EC SAFIRE Scenarios for Global Regions: ASEAN

EC SAFIRE Scenarios for Global Regions: ASEAN

In a continuation of our series based on a report to the European Commission by SAMI and a consortium of partners, IFOK, Cadmus, and Teknologi Radet, to develop a system for using foresight to develop EU R&I policy, it is the turn of the ASEAN region. This is the next in our series of ten blogs looking at scenarios for each of the regions covered by the study.  The ten regions are:

  • China;
  • Japan, South Korea & Taiwan;
  • ASEAN;
  • India & its Neighbours;
  • Australia & New Zealand;
  • Russia & Central Asia;
  • The Middle East & North Africa;
  • Sub-Saharan Africa;
  • Central & South America; and
  • United States, Canada & Mexico.

The original Report is available via the link here, and the original scenario reports for each Region can be found within Chapter 3 of the report.

The Report was published in autumn 2021, but we continue to monitor developments and trends in each of the ten Regions.  So these blogs, rather than simply recycling the content of the Report, will look at the trends that might influence how each Region might move across the scenario “board” over the next 20 years.

Introducing the ASEAN region

The Association of Southeast Asian Nations was founded in 1967. Its main objectives are economic growth and, through that, social progress; cultural development; and to promote regional peace and stability based on the rule of law and the principle of United Nations charter. Its 10 member countries are: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

The difficulty with exploring foresight in this region is the disparity between the different countries.  They differ in many ways from size, population numbers, levels of democracy, ethnicity to levels of economic development. In ASEAN, decisions are reached by consensus.  For the purposes of the report we focused on Singapore, Malaysia, Indonesia, Philippines, Thailand, Vietnam and Cambodia.

What Might Drive Change in the ASEAN region?

The EU/SAFIRE Report envisaged that by 2040, ASEAN would be a middleweight global power with its widely ranging members from small states such as Brunei, Laos and Singapore to the larger and more populous Malaysia and Indonesia.  Its influence would come from Research and Development on the part of Singapore and latterly, Malaysia and Vietnam, and its growing markets, especially Indonesia.  While ASEAN would be keen to develop, it is likely to be hampered by low investment and national differences between its member states, as well as its geographic spread.  The region would still be divided and greatly influenced by its neighbour, China.

Economic

The Covid-19 pandemic has damaged the economies of the ASEAN members to varying degrees.  Initially, countries like Singapore and Vietnam handled the pandemic well and their economies did not suffer.  However, with different variants (and waves of the pandemic), this advantage has disappeared.  Countries that relied on tourism for much of their GDP have been hit the hardest. Up until the pandemic, tourism had been 13% of the Region’s GDP (compared with the sector’s value of 10% of world GDP).

ASEAN countries had varying levels of vaccination, from Singapore at 87% to Indonesia at 57%. The vaccinations that were available to them were not necessarily the most effective formulations, leading to successive waves of infection, hospitalisation and deaths.

This affects not only people’s ability to work and earn money, but it also affects their economic choices.  Many people in the region do not have health insurance or sickness pay thus must rely on support from family and friends.  When disasters hit – either natural disasters or health disasters – their economic choices diminish.

GDP per capita fell between 2019 and 2020, but has risen slowly since, with Singapore (and Brunei) the outlier as usual.  There has been relatively little growth in the rest of the group.  ASEAN is a big market with a total population 660 million in 2020.  It has (or had) a growing middle class.  As a region, it is likely to be the engine for economic growth in Asia, but it is currently struggling.

The region has a growing and mostly young middle class, which means a growing local marketplace.  The supply chain disruption caused by Covid-19 has given it an opportunity as countries scrambled to minimise their supply chain dependence on China.  The biggest winners have been Singapore and Vietnam who had already developed significant expertise in the areas of IT, AI and Pharmaceuticals.

Singapore has a high standard of living and a mature economy, with its investment in R&D and education. Other countries – Malaysia, Thailand, Indonesia, Philippines – are following with investment in education and R & D; it is a region that should not be ignored.

Environment and Climate

The region grapples not just with climate change but also being on the “ring of fire”, many countries contain some of the most active volcanoes on Earth. They are thus subject to volcanos, earthquake and tsunamis.  It faces risks of rising sea levels in delta areas and islands and increasing intensity and frequency of typhoons and natural disasters. Parts of Jakarta were underwater in 2020, hence Indonesia’s decision to move its capital from Java to Kalimantan.

As Deltas become submerged, not only is land lost to cultivation, but water tables may become saline.  For instance, the Mekong Delta is sinking, but as the number of dams upriver increase, less water flows down, effecting not just agriculture, but also fish stocks in countries where people get much of their protein from fish.  The Mekong affects 5 of the 10 ASEAN countries.

As people’s incomes improve, they have more choices regarding where they work and live and how they respond to pollution.  They begin to make their voices heard where it is possible to do so.  It is, however, not necessarily easy for middle-income (and a few low-income) countries to respond quickly.  Coal – the biggest carbon emitter of all fossil fuels – remains the cheapest source for electricity generation across the region. Environmental issues may be largely ignored as countries struggle for economic stability and growth.

Politics

The region has a range of governance from the ‘more-or-less’ democratic (Singapore, Malaysia, Indonesia, Philippines) to limited/controlled democracy (Thailand) to autocratic/one party states (Cambodia, Vietnam).

Much of the region is distrustful of China to varying degrees, especially around the issues of the South China Sea.  While there is disagreement between member states about some things, this seems to be something about which almost all members agree.  Some countries (for instance, Malaysia) have had issues with investments via the Chinese Belt and Road initiative which has increased the distrust.  Singapore frequently operates as a bridge between the region and China.  Cambodia has taken advantage of the Belt and Road initiative, with joint investment in Mekong hydro and leisure/tourism from China.  However, China’s stance over the South China Sea is causing problems with Vietnam, Indonesia, Philippines, Malaysia and Thailand.

Conclusion

Turning finally to the question of where ASEAN may move on the Scenario Board, we began with ASEAN in Oak near the border with Willow.  In the past two years, and largely due to the Covid-19 pandemic, the region has become more authoritarian and fragmented.  It has suffered from the absence of tourism and falling remittances.  As incomes have dried up, people have less choice.  This has combined to move the region further into Oak.  For the region to move out of Oak, GDP would need to rise, creating larger markets and governments would need to be more willing to invest in public goods such as education, research and development to support innovation and social care.

Disruptors

  • What will China do in the South China sea and how will ASEAN members react? How will ASEAN react?
  • How will the AUKUS relationship affect the region?
  • Will tourism return to 2019 levels and if so, when?
  • How long will it take until Covid is merely endemic?
  • How quickly will member states decarbonise and address pollution?
  • How will the relationship between China and Taiwan play out?
  • How will China’s relationship with the different member states play out?

Written by Patricia Lustig, SAMI Principal 

The views expressed are those of the author(s) and not necessarily of SAMI Consulting.

Future-prepared firms outperform the average by 33% higher profitability and 200% higher growth. SAMI Consulting brings 30 years of experience delivering foresight, futures and scenario planning – enabling companies and organisations make “robust decisions in uncertain times”. Find out more www.samiconsulting.co.uk.

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