Abstract
Two sections follow a very brief description of the region as well as of the genesis of the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC). The first section summarizes the economies of the member nations of the AEC. The second section discusses the integration of markets of the ASEAN Economic Community, leading to the insight that the development of hard infrastructure—bridges, roads, rails and ports as well as digital infrastructure—is as important as the improvement of soft infrastructure to remove impediments to trade, capital and labour. It is in this context that recent initiatives of China are best appreciated. This leads to a discussion of the digital economy in Southeast Asia.
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Notes
- 1.
The Cold War was a standoff between the USA and her allies against the Union of Soviet Socialist Republics (and to some extent China) consisting in a large build-up of nuclear arsenals and geopolitical positioning. This lasted from the end of the Second World War until the fall of the communism in the USSR in 1989. The so-called domino theory that nations in Asia and Europe could sequentially fall under Marxist influence inspired much of the diplomatic and military acts of the USA during this time, bringing them to military involvement in Korea and then Vietnam, and stationing considerable assets in Germany.
- 2.
Many manufacturing processes are carried out by stages in different countries, so that country A adds so much value, country B additional value, and so on. Adding more value within this chain of production contributes more to the gross domestic product of the country and is advantageous.
- 3.
GDP is calculated by summing the value-added within the country. Trade (imports plus exports) is calculated by summing the total value of merchandise and services crossing the border, including the value-added in other countries. Trade is greater than GDP for many countries in Southeast Asia.
- 4.
A greenfield project establishes a new economic activity in the host country, as opposed to a brownfield project that incorporates existing elements by acquisition or leasing.
- 5.
Industry 4.0 refers to automation and data integration in manufacturing, such as the Internet of Things. A digital disruptor is a business, technology or event that changes the basic rules of business through computers or telecommunications.
- 6.
A global value chain is the worldwide sequence of activities required to conceive, develop, produce and market a good or service. For example, various Philippinesbusinesses participate in the global aerospace value chain via the manufacture and assembly of a small number of components and sub-assemblies in the interiors and fight controls systems, as well as some post-sales services such as MRO (maintenance, repair and overhaul).
- 7.
Economic prosperity is linked to the notion of value, which ultimately depends upon the desires of the solvent buyer. The following focuses on the supply side of value to simplify the argument. Value is produced by humans working. Organization, discipline, time and effort all contribute to the amount of value a human can produce, but one other factor is predominant: knowledge. Knowledge takes the form both of the skill of the worker and of the design of the tools which he or she uses to produce value. This is what nineteenth-century Germany and the USA, late nineteenth century and again post-Second World War Japan, then Taiwan, Korea and Singapore did so well, and China is now doing. To do so, they may have strayed over ethical limits in acquiring knowledge from other countries, manipulating property rights to favour local firms, hiring knowledge away from competitors and engaging in industrial espionage.
Once they have climbed the technological ladder, they become masters in foiling the attempts of other nations to acquire knowledge from them. Although this is rational for the firms involved in the short term, it is most unfortunate for the world economy operating on a chain reaction: the more wealth is dispersed, the faster economies can grow.
- 8.
“Southeast Asia is an example of a region that has integrated with several GVCs. Following the investments of many major multinational corporations attracted by the low costs of production, it has become known as a trusted hub for producing not only electronics parts and automobile components, but increasingly knowledge-intensive goods and services.” Quoted at http://www.worldbank.org/en/topic/trade/publication/book-making-global-value-chains-work-for-development. Accessed March 28, 2019.
- 9.
One personal communication to the author was that a Korean semiconductor plant was careful to exclude Vietnamese from any proprietary knowledge.
- 10.
Although even this can be complicated: Indonesia’s Go-Jek is currently in a battle to enter the Philippines where Grab has the ride-hailing market almost to itself. The Land Transportation Franchising and Regulatory Board blocked Go-Jek’s entry bid based on rules requiring 60% Filipino ownership, so Go-Jek has begun to negotiate with Ayala Corp to explore shared ownership in the Philippine venture. Founded in 1834, the Ayala Group is among the largest conglomerates in the Philippines, operating in real estate, financial services, water and telecommunications among other fields.
- 11.
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Macdonald, R. (2019). Conclusion: The ASEAN Economic Community. In: Macdonald, R. (eds) Southeast Asia and the ASEAN Economic Community. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-19722-3_14
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