Way forward for trade integration in addressing poverty in ASEAN

2017 marks the 50th anniversary of the Association of Southeast Asian Nations (ASEAN), established in 1967, to maintain peace and stability in the region. Over the past decades, challenges of a different nature have emerged; these include issues of food and water securities and potential impacts of climate change.

One of these challenges is economic insecurity, which exists when people do not have ‘an assured basic income – usually from productive and remunerative work or in the last resort from some publicly financed safety net’, according to the United Nations’ 1994 Human Development Report. This is most directly measured through poverty, wherein because of insufficient income, people have limited access to food, shelter, and other amenities. Other important indicators are the prevalence of temporary and informal employment, unemployment, and low wages, albeit these are only seen as intermediate factors affecting poverty. While the reasons for poverty may vary, one of the ways of addressing poverty is by providing individuals with opportunities to improve their incomes, whether through jobs or business opportunities.


Trade integration, economic development and poverty reduction in ASEAN

One of ASEAN’s approaches to addressing economic insecurity has been regional trade integration. Trade integration involves removing trade barriers such as tariffs as well as non-tariff barriers (NTBs), which include customs surcharges and delays in clearing products and product-specific technical specifications. Once barriers are removed, countries can specialize in producing commodities where they have a comparative advantage leading to a greater production in total. This also allows domestic enterprises to access cheaper alternative sources for factors of production, such as raw materials, within the region. As domestic enterprises grow, more jobs and business opportunities are created that can help uplift people out of poverty.

Since 1992, when ASEAN sought to create an ASEAN Free Trade Area (AFTA), 96% of trade and tariff barriers have been removed, while 80% of ASEAN’s targets in harmonizing standards and regulations, and 70% of targets in addressing other NTBs, have been achieved. Increased trade has then contributed to average GDP per capita growth in the region from 1990 to 2010, with the less developed states of Vietnam, Myanmar, Cambodia and Laos experiencing the fastest growth.

However, trade by itself does not automatically lead to poverty reduction. While the shares of poverty have gone down across all ASEAN countries, some countries such as Laos, Myanmar and the Philippines still have more than a fifth of populations living below national poverty lines. This calls for additional state action to reach groups that are excluded from reaping the benefits of trade. Courtesy of Flickr account of Phalinn Ooi and used under a creative commons license.


Integration amid a rapidly changing global environment

The imperative of making trade inclusive is essential, given the rapidly evolving global environment where there is a growing scepticism against having open and integrated economies.

Such growing scepticism can spread to ASEAN countries, and citizens may seek to push their governments to emulate insular economic policies practiced by some economies today. A targeted approach, focusing on specific groups and addressing barriers keeping them from participating in the market, is needed. These include the poor who don’t have adequate education to obtain jobs; rural inhabitants unable to bring their produce to market because of scant transport infrastructure; and women, limited in their access to education, finance and asset ownership in some societies.


Partnering for Change, Engaging the World

ASEAN’s theme for this year is ‘Partnering for Change, Engaging the World’. ASEAN’s Chair for 2017, the Philippines, has pushed for a list of priorities that can boost economic security through trade. One of these is to enable micro, small and medium enterprises (MSMEs) to participate in the digital economy. This entails encouraging governments to provide MSMEs with much needed infrastructure and internet platforms for reaching overseas markets. MSMEs form the backbone of the regional economy, employing majority of workers across ASEAN countries.

Another strategic priority is to increase trade, allowing ASEAN’s MSMEs to reach more markets. The Regional Comprehensive Economic Partnership (RCEP) offers an encompassing economic partnership that can expand trade beyond the ASEAN region. In fact, a statement on the RCEP negotiations, and potentially their conclusion, has been envisioned by this year’s chair.

Over the years, there has been an increasing importance of trade and greater integration for ASEAN economies. Now, more than ever, there is a pressing need to ensure benefits of this economic growth are accessible to all.