When I was EU Trade Commissioner I used to tell ASEAN trade Ministers that the challenge with European businesses and investors was to convince them to “stay on the plane for another hour”. Although this was a very ‘euro-centric’ way of thinking, they knew exactly what I meant. Then, as now, the opportunities of China dominated the way many Europeans thought about wider Asia.
One of my big aims as EU Trade Commissioner was to change the way the EU devoted resources to Asia, and to ASEAN inside Asia. After 1989, when the Chinese economy began to open to the outside world, policymakers and politicians across Europe strived to secure access to the country’s huge and previously untapped market. But in a Europe where China loomed large, South East Asia often took something of a backseat. In the 1990s and 2000s, the emergence of ASEAN was seen as a footnote to the story of the rise of China.
There were other reasons for the lack of European focus on this region. China was a big single market. ASEAN, with its fragmented, varied, and relatively small markets, was too difficult to understand. There was a sense that efforts by its members to promote regional integration would be slow and incremental. Wasn't that 'the ASEAN way'?
In recent years, things have begun to change. China is and will remain of vital importance. The recent tumult in the Chinese stock market has been felt around the world. China is a weather maker in the global economy. But amongst European businesses there is often a sense of concern that for all the talk of opening up, China’s economy still remains a difficult place for foreign businesses to operate.
The contrast with Southeast Asia is often highly favourable. The election of President Jokowi in Indonesia last year attracted an unprecedented level of positive international interest not just in Indonesia but in the entire region. Singapore remains a safe haven for global financial services and other multinational firms. Vietnam has worked hard to open up and liberalise its market. Consumer economies are thriving in Malaysia and the Philippines. Most importantly, as the region prepares for the launch of the new ASEAN Economic Community later this year, the potential of the regional market is again coming into focus.
The fundamentals of the ASEAN market are strong: 600 million consumers who have higher spending power than their peers in India or China. A growing middle class driving demand not just for consumer goods but for services like banking and insurance. Many of the governments in the region have rightly focused their attention on improving the ease of doing business, cutting red tape and encouraging investment in infrastructure and logistics. The debate over palm oil and other forest commodities in recent years has both revealed and helped to drive a growing awareness about sustainability issues, which is making some of the region’s companies into global leaders in this area.
The EU’s announcement in April that it will seek to restart negotiations on an EU-ASEAN FTA is clear acknowledgement of the region’s potential. Making the most of this fresh engagement and existing momentum will mean trumping some of the things that have sometimes held ASEAN back in the past, especially defensiveness on regional market building and foreign trade and an incremental approach to integration. But the incentives to ‘stay on the plane’ an extra hour are now increasingly clear. Businesses and policymakers have to rise to the challenge.
Peter Mandelson is the Chairman of Global Counsel.