Social inclusion for ASEAN’s long term stability

Economic insecurity bred by inequitable distribution of wealth due to globalization and trade liberalization resulted in rising populist protectionism in many parts of the world. The failure of governments to promptly address the loss of opportunity and the rising inequality has created a political backlash, recently shown by the retreat to protectionism in the US and the Brexit.

Whether this will become a long-term global trend or just a short phase is hard to answer at this point. However, the political developments in those countries and their international spread require particular attention. What has been shown by these developments is how fragile the institutions that promote economic openness are in the movement propelled by nationalist populism, xenophobia and fear-mongering propaganda and campaigns that have taken advantage of the people’s frustrations.

It is crucial that proactive steps are undertaken so that the rising populist protectionism does not spread in other parts of the world, and in particular, the vulnerable emerging economies of ASEAN (Association of Southeast Asian Nations).

ASEAN has come a long way since it intensified its regional economic integration initiatives through the ASEAN Free Trade Area (AFTA) in 1992, followed by the Free Trade Agreements (FTAs) with regional partners, and the ASEAN Economic Community (AEC).

The region has become a more attractive and important trade hub and investment destination, drawing foreign direct investments (FDI) amounting ton$122.8 billion and total trade amounting ton$2.23 trillion in 2018.

However, many people cannot readily see the value of an open trade regime in their daily lives. The region is characterized by high levels of income inequality. In-country income inequality is steep, and extreme poverty, measured in terms of people living below $1.90/day, has not been eliminated even in middle-income Indonesia and the Philippines. Inequality in terms of access to opportunities and even basic public facilities and social services is pronounced.

Economic opportunities remain elusive for many Southeast Asians, particularly the youth, women, ethnic minorities, and persons with disability. To survive, they join the informal sector.

As a result, the informal sector — street hawkers, contractual and service workers, domestic helpers, and the like — has substantially grown. Based on International Labor Organization’s (ILO) figures, 60% of Asia and the Pacific’s workforce depends on informal sector employment. Although not all informal workers are poor, the majority of the poor are in informal sector jobs, which have low-income prospects, and are lacking in security, health and social benefits. In Southeast Asia, 75% of jobs in the five middle-income countries — Vietnam, Indonesia, the Philippines, Thailand, and Malaysia — are generated by the informal sector.

A study conducted by the Economic Research Institute for ASEAN and East Asia (ERIA) in 2017 identified income disparity and social inequality as the top concerns of citizens of ASEAN Member States (AMS), next to corruption plaguing national governments.

High levels of income inequality, as well as lack of opportunities for decent jobs, contribute to pessimism and trust deficit in domestic and international institutions. In the future, this can lead to social instability and fragmentation.

The ASEAN recognizes the need for equitable economic development in building a resilient and open region. Promoting inclusive growth has been part of the ASEAN agenda, as stated in the ASEAN Economic Community 2025 goals.

Several programs have been launched, such as the support for the Micro, Small and Medium-sized enterprises (MSME). However, the successful delivery of such programs depends on individual state performance.

Inevitably, domestic political challenges, inadequate political will, and lack of technical and economic capacity can hurt their successful implementation. The ASEAN needs to build a stronger Regionalism-Welfare framework and strategy that will rapidly facilitate the spread of the benefits of regional economic integration.

To begin with, the ASEAN must strengthen its Secretariat so that it can expand its role beyond policy advocacy, and perform a more active role in pushing policies that will provide wage and health insurance to workers, as well as policies that will help informal sector workers achieve economic security and transition to productive sectors.

The ASEAN can learn lessons from poverty-reduction initiatives of other regions. For example, the Southern African Development Community (SADC), along with international donor partners, signed a Memorandum of Understanding (MoU) with its 12 member states, which stipulates the commitments of SADC and the member state, including details of implementation and how the funds from international donors will be allocated in cross-border poverty reduction and health programs. If ASEAN resources are properly mobilized for social inclusion initiatives, the success rate could be much higher and faster, given its financial resources and human capital.

Innovations in Region-State relationship that will allow binding mechanisms for regional governance on issues concerning social inclusion merit examination. Despite its non-interventionist principle, the ASEAN is no stranger to binding mechanisms. It has implemented several successful binding programs pertaining to regional economic cooperation, such as AFTA (ASEAN Free Trade Area) and the ASEAN Single Window. Those programs can provide the model for collaboration between ASEAN and the member state to come up with well-targeted, regionally monitored social inclusion projects that are integrated into the domestic policy framework of ASEAN Member States.

Furthermore, the ASEAN needs to invest more in soft power strategy to advance and embed its regional economic and social goals. The ASEAN should have a more visible and active role in implementing practical strategies to educate the citizens, and not just the business elites, on how regional economic integration can be useful to them.

A strong and open ASEAN is vital in stabilizing the rapidly changing Asia-Pacific region and is crucial in sustaining the global supply chains that are producing among the most innovative products in the modern world. ASEAN and its allies should invest in a comprehensive strategy that will counter the pessimism and doubt on the benefits of regional economic integration by supporting social inclusion policies that will help member countries improve the economic prospects of its people.

Jenny D. Balboa has a Ph.D. in International Relations from the National Graduate Institute for Policy Studies (GRIPS) in Tokyo and is a Lecturer at the Tokyo University of Foreign Studies in Japan. AER collaborates with Filipino scholars from GRIPS.