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Taking the Asean trade horse to the water

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With trade-driven Singapore now installed as Asean's chair, there is no better time for both Singaporeans and their regional peers to see how best they can leverage this unique opportunity for their mutual profit.

SINGAPOREANS, it is sometimes said, are more familiar with the Appalachian mountain ranges of America than the Visayas of the Philippines.

Seized by the distant beauty, they often fail to spot how much of it exists in their backyard as well.

Perhaps familiarity breeds contempt, because when it comes to business opportunities, those farther away seem not to be able to take their eyes off the region.

The Australian Foreign Policy White Paper released at the end of last year notes that within the next 15 years, four of the world's five biggest economies in purchasing power parity terms are likely to be in Asia: China, India, Japan and Indonesia. China and India together make up more than 60 per cent of Asia's economic activity.

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Over the next 10 years, a billion more Asians will join the middle class, creating a consumer market larger in number and spending power than the rest of the world combined. Their choices will reshape global markets.

By 2030, the region will produce more than half of the world's economic output and consume more than half of the world's food and 40 per cent of its energy.

By then, more than 600 million additional people will live in the region's cities.

Bang in the middle of this starburst sits Asean, with a combined population that is some 113 times Singapore's size and an economy of about US$2.7 trillion which is expanding steadily.

With trade-driven Singapore now installed as Asean's chair, there is no better time for both Singaporeans and their regional peers to see how best they can leverage this unique opportunity for their mutual profit.

It is not that there has not been much movement in recent years.

Last year, Singapore's merchandise trade with Asean accounted for nearly 26 per cent of its total trade, 11.5 per cent of total services exports and almost a fifth of direct investment abroad.

The pickings will be richest for those that can help others make sense of the growing pool of data, and who can assure consumers and businesses that their data and digital transactions are secure. Ancient civilisations tended to thrive at the junctions of major river systems or along them.

The future hot spots of growth will be at the crossroads and hubs of digital highways.

That makes Asean Singapore's biggest investment destination and third-largest market for services.

The question, of course, is whether more could be done together, and the answer is an unequivocal "yes"!

But this calls for concerted efforts by Asean member states to deepen economic integration, not only in the familiar areas of trade liberalisation, but also to find new areas to grow.

One area is e-commerce.

Amol Gupte, head of Asean for Citigroup, notes an interesting dynamic at play in the combination of e-commerce operations and faster payment networks, such as mobile wallets, across South-east Asia. "A lot of the Asean fabric has similarities," he told me recently.

"Asean e-commerce companies may not be looking to conquer Australia or Japan, but they feel that if you can do well in Indonesia, you might be able to replicate the model in Vietnam.

"Such companies will drive a level of infrastructure alignment that hasn't happened as yet in Asean."

THE PAYOFF

It is an opportunity waiting to be seized, and the reason Singapore has decided on the deepening of regional connectivity as an economic objective for its chairmanship. The goal is to position Asean as the region for increasingly seamless economic activity, especially in the areas of innovation and the digital economy.

Wisely executed, the payoffs for the region could be significant.

By some estimates, the Asean digital economy has the potential to grow to US$200 billion by 2025, with e-commerce alone accounting for US$88 billion.

From proliferating e-payments that will fetch new opportunities for companies in fintech and digital authentication, to the devices, equipment, vehicles, factories, warehouses and headquarters that will be connected digitally through the Internet of Things, new business opportunities will emerge.

The pickings will be richest for those that can help others make sense of the growing pool of data, and who can assure consumers and businesses that their data and digital transactions are secure.

Ancient civilisations tended to thrive at the junctions of major river systems or along them.

The future hot spots of growth will be at the crossroads and hubs of digital highways.

Critical to this enterprise will be the challenges of creating an enabling environment. This is where initiatives such as the Asean Agreement on E-Commerce and Asean Financial Innovation Network among businesses and innovators need to be pushed.

The development of an Asean Digital Integration Framework Scorecard is also on the cards.

It is not as though the traditional sinews of commerce are flagging.

And it needs no saying that even as Asean moves to take advantage of the future economy, there is nothing lost with the legacy architecture that served it well over the decades being strengthened and brought up to date.

A small but potentially significant step for better trade flows was made at the start of the New Year, with the launch of the Asean Single Window. This enables the businesses of participating countries to electronically exchange the so-called Form D, which is Asean's Trade in Goods Agreement's Certificate of Origin.

There are issues with it at the moment and the benefits will be uneven in the initial years.

As trade economist Sanchita Basu Das pointed out in these pages earlier this month, it takes only about six to 10 days for goods to be exported out of Malaysia or Singapore, while some Asean countries take double the time.

Still, there is no question that the single window, once it works smoothly, will accelerate the release of cargo and help businesses everywhere cut transaction costs and time.

Enhanced framework agreements for investments and services are also being planned.

THE RESISTANCE

The challenge is that in these times when the region is enjoying a lift from the cyclical upturn in the global economy, there will be less incentive to break out of old moulds. But it needs no saying that things cannot stay that way forever and the inevitable downcycle will come eventually.

So, even as initiatives to expand the current trade architecture are attempted, it is critical to build an enabling environment for the digital economy in tandem.

Beyond is the wider vision of Asia, with the Asean-driven Regional Comprehensive Economic Partnership, which will aggregate all free trade agreements signed by the 10-member group into a single agreement.

RCEP, which has already missed its end-2015 deadline, is the building block for a wider Free Trade Area of the Asia-Pacific.

This journey will not be an easy one, let there be no doubt about that. Geopolitical rivalries, domestic political considerations and fears of economic dominance stand in the way.

Also, the big-population economies of Asia are all pushing to have more manufacturing done onshore. Time then for even the most faint-hearted businessman to step out of his comfort zone to test the Asian waters, perhaps by expanding into Asean as the first step towards an internationalisation strategy.

At the end of the day, trade ministers can only make it convenient for horses to reach the pond. They cannot be the judge of their levels of thirst.

To drink from it has to be the steed's own decision.

THE STRAITS TIMES

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