ASEAN-Australia: The Road to Recovery

By Penny Burtt & Chen Chen Lee
Group CEO & Adviser (Diplomacy), Asialink

To mark ASEAN Day on 8 August 2020, an interactive webinar on “ASEAN-Australia: The Road to Recovery” was organised by the ASEAN Committee in Canberra (ACC), the ASEAN-Australia Council (AAC) and Asialink. Against the backdrop of the global pandemic crisis, speakers discussed the opportunities for enhanced economic collaboration, especially how the digital economy and resilient supply chain and logistics are clear growth areas driving post-COVID recovery for ASEAN and Australian businesses.

The event featured Australian Minister for Trade, Tourism and Investment Senator The Hon Simon Birmingham and ASEAN Secretary-General Dato’ Lim Jock Hoi, Vice Minister for Foreign Affairs of the Republic of Indonesia H.E. Mahendra Siregar, Chairman of the ASEAN Business Advisory Council (Malaysia) Tan Sri Dr Munir Majid, Chair of the Australia-ASEAN Council Board and Australia Post CEO Ms Christine Holgate, and Deputy Chair of the National COVID-19 Coordination Commission (Advisory Board) Mr David Thodey AO.

Recognising ASEAN’s critical role in coordinating responses to the COVID-19 pandemic across Southeast Asia, Minister Birmingham flagged Australia’s $23 million package to support ASEAN’s health security and economic recovery efforts. Australia also had pledged $352 million to accelerate vaccine development and treatments for COVID-19, which should be made available to all countries. The coronavirus had aggravated many of the existing challenges facing the region, further straining established rules and institutions. The increasingly competitive dynamic between the United States and China was impacting global trade and investment, international institutions, and global supply chains. Minister Birmingham cautioned against the abandonment of economic openness, citing the significant dividends that it has brought to both Australia and ASEAN.

As Indo-Pacific countries look for new sources of growth, there is a significant opportunity between Australia and ASEAN which, as a bloc, is Australia’s second largest trading partner. Australia offers ASEAN high-quality education, healthcare, infrastructure, and a pool of entrepreneurial talent. Digital trade has emerged as a bright spot in a socially-distanced world and Australia is already collaborating with several ASEAN members in this space. The ASEAN-Australia Digital Trade Standards Cooperation Initiative was a pioneering regional project to set internationally-accepted standards to support such growth.

Secretary-General Lim underlined the imperative for ASEAN and Australia to strengthen their partnership given the pandemic. ASEAN responded early and swiftly to the pandemic, in tandem with partners like Australia. The Hanoi Plan of Action demonstrated ASEAN’s commitment to keep markets open and ensure that trade flowed, especially for essential products. COVID-19 had presented an opportunity for ASEAN to re-energise its integration and community development efforts, and strengthen cooperation with partners in emerging areas such as digitalisation and sustainability. The review of the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) would focus on a few key elements, such as e-commerce and competition policy. This was timely given ASEAN’s digital transformation agenda and existing cooperation with Australia on digital standards and smart cities. Digitalisation was a key driver for COVID-19 recovery, but this growth needed to be inclusive.

Road to Recovery panel discussion
The Road to Recovery panel discussion. Image credit: Asialink.

The panel discussion recognised the acceleration of underlying trends in the region as a result of the pandemic,including geopolitical tensions. More than ever, ASEAN needed the support of partners like Australia to uphold the rules-based order and the principles reflected in the ASEAN Outlook on the Indo-Pacific. The Regional Comprehensive Economic Partnership (RCEP) was also an embodiment of those principles in the regional economic architecture and would contribute greatly to economic recovery. There was thus great urgency for RCEP to be signed in 2020.

The pandemic had also revealed the fragility of global and regional supply chains, creating pressures for near-shoring or re-shoring in some economies. ASEAN has witnessed shifts in global value chains as a result of the pandemic. Diversification of market sources was growing, and recent months had seen increased intra-ASEAN trade and collaboration among companies established within the ASEAN-based value chain. The new global value chain would be digitalised from end to end, as the pandemic compelled ASEAN consumers and businesses to adapt quickly to online solutions. Governments and the private sector had already been working to promote the necessary infrastructure, digital education, digital literacy, and online access. While there was support for open borders and trade, governments were now also cognisant of the need to ensure sovereign capability and a degree of strategic on-shoring capabilities, even as economies continue with digital integration in supply chains.

The digital economy is ultimately about the technological enablement of things that people already do, including communications, buying and selling of products and services, logistics, and financial services. COVID-19 accelerated the use of technology for both government and business and created new opportunities such as telehealth. Many small Australian businesses had turned to e-commerce during the lockdown period, with 259,000 SMEs moving online, adding $2.4 billion in revenue during the first half of 2020. E-commerce offered similar opportunities for Australian businesses in Southeast Asia, which was already a highly digitally-savvy market.

Despite the opportunities offered by the digital economy, panellists noted the adverse impact of the pandemic onmicro, small and medium-sized enterprises (MSMEs), many of whom were forced to digitalise quickly but struggled to deal with the crash on both the supply and demand side of economies. The pandemic had almost “broken the backbone” of the MSME sector in ASEAN. It was important to support the digital capabilities and pivoting of MSMEs—the largest employers in most economies—to drive economic recovery before ongoing government stimulus ends. COVID response packages providing significant new funds for upskilling workers were a good example of support to this sector. Australian companies were well-placed to assist ASEAN through capability building and by sharing access to their e-commerce and digital eco-systems.

Given the enduring economic fallout from the pandemic, countries need to find ways to start using technologies such as AI, IOT, blockchain and advanced manufacturing to drive productivity and reach markets faster and better. Technology can also help with the revival of the tourism, manufacturing and transportation sectors, which have been hit hardest by the pandemic. The free flow of data would be important for the regional digital economy, underpinning trade in goods and services. A clear set of rules and approaches regarding data was critical, and agreements like the Australia-Singapore Digital Economy Agreement and the ASEAN-Australia Digital Trade Standards Cooperation Initiative could help set internationally accepted standards on cross border data flows, cyber-security, personal privacy, and the use of artificial intelligence. Facilitation of logistics flows across borders, including digitising trade documentation and harmonisation of standards, will also be critical in reaping the full benefits of a digital economy.

Asialink Business summarised key takeaways from the discussion: First, the private sector has an important role to play in supporting and collaborating with governments to develop economic recovery roadmaps across the region. Second, both Australia and ASEAN remained committed to open trade and economic integration. With significant untapped potential in e-commerce and the digital economy, strengthening supply chains and facilitating cross-border movement of goods and services has to be a priority. Third, ASEAN and Australia have an enduring friendship and a convergence of economic and security interests. The continued investment in greater people to people engagement is key to maintaining that understanding and trust which will drive future collaboration.