ASEAN GROWTH TRUMPS CHINA AND INDIA
Diverse trade bloc develops an appetite for success
When the Association of Southeast Asian Nations (ASEAN) was formed in 1967, no one gave this proposed economic community much chance of success. With countries ranging from Singapore’s centrally managed economy to the Philippines’ “rowdy parliamentary system,” it was considered too “politically diverse and ineffectual” to succeed.
Indeed, that was the experience until 2012, prompting observers to say: “If the EU can’t work, then what chance does ASEAN have?” With the ten member nations only accounting for 3% of world GDP and 7% of global trade, they had a point.
But today’s numbers tell a different story. For the past four years ASEAN growth has outstripped that of both China and India. From a 6% GDP growth in recessionary 2012, their combined economy has more than doubled, and has done so without adopting a common currency, or pooling sovereignty.
The ASEAN member states cut trade tariffs to zero and lifted restrictions on investment, while jettisoning their founding principle of consensus which had paralyzed the organization since its formation. Instead they created ‘One Community’ focused on economic success, without a lot of red tape.
Some will say that it was exactly the diversity, and political discrepancies, of these ten nations that forced them to focus on pure economic choices, rather than try to integrate that which cannot. Even today, in terms of ease of doing business, Singapore ranks #1 while the Philippines ranks #80. Similar differences are found when comparing economic freedom and wealth gaps.
While growth in China and India has been more modest since the early 2010s, ASEAN has been the economic success story and a surprising darling of investors – despite all the soothsayers telling us it couldn’t be done.
Warning: Hazardous thinking at work
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