MALAYSIA will assume the Asean chairmanship in 2025, 10 years after it previously held the role.
In the decade since, Asean’s combined economy has grown from the 15th to the fifth largest globally, with its total share of global gross domestic product (GDP) rising from 1% to 3.6%.
It’s time to realise the age of Asean.
The stage is set for Malaysia to guide the agenda, by steering a course to strengthen regional cooperation in a changing global landscape.
As we look to that future, we see three key themes that Malaysia can champion to inform the direction of regional success in the decades ahead.
At the Age of Asean event on Aug 6, co-hosted by the Ministry of Investment, Trade and Industry (Miti), Asean Business Advisory Council Malaysia and Boston Consulting Group (BCG), representatives from both public and private sectors deliberated on these themes and developed meaningful ideas about how Malaysia can help ensure Asean continues to collectively thrive.
Theme 1: Growing Asean as a consumer base
Economic growth projections for Asean are encouraging, with nine out of 10 Asean member states forecast to achieve at least upper-middle income by 2045.
Asean’s potential as a leading consumer market is significant – with projections that the emerging regional middle class will reach 485 million by 2030, accounting for approximately 70% of the total regional population.
While this indicates robust economic growth, most Asean member states today face high income inequality.
Therefore, we cannot take the emergence of a robust Asean middle-class society as a given.
If this does come to fruition, Asean’s middle class could compensate for ageing societies in developed economies such as the United States and Europe, and equip the Asean bloc with greater global bargaining power.
This will require Asean policymakers to shift their approach from export-oriented growth to consumption-led growth, and to position equitable growth as a key regional priority.
In striving for equitable growth, it is imperative that efforts are made to enable both individuals and micro, small and medium sized enterprises (MSMEs).
One key priority will be to enhance financial inclusion for MSMEs by extending interoperability of payment systems across Asean for cross-border trade transactions.
Another focus should be improving individuals’ access to quality education, leveraging digital schools to empower them to achieve a better life.
Theme 2: Building an Asean-wide supply chain
Asean member states stand to benefit significantly from enhanced Asean-wide supply chains.
This will allow member states to leverage each other’s existing and natural advantages to complement regional capabilities and minimise the risk of a race to the bottom.
However, Asean’s intra-regional trade is currently relatively low when compared against the European Union (EU) benchmarks – with intra-Asean trade just 28% of trade volume in 2022, compared to 58% intra-regional trade in the EU.
A shift in mindset is required so Asean can enhance economic growth through regional trade, reinforcing existing supply chains and collaborating in a “race to the top”.
While promoting intra-Asean collaboration to establish an Asean-wide supply chain is key, we must also recognise that this cannot come at the cost of competition.
The focus should be moving towards a level playing field across Asean, where the business landscape minimises intra-Asean barriers and provides an efficient ecosystem for all.
Establishing a common supply chain taxonomy and harmonising standards in key industries, for example, will make it easier for Asean member states to collaborate.
On a similar note, enabling easier movement of talent between member states will help individual states to tap into Asean’s significant collective talent pool.
For example, leveraging leading technical talent from Singapore to complement Malaysia’s established automobile industry could provide a pathway to unlock regional value in the electric vehicle (EV) segment.
Theme 3: Establishing Asean as a common market
Individually, Asean member states are projected to enjoy strong growth in the coming years.
Only by aggregating that size, however, can we wield enough influence from an economic perspective to negotiate at the same level with larger, more developed markets.
The World Economic Forum’s projections indicate that Asean’s combined GDP is poised to reach an estimated US$4.5tril by the year 2030, propelling Asean as the world’s fourth-largest economy.
The substantial aggregated value showcases Asean’s increasing influence on the global stage and serves as a powerful platform for trade negotiations.
Minimising intra-Asean trade barriers and deepening interconnectivity will allow Asean to operate as a cohesive bloc.
This provides a powerful platform to gain favourable terms in agreements with international partners and opens the door to strategic collaborations with global partners.
Focusing on interoperability will be essential to facilitate further intra-Asean collaboration, as well as collaboration with global partners.
This is illustrated by the wider need to cooperate on the pressing demands of addressing climate change both regionally and globally.
On energy transition, interoperable carbon markets with harmonised standards and reporting will help Asean to catalyse individual member states’ carbon market efforts and collectively tap into global liquidity.
On energy security, interoperable energy systems are needed to realise the much-discussed potential of the Asean grid.
Malaysia’s time to shift the dial
Asean has witnessed impressive and sustained growth over the decades since it was founded, and while the challenges for the next stage of this journey are complex, the full potential which Asean can realise is clear.
Malaysia plays a critical role to help realise the Age of Asean as Asean Chairman in 2025.
It is imperative that Malaysia continues its track record of diplomatic and effective Asean leadership demonstrated in its previous role as Asean chair in 2006 and 2015.
The agenda we set must ensure that Asean is set up for success by carefully navigating the emerging headwinds towards one that is anchored on achieving a common market, stronger regional supply chains and more equitable growth.
In addition, Malaysia will be the first in line to drive the upcoming Asean Economic Community 2025-2045 Strategic Plan.
Collaboration across all levels of the region will be the catalyst to unleash a genuine Age of Asean. That means between governments at the top Asean level selectively collaborating on key strategic topics for the benefit of all.
It also means collaboration between the public and private sectors to realise the foundations to the next stage of growth.
The public sector can benefit from the private sector’s resources in finance, knowledge and networks.
In turn, the Malaysian private sector must step up and contribute towards realising the Age of Asean.
Finally, it will require the commitment of Asean’s people – to believe in this region as a collective success story, to commit to and consume regional goods, and to provide the energy to realise our shared potential.
Nurlin Mohd Salleh is BCG Malaysia head and Yung Shen Ow is principal of Boston Consulting Group (BCG).
