Member states of ASEAN (Source: Wikipedia Commons) Hanoi (VNA) - Membercountries of ASEAN need to give priority to promoting ASEAN Economic Community 2025(AEC 2025) and concluding Regional Comprehensive Economic Partnership (RCEP)negotiations to deal with economic headwinds in 2019, according to a recent articleon the website https://www.eurasiareview.com.
The article said 2019 will likelysee Southeast Asian economies face major economic headwinds namely the US-Chinatrade tensions and the interest rate increases by the US Federal Reserve (Fed).
Consequently, the world in 2019may witness more rounds of tariff escalations or trade-restricting measuresbeing rolled out by Washington and Beijing. Regional economies will have tobrace themselves again for future impacts.
On the financial front, on December19, 2018, Fed raised the interest rate from 2.25 to 2.50 points and forecasttwo increases in 2019, it said, adding that this could trigger capital pulloutsfrom Southeast Asian countries as investors move funds to seek higher yields inthe US.
If not well-managed, such capitaloutflows may instigate financial instability and crisis in regional economies,it stressed.
While it is unlikely to avoid the effects of such headwinds on regionaleconomies, ASEAN member states in 2019 can nevertheless counter such impactsvia regional initiatives, namely AEC 2025, ASEAN-Hong Kong Free Trade andInvestment Agreements (AHKFTAs), RCEP, and Chiang Mai InitiativeMultilateralization (CMIM).
ASEAN policymakers shouldprioritise the complete implementation of AEC 2025 - the regional economicintegration project promoted by ten ASEAN member states to achieve fiveobjectives.
Advancing AEC 2025 will enablebusinesses to better tap on the integrated market of 630 million people,rendering regional economies more resilient amidst the incoming headwinds, thearticle said.
It said ASEAN member nations’ governments should ratify AHKFTIAs signed inNovember 2017 so that these treaties can enter into force in early 2019 asexpected.
The agreements will help enhance cross-border flows of goods, services, andinvestment between ASEAN and Hong Kong economies.
They not only allow firms toenjoy greater access to goods and services markets and better investmentprotection, but also enable ASEAN nations to further tighten trade andinvestment ties with China and recuperate from the damage that futureWashington-Beijing trade spats will inflict on them.
Moreover, ASEAN authoritiesshould concentrate on wrapping up the talks of RCEP - a free trade agreementamong 16 economies.
If concluded, this bloc will encompass the market of 3.6 billion people andcontribute a third of the global GDP. It will cover 29 percent of the globaltrade and 26 percent of the world’s foreign direct investment flows.
Concluding the negotiation willalso enable RCEP economies to diversify and cushion the negative consequencesof the future US-China trade tensions.
ASEAN member nations should workcloser with China, Japan, and the Republic of Korea to advance the CMIM, aregional financial safety net under the ASEAN 3 financial cooperation process.
Launched in 2010, the scheme provides financial support via a network ofcurrency swaps to help ASEAN 3 nations weather their balance-of-paymentsdifficulties because Fed’s future rate hikes could cause financial instabilityand capital flights in certain regional economies.
Admittedly, the above initiatives face their own challenges. Thus, individualASEAN countries must sort out how to better coordinate work among the involvedauthorities.-VNA
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