meetings continues in Vientiane this week, where the 24th ASEAN Energy Business Forum will go on until Friday. Laos chairs the ten-country block this year after assuming the rotating chairmanship from Indonesia, which held the position in 2023.