By Ms Anita Prakash, Senior Policy Advisor for International Economic Cooperation

ASEAN and the Indo-Pacific Architecture 

The evolving economic architecture in the Indo-Pacific rests squarely on the post-war construct of the Asia-Pacific, which has been in existence for six decades but is undergoing changes in the established patterns of economic integration and supply chain linkages. There are without doubt both opportunities and challenges in the new policy alignments, although with different levels of willingness among governments – both in Asia and outside Asia – to materialise a newer construct of trade and economic cooperation.

The raison d'être of building a new Indo-Pacific construct lies in the re-evaluation of the existing trade and investment linkages – in Asia, between Asia and the Pacific, Asia and Europe, and Asia and Africa – and in the re-calibration of these linkages, along with technology cooperation activities, to reflect the emergent economic and strategic alignments among countries and regions.

From Asia-Pacific to Indo-Pacific

Just like Asia-Pacific, Indo-Pacific is more than a geographical understanding – a concept that lacks geographical continuity but professes cooperation over trade, investment, technology and infrastructure, and institutional. ASEAN has helped shape the conception of our region – the more familiar ASEAN and East Asia – which is increasingly seen as the global centre of manufacturing, and consumption of goods and services.

ASEAN has played an important role in the early history of institutional cooperation in this region. ASEAN and the three North Asian economies – China, Japan, and Korea –institutionalised the ASEAN+3 grouping in 1999 at the third ASEAN+3 Summit in Manila. The East Asia Summit (EAS) – which includes the original ASEAN+3 and India, Australia, and New Zealand (later expanded in 2010 to include the United States and the Russian Federation) – was convened in 2005 within the ASEAN Summit process.

ASEAN has been central to all economic and strategic cooperation initiatives by optimising the ASEAN ministerial and leaders’ meetings with ASEAN Dialogue Partners. The Regional Comprehensive Economic Partnership (RCEP), initiated in 2012 and finalized in 2019, was steered by ASEAN.

How can ASEAN now ensure the emerging economic architecture in the Indo-Pacific is beneficial to all stakeholders and ‘builds back better’ over the Asia-Pacific? A prolonged peace dividend, increased global competitiveness, and exemplary economic cooperation such as the RCEP, have not been able to prevent ASEAN and East Asia sliding into a gradual conflation of economic and strategic interests.

In 2018, then Japan Prime Minister Shinzo Abe’s speech at the United Nations General Assembly brought the focus onto economic linkages and cooperation in this region, albeit aligned with strategic interests. He emphasised that a ‘free and open Indo-Pacific’ would be the platform for all economic cooperation and connectivity in the region, between Asia and Africa, and between Asia and Europe. He separately revived the Quadrilateral Security Dialogue, commonly known as the Quad, bringing in the US as a major economic partner in the region – underplaying the security partnerships of the US and actively engaging with Australia and India, with ASEAN playing an important link in between, although not at the (Quad) table.

ASEAN lost no time in bringing out the ASEAN Outlook on the Indo-Pacific at the 34th ASEAN Summit in Bangkok, Thailand in June 2019. It recognises ASEAN’s centrality in the new architecture of the Indo-Pacific and was endorsed by the EAS in the same year. ASEAN’s centrality in the Indo-Pacific requires greater examination, given that the Indo-Pacific architecture is a balancing act of economic and strategic interests in the region, with the emphasis on consensus, inclusiveness, governance, transparency, and sustainable growth.

This architecture also embeds bilateral, triangular, and plurilateral initiatives for establishing infrastructure for new supply chains, for the digital economy, and for goods of the future.

In contradistinction to the ASEAN led processes, the Indo-Pacific platform is emerging as an economic construct along the Indian Ocean, in which several alternative plans and groups of countries are working on their mutual relations and combined strengths. The new plans aim to create new or alternative supply chains or strengthen existing ones. This is in order to address changing political and economic needs in Asia, incorporate the opportunities arising from the digital economy and Industry 4.0, expand the location of the global value chains (GVCs) and new markets, ensure inclusive growth, bridge the fault lines in supply chains exposed during the pandemic, and accommodate partners’ interests from within and outside Asia.

The Indo-Pacific Economic Framework for Prosperity (IPEF) negotiations among 14 countries presently has four pillars: fair and resilient trade; supply chain resilience; infrastructure, clean energy, and decarbonization; and tax and anti-corruption. It addresses in part the changing economic and political needs of countries. The presence of the US as the largest economic and strategic partner in the Indo-Pacific is meant to be a guarantor of these objectives and consensus-based changes in the region. Whether these contours will pass the test of time will greatly depend upon the support and active participation of ASEAN in new supply chains, infrastructure, and development connectivity – and in the rules governing this architecture.

Indo-Pacific is a well-established term in discussions on international security in venues such as the ASEAN Regional Forum and its Council for Security Cooperation in the Asia Pacific. A school of thought regards the current use of Indo-Pacific as a rather transparent effort to create a forum for the promotion of leadership in Asia, excluding China. When evaluated in the context of trade and investment and robust supply chains in ASEAN and East Asia, and between Asia and the EU and the US, our research disproves such claims. In a real sense, the Indo-Pacific is the quest for a more inclusive and rules-oriented trade and economic cooperation where places of production and consumption are diversified and advantageous for all stakeholders.

ASEAN is the axis of Indo-Pacific supply chains

The ASEAN+3 region – comprising the 10 ASEAN Member States (AMS), China, Japan, and Korea – provides the most vibrant GVC integration in the Indo-Pacific region. This region has, over the years, provided buoyancy to international trade and is the largest recipient of investment. The RCEP agreement estimates the 15 member countries of Southeast and East Asia contribute $26.3 trillion to global gross domestic product (GDP). If India were added, this region would account for nearly one-third of global GDP.

It is no surprise, then, that important global economies such as the US and the EU (and the post-Brexit UK) are keen on an Indo-Pacific partnership, which allows for sharing the economic dynamism of the region through its production facilities, markets, and vast human resources capacity. The Indo-Pacific is emerging as a plurilateral component of the international economy. Nobody is thinking in terms of a bloc. The development of production networks, including the third unbundling, likely make the blocs of earlier eras impossible. A plurilateral Indo-Pacific would simply be a region which finds it mutually advantageous to work cooperatively.

The Indo-Pacific economic architecture is therefore a longer-term response for the balancing of trade and investment partnerships among the major economies of the world, with Southeast Asia, East Asia, and the Pacific at the core. The Indo-Pacific is also differentiated by a larger role for South Asia, especially India, in the alignment of strategic and economic interests with the rest of the major players in the architecture.

To say that the evolution of the Indo-Pacific economic architecture is for the containment of China is a simplistic explanation. The Indo-Pacific no doubt addresses China centrality in production sharing in the region, and the dependency of the EU and US on the supply chains of China. Long-time observers of this region will know the Indo-Pacific economic architecture is more than a reaction to the existing production networks and investment channels in the region.

The evolution of this architecture is preparation for new economic demands facing all countries in the region. Structural transformation and employment generation policies in developing Asia and the Pacific must understand, prepare, and respond to the new digital economy, as it will affect the patterns and geographical location of industries, employment, trade, and economic growth. Increased industrialisation and participation in GVCs are important for growth and employment generation in less developed countries. The future of work is vulnerable to decreased investments in manufacturing and jobs being replaced by automation, robotics, and artificial intelligence, especially for countries which are not deeply integrated in regional or global value chains.

Geographical inclusiveness is an important aspect of the new Indo-Pacific architecture. The role of smaller countries – especially the least developed countries (LDCs) and Pacific Island states, which are new entrants to regional connectivity plans – are conspicuous in the policy initiatives in the Indo-Pacific. Human resources and the movement of people are equally linked with the new digital economy, as well as the future of work. The Indo-Pacific is preparing the region for the future.

The coronavirus (COVID-19) pandemic has reinforced the need for more equitable distribution of infrastructure and capacities, and investments in new centres of production, supply chains, and consumer/supplier clients. While there are several interpretations of the effects of the pandemic on supply chains, two extreme examples underscore the need for a more enabled, equitable, and inclusive economic cooperation model for the region. The breakdown of the supply of medical equipment and kits from China during the pandemic and the regional distribution of vaccines produced in India in the later part of the pandemic are emblematic of the problems and solutions before the Indo-Pacific economic architecture.

Trade and investment have underwritten the growth story in Southeast and East Asia. The digital economy is, however, here to stay. Asia, Europe, and the US have different levels of digital infrastructure. However, cooperation for the development of services, human capital, regulations for data protection, e-commerce, and taxation require greater institutional linkages among all stakeholders. ASEAN and its Dialogue Partners have a critical task ahead to ensure the Indo-Pacific architecture promotes inclusive participation in the digital economy, especially for youth and women.

Multilateralism, global actions, and a rules-based Indo-Pacific

The Indo-Pacific economic architecture is linked to restoring multilateralism, which recognises diversity yet leaves no one behind. It is worth noting multilateralism has provided stability and prosperity to a great number of countries for nearly a century. Global governance of connectivity is also a new challenge, as countries contest and compete for technology which provides interconnections. Managing the internet is most apparent, but the technology underlying electronic commerce and the financial system is much more significant. The Indo-Pacific economic architecture has no choice but to undertake global actions which aim to resolve this challenge.

In the end, neither multilateralism nor global governance exist for their own sake. The ultimate test for both is to create prosperity which is inclusive and sustainable. Indo-Pacific brings the Atlantic and Pacific powers much closer to the Indian Ocean. The challenge is not to maintain a rules-based system, but to create and operate institutions which evolve and sustain rules in the face of change, and the relationships must all be inclusive. ASEAN’s participation in this exercise is needed at the front, not at the centre, to ensure the Indo-Pacific economic architecture fulfils the objectives of mutual trust and mutual growth – the key principles of the ASEAN Community.

ASEAN’s experience in community building and as a regional anchor are critical for rebalancing the old elements of trade integration, and the introduction of new elements of cooperation in which strategic and economic interests are brought closer to the principles of governance, transparency, equity, and inclusiveness, and placed at the core of the emergent architecture in the Indo-Pacific.

This opinion piece was written by ERIA's Senior Policy Advisor for International Economic Cooperation, Ms Anita Prakash, and has been published in The Jakarta Post. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.