Asean can fend off blow from protectionism by boosting integration: Singapore Business Federation

Straits Times

2 hours ago

Sign up now: Get ST's newsletters delivered to your inbox
Singapore Business Federation chief executive Kok Ping Soon said the tools are all there and the opportunity for collective action has never been greater.
SINGAPORE - Asean, the world's fourth-largest economy, does not have to take US President Donald Trump's tariff-induced chaos lying down.
The regional grouping's members can instead close ranks and accelerate progress towards the long-stated goal of economic integration – which would boost intra-regional flow of goods, services and investments and create new jobs.
An Asean that is a more homogenised market can then become a global production base, with strong trade and investment links with other major economies worldwide.
This is the desired response that Asean can make, said Mr Kok Ping Soon, chief executive of the Singapore Business Federation (SBF), the Republic's apex business association with more than 32,000 companies under its fold.
It would not only enable the grouping's members to mitigate any medium-term loss in economic growth, trade and investment potential, but also further strengthen the region's economy.
He said Asean can boost economic integration by removing non-tariff barriers to trade, leveraging its fast-growing digital and green economy, and intensifying its trade and investment engagements with other trading blocs.
'I think the question is whether in the current climate, are we able to do more to strengthen the Asean regional economic integration. The answer must be absolutely yes. If not now, then when? The impetus (now) is even stronger,' Mr Kok told The Straits Times in an interview.
Top stories
Swipe. Select. Stay informed.
Singapore NDR 2025 a rallying cry amid significant challenges facing Singapore, say analysts
Opinion A 'we first' Singapore is the hardest policy for PM Lawrence Wong to deliver
Singapore NDR 2025: The case for growing old at home in super-ageing Singapore
Business Singapore key exports fall worse than expected in July as shipments to US plunge 42.7%
Singapore N(T) students more likely to finish school, do as well in job market as N(A) peers: Study
Singapore Singapore-developed device for diabetics measures long-term average blood sugar levels within 6 mins
World Trump, tech and Texas: What's next for the US?
World Ukraine weighs Trump's offer of security guarantees with caution
Asean is a grouping of diverse economies, with some highly exposed to global trade while others remain mainly dependent on natural resources and labour-intensive industries.
But put together, Asean in 2024 had an estimated gross domestic product (GDP) of US$4.13 trillion (S$5.31 trillion), accounting for 8 per cent of global trade, 5 per cent of manufacturing value-added, and in 2023 attracted 17 per cent of foreign direct investment, according to the Economic Research Institute for Asean and East Asia.
The bloc has become China's top trading partner, Japan's second largest, the European Union's and South Korea's third largest, and the fourth biggest for the United States.
Asean's diversity is part of its appeal, as it offers investment opportunities at various stages of the value chain and allows trade in a wide assortment of goods and services . But when it comes to intra-regional trade, the disparity between the economies becomes a source of inertia.
Trade within Asean has been stagnant in the past decade at about 22 per cent of the region's total. That compares with 62 per cent for the EU and about 40 per cent for the United States-Mexico-Canada Agreement (USMCA) members.
And the reason for this is that while the bloc has over the years successfully eliminated most levies that are paid at the border, non-tariff barriers remain a hindrance.
In 2019, the European Union-Asean Business Council estimated that there are about 6,000 non-tariff measures across the region – with many being potential barriers to trade. And this number continues to grow.
Hinrich Foundation, a Singapore-based think-tank , found that Asean economies between 2015 and 2025 have put in place 9,873 non-tariff measures that have undercut the regional value chains and created obstacles to regional trade in a host of products.
Mr Kok noted that licensing bottlenecks, inconsistent standards and customs procedures that require excessive documentation continue to weigh down intra-regional trade.
He said pacts such as the Asean Trade in Goods Agreement – which is part of the Asean Economic Community Blueprint 2025 – can help, but not before they are rectified by member states.
'We really need to make a greater effort to remove some of these non-tariff barriers,' Mr Kok said.
The same is true for the Asean Digital Economy Framework Agreement (DEFA), which holds the key to unlock the region's true potential in trading digital services.
'A lot of attention is focused on trade in goods, because of the US tariffs,' he said.
'But it is the trade in services that is more exciting and multiplefold and for that, what businesses are looking for is the free flow of data, digital payment and digital identity.'
Asean has already risen to become the world's third-largest digital services exporter, behind only the US and the UK. The World Economic Forum estimates that Asean's digital economy is on track to hit US$600 billion in gross merchandise value by 2030.
Mr Kok said DEFA can help Asean economies claim an even larger share of global digital services exports and reinvigorate the region's start-up ecosystems.
The region is already home to some of the fastest-growing unicorns, including Singapore's Grab, Sea Group and Lazada, Indonesia's GoTo, Bukalapak and Traveloka, Thailand's Ascend Money, Vietnam's VNG Corp's messaging app Zalo, and Malaysia's car marketplace Carsome.
But to boost the competitive advantage of existing and upcoming unicorns and digital services exporters, Asean will have to address the regulatory fragmentation and non-tariff barriers, and push for interoperability of digital identities.
Mr Kok said companies are looking for consistent standards for cross-border data flow, and digital payments as well.
In 1998, the World Trade Organisation declared a moratorium on customs duties related to e-commerce transactions. That moratorium is set to expire in 2026.
Trade experts fear that expiry of the moratorium would send a wave of protectionist measures worldwide, undermining Asean's digital value chains by increasing the costs of doing business. Hence, a speedy conclusion and ratification of DEFA by Asean members becomes even more critical.
Related to digitalisation is also the transition to a green economy, which includes carbon trading and the Asean power grid for renewable energy transmission.
Mr Kok said with the world economy fragmenting amid geopolitical and trade conflicts, the urgency and opportunity for collective action has never been greater.
'There is opportunity... but whether we can live up to it is a big question,' he said.