ASEAN, Japan, China, S. Korea to Bolster Financial Cooperation

The Association of Southeast Asian Nations has much to crow about as it marks its 50th anniversary: economic and social progress, a manufacturing powerhouse and a relative political stability.

Foreign ministers from the 10 ASEAN members plus Japan, China and South Korea agreed Monday they will bolster financial cooperation to promote economic stability in the region, news outlets reported.

This year marks the 20th anniversary of the Asian financial crisis which sent shockwaves through the region and rattled currency and stock markets across the globe.

Tokyo will "closely" cooperate with the ASEAN countries, China and South Korea "in order to increase the predictability of a regional or world economic crisis," Japan's new foreign minister, Taro Kono, who replaced Fumio Kishida last Thursday in a Cabinet reshuffle, said during the meeting in Manila, Philippines.

Kono also pledged Japan will make efforts to combat "growing protectionism," taking a clear stand against trade-restraining moves at a time when US President Donald Trump has touted increasingly reductive trade policy.

The foreign ministers exchanged views on a free trade agreement including the 13 nations, Australia, New Zealand and India, as well as infrastructure and maritime order in the region, a Japanese government official said, according to Kyodo News Agency.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, which all have diplomatic relations with North Korea.

Asia a Global Growth Leader

The 10 ASEAN members boast of some of the world’s fastest expanding economies like the Philippines and Vietnam, with growth rates of more than 6%. With a combined population of over 620 million and an economy of $2.6 trillion, the investment potential is huge and by 2020, the region will have the world’s fifth largest economy, Bloomberg reported.

Yet the goal of integrated economies remains a long way off. Businesses still face restrictions despite a 2015 blueprint mapping steps to eliminate trade barriers and create a single market to allow the free flow of goods, services and labor.

Gross domestic product in ASEAN has surged to $2.6 trillion in 2016, about the size of UK’s economy, from a mere $37.6 billion in 1970. Growth in ASEAN is seen at 4.9% next year, with Myanmar, Vietnam and the Philippines posting the fastest expansion in the region.

Many of the bigger ASEAN members like Singapore are heavily export-reliant, making them dependent on the global growth cycle. Southeast Asia has emerged as a strong manufacturing alternative to neighboring China, helped by lower labor costs, growing domestic demand and improvements in infrastructure.

Trade among ASEAN members remains low compared to regional groupings like the EU, according to Capital Economics Ltd. Intra-regional trade makes up about a fifth of total trade, compared with more than 60% in the EU. Non-tariff barriers are still high among members, especially in Indonesia, Gareth Leather, a senior Asia economist in London, said in a note recently.  

ASEAN and EU

The ASEAN and the European Union on Sunday adopted a new plan of action, seeking to strengthen cooperation in various areas, including the implementation of the Paris agreement.

In commemoration of the 40th anniversary of relations, the two organizations said in a joint statement that they are looking to "further enhance political and security dialogue and cooperation," which will cover climate change, maritime security, counterterrorism, cyber security, preventive diplomacy, mediation and crisis management.

Together, ASEAN and the EU make up for around 18% of the world's population and 26% of the world's gross domestic product. The EU is ASEAN's largest external source of foreign direct investment. In 2015, the inflow was worth $20.1 billion.

Despite strong economic partnership, EU's influence in the political and security sector is limited. However, EU's foreign policy chief Federica Mogherini is confident about the organization's role as the anchor of global security and said that defense cooperation with ASEAN must be enhanced to meet today's threats.

"We need to bring our EU and ASEAN defense structures closer. We need to invest more to ensure that common threats receive common answers; make our critical infrastructure resilient and resistant and resistant to cyber-attacks; disrupt and break extremist networks so as to prevent terrorism," Mogherini said in a recent interview with AseanFocus, a publication issued by the Institute of Southeast Asian Studies in Singapore.