• Home
  • About RSIS
    • Introduction
    • Welcome Message
    • Board of Governors
    • Staff Profiles
      • Executive Deputy Chairman's Office
      • Dean's Office
      • Management
      • Distinguished Fellows
      • Faculty and Research
      • Associate Research Fellows, Senior Analysts and Research Analysts
      • Visiting Staff
      • Adjunct Staff
      • Administrative Staff
    • Honours and Awards for RSIS Staff and Students
    • RSIS Endowment Fund
    • Endowed Professorships
    • Career Opportunities
    • Getting to RSIS
  • Research
    • Research Centres
      • Centre for Multilateralism Studies (CMS)
      • Centre for Non-Traditional Security Studies (NTS Centre)
      • Centre of Excellence for National Security (CENS)
      • Institute of Defence and Strategic Studies (IDSS)
      • International Centre for Political Violence and Terrorism Research (ICPVTR)
    • Research Programmes
      • National Security Studies Programme (NSSP)
      • Science and Technology Studies Programme (STSP)
      • Studies in Inter-Religious Relations in Plural Societies (SRP) Programme
    • Research @ RSIS
  • Education Programmes
    • Graduate Programmes
      • Graduate Programmes Office
      • Overview
      • MSc (Asian Studies)
      • MSc (International Political Economy)
      • MSc (International Relations)
      • MSc (Strategic Studies)
      • NTU-Warwick Double Masters Programme
      • PhD Programme
      • Exchange Partners and Programmes
      • How to Apply
      • Financial Assistance
      • Information Sessions
      • Alumni
    • Executive Programmes
  • Networking
    • Asia Pacific Programme for Senior Military Officers (APPSMO)
    • Asia-Pacific Programme for Senior National Security Officers (APPSNO)
    • RSIS’ Activities in the Council for Security Cooperation in the Asia Pacific (CSCAP) Singapore National Committee
  • Publications
    • RSIS Publications
      • Annual Reviews
      • Books
      • Bulletins and Newsletters
      • Commentaries
      • Counter Terrorist Trends and Analyses
      • Event Reports
      • Monographs
      • NTS Insights
      • Policy Reports
      • Working Papers
      • RSIS Publications for the Year
    • Glossary of Abbreviations
    • External Publications
      • Authored Books
      • Edited Books
      • Edited Chapters
      • Journal Articles
      • Op-Eds
      • Working Papers
      • External Publications for the Year
  • Events
  • Media
    • Media Highlights
    • News Releases/Speeches
    • RSIS Video Library
  • Alumni
  • Contact Us
Facebook
Twitter
YouTube
Linkedin
RSS
  • Home
  • About RSIS
      • Introduction
      • Welcome Message
      • Board of Governors
      • Staff Profiles
        • Executive Deputy Chairman's Office
        • Dean's Office
        • Management
        • Distinguished Fellows
        • Faculty and Research
        • Associate Research Fellows, Senior Analysts and Research Analysts
        • Visiting Staff
        • Adjunct Staff
        • Administrative Staff
      • Honours and Awards for RSIS Staff and Students
      • RSIS Endowment Fund
      • Endowed Professorships
      • Career Opportunities
      • Getting to RSIS
  • Research
      • Research Centres
        • Centre for Multilateralism Studies (CMS)
        • Centre for Non-Traditional Security Studies (NTS Centre)
        • Centre of Excellence for National Security (CENS)
        • Institute of Defence and Strategic Studies (IDSS)
        • International Centre for Political Violence and Terrorism Research (ICPVTR)
      • Research Programmes
        • National Security Studies Programme (NSSP)
        • Science and Technology Studies Programme (STSP)
        • Studies in Inter-Religious Relations in Plural Societies (SRP) Programme
      • Research @ RSIS
  • Education Programmes
      • Graduate Programmes
        • Graduate Programmes Office
        • Overview
        • MSc (Asian Studies)
        • MSc (International Political Economy)
        • MSc (International Relations)
        • MSc (Strategic Studies)
        • NTU-Warwick Double Masters Programme
        • PhD Programme
        • Exchange Partners and Programmes
        • How to Apply
        • Financial Assistance
        • Information Sessions
        • Alumni
      • Executive Programmes
  • Networking
      • Asia Pacific Programme for Senior Military Officers (APPSMO)
      • Asia-Pacific Programme for Senior National Security Officers (APPSNO)
      • RSIS’ Activities in the Council for Security Cooperation in the Asia Pacific (CSCAP) Singapore National Committee
  • Publications
      • RSIS Publications
        • Annual Reviews
        • Books
        • Bulletins and Newsletters
        • Commentaries
        • Counter Terrorist Trends and Analyses
        • Event Reports
        • Monographs
        • NTS Insights
        • Policy Reports
        • Working Papers
        • RSIS Publications for the Year
      • Glossary of Abbreviations
      • External Publications
        • Authored Books
        • Edited Books
        • Edited Chapters
        • Journal Articles
        • Op-Eds
        • Working Papers
        • External Publications for the Year
  • Events
  • Media
      • Media Highlights
      • News Releases/Speeches
      • RSIS Video Library
  • Alumni
  • Contact Us
Connect

Getting to RSIS

Map

Address

Nanyang Technological University
Block S4, Level B3,
50 Nanyang Avenue,
Singapore 639798

View location on Google maps Click here for directions to RSIS

Get in Touch

Engage with Us

  rsis.ntu
  rsis_ntu
  rsisntu
  school/rsis-ntu
  RSS

RSIS Intranet

S. Rajaratnam School of International Studies S. Rajaratnam School of International Studies
Nanyang Technological University Nanyang Technological University

Skip to content

 
  • RSIS
  • Publication
  • RSIS Publications
  • Economic Headwinds in 2019: Navigating Priorities for ASEAN
  • CO19005 | Economic Headwinds in 2019: Navigating Priorities for ASEAN

    Kaewkamol Pitakdumrongkit

    CMS / RSIS / Commentaries / Country and Region Studies / East Asia and Asia Pacific / Global / International Political Economy / Regionalism and Multilateralism / Religion in Contemporary Society / South Asia / Southeast Asia and ASEAN

    07 January 2019


    RSIS Commentary is a platform to provide timely and, where appropriate, policy-relevant commentary and analysis of topical and contemporary issues. The authors’ views are their own and do not represent the official position of the S. Rajaratnam School of International Studies, NTU. These commentaries may be reproduced with prior permission from RSIS and due recognition to the author(s) and RSIS. Please email to Mr Yang Razali Kassim, Editor RSIS Commentary at [email protected]

    SYNOPSIS

    To face economic headwinds in 2019, ASEAN member states should prioritise implementing ASEAN Economic Community 2025 and concluding RCEP negotiation.

    COMMENTARY

    THE NEW Year will likely see Southeast Asian economies face major economic headwinds namely the US-China trade tensions and the interest rate increases by the US Federal Reserve. While some observers think that the 90-day truce between Washington and Beijing could beget better relations between these two powers, they may overestimate China’s ability to make concessions to the US.

    As reflected in his speech at a gathering to celebrate the 40th anniversary of China’s reform and opening up on 18 December 2018, President Xi Jinping stressed that “No one is in a position to dictate to the Chinese people what should or should not be done”. Given that such remark came against the backdrop of the truce, it connotes that Beijing may not easily bow to Washington’s demands.

    Coping with Economic Headwinds

    Even though China finally makes concessions in March 2019, it may not fulfill what the Trump administration wants. For instance, buying more American soybeans is easy, but implementing measures to address “unfair” trade practices to the degree that satisfies the US is more difficult to get done within the 90-day timeframe.

    Consequently, the world in 2019 may witness more rounds of tariff escalations or trade-restricting measures being rolled out by Washington and Beijing. Regional economies will have to brace themselves again for future impacts.
    On the financial front, on 19December the US Federal Reserve raised the interest rate from 2.25 to 2.50 points and forecast two increases in 2019. The Fed did so to ensure there will be room for it to use a monetary policy, especially decreasing the interest rate, to fight the next US recessions. These future moves can still affect the ASEAN region.

    The additional 2019 hikes could trigger capital pullouts from Southeast Asian countries as investors move funds to seek higher yields in the US. If not well-managed, such capital outflows may instigate financial instability and crisis in regional economies.

    How ASEAN Can Avoid Headwinds

    While it is unlikely to avoid the effects of such headwinds on regional economies, ASEAN member states in 2019 can nevertheless counter such impacts via regional initiatives, namely ASEAN Economic Community 2025 (AEC 2025), ASEAN-Hong Kong Free Trade and Investment Agreements (AHKFTAs), Regional Comprehensive Economic Partnership (RCEP), and Chiang Mai Initiative Multilateralization (CMIM).

    First, Southeast Asian policymakers should prioritise the complete implementation of AEC 2025. This is a regional economic integration project by ten ASEAN member states purposed to achieve five objectives: a highly integrated and cohesive economy; a competitive, innovative, and dynamic ASEAN; enhanced connectivity and sectoral cooperation; a resilient, inclusive, people-oriented, and people-centred ASEAN; and a global ASEAN.

    Advancing AEC 2025 will enable businesses to better tap on the integrated market of 630 million people, rendering regional economies more resilient amidst the incoming headwinds.

    Second, Southeast Asian governments should ratify ASEAN-Hong Kong Free Trade and Investment Agreements (AHKFTIAs) signed in November 2017 so that these treaties can enter into force in early 2019 as expected. The agreements will enhance cross-border flows of goods, services, and investment between ASEAN and Hong Kong economies.

    They not only allow firms to enjoy greater access to goods and services markets and better investment protection, but also enable ASEAN nations to further tighten trade and investment ties with China and recuperate from the damage that future Washington-Beijing trade spats will inflict on them.

    Wrap Up RCEP Soon

    Moreover, ASEAN authorities should concentrate on wrapping up the RCEP talks. RCEP is a free trade agreement among 16 economies. If concluded, this bloc will encompass the market of 3.6 billion people and contribute to a third of the global GDP. It will cover 29% of the global trade and 26% of the world’s foreign direct investment flows.

    Concluding the negotiation will not only create more opportunities for businesses to deepen their supply chains, but also enable RCEP economies to diversify and cushion the negative consequences of the future U.S.-China trade wars.

    In addition, Southeast Asian nations (together with China, Japan, and South Korea) should advance the CMIM, a regional financial safety net under the ASEAN+3 financial cooperation process. Launched in 2010, the scheme provides financial support via a network of currency swaps to help ASEAN+3 nations weather their balance-of-payments difficulties.

    Because future Fed rate hikes could trigger investors’ panic leading to financial instability and capital flights in certain regional economies, CMIM can provide financial assistance to alleviate such problems.

    How to Get There from Here?

    Admittedly, the above initiatives face their own challenges. For example, a main hurdle for completely implementing AEC 2025 is in little coordination among domestic ministries and agencies. Thus, individual ASEAN countries must sort out how to better coordinate work among the involved authorities.

    Also, the elections in Australia, India, Indonesia, and Thailand may likely delay the conclusion of RCEP negotiation in the first half of 2019 as the politicians in these nations will likely prioritise their electioneering over international matters. As the momentum in RCEP talks will tend to pick up in the second half of next year, the parties’ different positions and preferences need to be reconciled to seal the deal.

    Certain domestic hurdles must be cleared for a successful ratification of the ASEAN-Hong Kong treaties. Regarding CMIM, while an agreement on 14 December to create more favourable conditions enabling the regional financial safety net to better assist crisis economies is laudable, efforts to advance the other CMIM aspects have been lackluster in recent years.

    For one thing, its size has remained the same US$240 billion since 2012. With this amount, the scheme can at best simultaneously provide lending support to a few small- and medium-sized economies should they come under a crisis. Hence, the participants must seriously push for the expansion of the CMIM size.

    In sum, the U.S.-China trade tensions and Fed rate hikes will likely generate some undesired effects on regional economies next year. Despite the challenges of the above initiatives, ASEAN countries must collectively pursue them to navigate through the economic headwinds. As time is running out, the authorities must act fast.

    About the Author

    Kaewkamol Pitakdumrongkit is Deputy Head and Assistant Professor at the Centre for Multilateralism Studies (CMS), S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.


    Categories:

    Commentaries / Country and Region Studies / East Asia and Asia Pacific / Global / International Political Economy / Regionalism and Multilateralism / Religion in Contemporary Society / South Asia / Southeast Asia and ASEAN

    Related events:
    Citation:

    Last updated on 07/01/2019

    Back to top

    Home

    About RSIS

    Board of Governors Staff Profiles Career Opportunities Getting to RSIS

    Research

    Research Centres

    • Centre for Multilateralism Studies (CMS)
    • Centre for Non-Traditional Security Studies (NTS Centre)
    • Centre of Excellence for National Security (CENS)
    • Institute of Defence and Strategic Studies (IDSS)
    • International Centre for Political Violence and Terrorism Research (ICPVTR)

    Research Programmes

    • National Security Studies Programme (NSSP)
    • Science and Technology Studies Programme (STSP)
    • Studies in Inter-Religious Relations in Plural Societies (SRP) Programme

    Graduate Programmes

    Executive Programmes

    Networking

    Publications

    Events Calendar

    Map

    Locate Us

    Block S4, Level B3,
    50 Nanyang Avenue,
    Singapore 639798

    View location on Google maps

    Get Connected

    • Facebook
    • Facebook
    • YouTube
    • Linkedin
    • RSS
    SITEMAP