DESARU – Facing increasing global geopolitical and geo-economic uncertainties, Malaysia is taking the lead in proposing 18 priority economic deliverables (PEDs) to fellow ASEAN economic ministers. Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz announced this aspiring plan during the 31st ASEAN Economic Ministers’ Retreat held on Thursday, Feb. 27, in desaru. The proposals aim to strengthen ASEAN’s economic resilience and integration in the face of escalating global challenges, focusing on key areas like trade facilitation and digital economy advancement.
The core of Malaysia’s proposal includes significant upgrades to the ASEAN Trade in Goods Agreement (ATIGA), a crucial framework for facilitating trade within the region. Moreover, continued discussions on the Digital Economic Framework Agreement (DEFA) are also a key component, alongside the consideration of Timor Leste’s membership into the ASEAN bloc. These initiatives reflect a concerted effort to deepen economic cooperation and expand ASEAN’s reach, ensuring the region remains competitive on the global stage.
Upgrading ATIGA to Streamline Trade and Navigating the Digital Economy with DEFA
tengku Zafrul expressed optimism regarding the ATIGA upgrade, stating, I am optimistic that we will be able to conclude atiga by March as there are countries ready to sign the agreements. This swift progress signals a strong commitment among member states to streamline trade processes and reduce barriers. However,the DEFA presents a more nuanced challenge,requiring careful consideration of each member’s unique economic landscape.
Addressing the complexities of the DEFA negotiations, Tengku Zafrul noted, With regards to Defa, we need to finetune some matters as each country will have their own issues. I have mentioned before that each country in Asean are different in their per capita gross domestic product (GDP). He emphasized the importance of ensuring that talks on the digital economy are equitable for all member states, acknowledging the diverse economic landscapes within ASEAN. This highlights the need for tailored approaches that consider the varying levels of digital infrastructure and readiness across the region.
Geopolitical Challenges and the Importance of ASEAN Unity
The current global landscape, fraught with geopolitical tensions, adds another layer of complexity to ASEAN’s economic endeavors. Tengku Zafrul acknowledged these challenges, stating that it was harder to navigate now due to the landscape of geopolitical challenges facing the world today. These tensions, especially between major global powers, can disrupt trade flows, investment patterns, and overall economic stability.
Despite these difficulties, he stressed the importance of unity within the bloc: However it is significant for this bloc of Asean countries to band together to face all the potential challenges that may come including addressing and mitigating them together. This collective approach is deemed essential for ASEAN to effectively address and mitigate potential economic disruptions, ensuring the region speaks with one voice on the global stage.
Addressing Trade Protectionism and Potential US Tariffs
The potential imposition of tariffs by the United States was also a topic of discussion. Tengku Zafrul indicated that this issue, along with matters concerning trade, technology security, and supply chain security, would be addressed. He emphasized the need for consensus among all members on any decisions made, ensuring that ASEAN moves forward as a unified entity, protecting its collective interests.
Regarding protectionist policies adopted by some countries, Tengku Zafrul offered a pragmatic perspective: It was natural for countries to be protective of their industries that they feel were not mature or ready to face fair competition. he suggested that ASEAN should focus on mitigating these effects through deeper integration and collaboration within its own framework, strengthening its internal market and reducing reliance on external actors.
He further elaborated on the potential of the DEFA, stating, one area that we think we can work stronger is through the Defa to make it more inclusive and to ensure that not just the big players benefit from this Asean integration. This highlights the commitment to ensuring that the benefits of ASEAN integration are distributed equitably among all member states, not just the larger economies, fostering inclusive growth and reducing inequality.
Tengku Zafrul also pointed out that protectionism extends beyond trade in goods,noting that there was more protection which exists in the services sector rather than in the trade sector and this should be addressed in the long term. Addressing these barriers in the services sector is seen as crucial for fostering a more open and competitive ASEAN economy, unlocking new opportunities for growth and innovation.
Impact of US-China Tensions on ASEAN Economies
When asked about the potential benefits of US-China tensions for ASEAN, tengku Zafrul expressed caution, stating that he was not in total agreement with the notion that ASEAN would automatically benefit. He explained that any significant developments between the two global economic powerhouses would inevitably have repercussions for ASEAN, both positive and negative.
He elaborated on this point: If you look at the two global economies, they represent close to 40-45% of the total global GDP. So if the pie shrinks it will affect Asean. He warned that any decline in trade or economic growth in the US and China would have a corresponding impact on ASEAN economies, highlighting the region’s vulnerability to external shocks.
Addressing the issue of foreign direct investment (FDI), Tengku Zafrul acknowledged that there could be some truth temporarily to the idea that geopolitical tensions have led to a redirection of FDI towards ASEAN. He noted that while global FDI has declined, FDI into ASEAN remains positive, suggesting a potential shift in investment patterns.
However, he cautioned against complacency, stating, But to sustain this, we still need global economic growth becuase ultimately, it is a function of demand and supply and when demand is affected, so of course supply will also be affected along with investments. He emphasized that ASEAN’s open economy makes it vulnerable to shifts in global demand and supply chains, requiring proactive measures to maintain competitiveness and attract investment.
Tengku Zafrul concluded by highlighting the delicate balancing act that ASEAN must perform in navigating geopolitical tensions: So again Asean will be put on the spot to make a choice but we of course as a non-aligned movement will continue to be neutral in our position but being neutral means that we must navigate this carefully. This underscores ASEAN’s commitment to neutrality and its need to carefully manage its relationships with major global powers, ensuring its economic interests are protected while maintaining regional stability.
The 31st ASEAN Economic Ministers’ Retreat in Desaru underscored the region’s commitment to addressing global economic uncertainties through enhanced cooperation and strategic initiatives. Malaysia’s proposal of 18 priority economic deliverables reflects a proactive approach to strengthening ASEAN’s economic resilience and ensuring inclusive growth for all member states. As ASEAN navigates a complex geopolitical landscape, unity and careful diplomacy will be crucial in safeguarding its economic interests and promoting regional stability, paving the way for a more prosperous and resilient future.
