In Southeast Asia, 2017 will doubtless see much celebration as the Association of Southeast Asian Nations (Asean) reaches its 50th anniversary. But, for the World Economic Forum, 2016 is our milestone year, for it marks 25 years of staging a regional summit in Asia. On June 1 and 2, more than 550 business and government leaders will gather in Kuala Lumpur for the 25th World Economic Forum on Asean.
Anniversaries are occasions both to reflect on the past and to consider the future. In the case of Asean, the past 25 years have been truly transformative. Back in 1991, the 10 nations that today make up the Asean bloc accounted for just 1.7 per cent of the global economy. Today, they have doubled that share to 3.5 per cent, or 6.1 per cent if measured using purchasing power parity. Over the same period, Asean’s share of the global population also increased, but by much less, from 8.3 per cent to 8.6 per cent. This process of economic catch-up is steadily bringing Asean’s economic weight into line with its demographic weight.
Of course, the region’s change and development can be measured in countless other ways. Consider urbanisation. Back in 1991, the region’s urban population stood at 143 million (just under a third). Today, Asean has 306 million urban dwellers (nearly half the population). Or, look at technology, Internet penetration has risen from zero to 250 million users, and continues to climb, with another 100 million users expected to connect in the next three years.
The Asean organisation itself has also seen tremendous change. What began life in 1967 as a security arrangement among five states, to preserve regional peace, has morphed into an ambitious integration project taking in 10 nations. The region formally unveiled the Asean Economic Community in 2015, which aims to create a single regional market, with borderless flows of goods, services, capital and labour.
STRONG TRACK RECORD, UNCLEAR
FUTURE
But, what of the future? With its young workforce and the prospect of many more years of catch-up growth, many commentators are optimistic. The International Monetary Fund, for example, predicts that Asean will make up four per cent of global Gross Domestic Product (GDP) by 2020.
But, the global context is changing at an accelerating rate. Asean’s biggest trade partner, China, is undergoing profound structural changes. Debt levels around the world — and within many parts of Asean itself — have subdued demand for trade. Commodity prices, which impact many Asean nations, look set to stay low for some time. Ultra-low monetary policy in the United States, which in recent times has benefited the region, could well tighten in the years ahead.
Regional integration, which is vital for building economic resilience, still has major hurdles to overcome. Issues of sustainability and economic inclusiveness will loom ever larger.
Perhaps most significant of all for Asean, the impact of the Fourth Industrial Revolution will be transformative. As a plethora of new technologies, such as advanced robotics, artificial intelligence, 3D printing, autonomous vehicles, machine learning and the Internet of things take hold, Asean must learn how to master the opportunities that will arise, as well as the very real risks of being left behind. As the cost of automation plummets, the region will struggle to compete on the basis of low-cost labour alone. Traditional development paths based around export manufacturing will come into question. Service industries, from education to financial services to healthcare to retail will be disrupted beyond recognition.
Will policymakers be agile and quick enough to respond? Can they re-shape their education systems to equip their workers for the future of jobs? And, can they harness the power of new digital technologies to improve standards of governance and institutional quality which will be so vital to continued economic success?
The questions facing the Asean bloc and how will it navigate the challenges ahead are both fascinating and critically important. At our World Economic Forum on Asean next month, we’ll be bringing together heads of government and their key ministers from across the region, as well as global chief executive officers and chairmen, leading academics, and the heads of international organisations and civil society groups to debate the big questions, and to help shape the agenda for the next 25 years.
Justin Wood is head of Asia Pacific, and a member of the Executive Committee at the World Economic Forum