AAYLF delegate from Cambodia Leeza Chang highlights the obstacles that persist despite understanding of the mutual benefits of ASEAN-Australia cooperation in trade, investment and finance.
Formed in 1967, ASEAN is projected to become the world’s 4th Largest Economy by 2030, trailing behind only the United States, China, and European Union . ASEAN’s combined GDP reached US $2.8 trillion in 2017 . Within ASEAN’s neighborhood, Australia became its first dialogue partner in 1974, and established the Australian Mission to ASEAN in 2013 . Besides diplomatic relations, the two sides share interests in promoting mutual economic prosperity through trade, investment and finance.
In 2009, the ASEAN-Australia-New Zealand Free Trade Agreement (AANZFTA) was initiated to strengthen economic cooperation and development, promote business sustainability and opportunities, and to protect the investors . Under this agreement, trade volume has increased year on year. In 2017, ASEAN exports to Australia reached US $34,557 million, increasing by almost 19 percent compared to 2009. Similarly, ASEAN imports from Australia rose to US $24,583 million, up by 34% from 2009 .
The variety of two-way investments between Australia and ASEAN, ranging from agriculture to technology, was valued at AU $224.4 billion in 2016 . Two-way flows of foreign direct investment also reached AU $81.6 billion in 2016.Through foreign direct investment, the transfer of soft skills and technologies, important long-term inputs of economic growth and development, have flowed between Australia and ASEAN. Australian firms, have benefited from ASEAN’s labor force, which ranked the world’s third largest labour force in 2017 .
The relationship between ASEAN and Australia’s financial sectors has improved. Under the ASEAN-Australia Strategic Partnership Action Plan 2015-2019, there was a call for action to promote financial development and integration of capital markets . Furthermore, Shaping Inclusive Finance Transformations Program (SHIFT) was launched to enable small and medium enterprises, especially those owned by women and low-income individuals, easy access to financial opportunities through the digital financial inclusion, aiding sustainable development of the economy and improvement of living standards .
Despite the mutual benefits, obstacles to trade and investment persist. First, there is a lack of adequate infrastructure to support supply chains and final goods delivery to both inside and outside the region. Second, Australia’s ignorance about some ASEAN states will leave space for other countries to closely connect with ASEAN, causing Australia, in the long run, to lose political bargaining power in the region. By looking at the investment corner, most of the investments have flowed into only the more developed ASEAN states. Particularly, only Singapore ranks among the top 20 countries Australia invested in in 2018 . Third, banking differences between ASEAN and Australia are still considerable. Due to the different stages of development among them, it is challenging to promote the concept of banking integration, which is considered as a main obstacle to investment.
In response to the infrastructure problem, ASEAN and Australia, through the Master Plan on ASEAN Connectivity 2025, should join efforts to translate the plans of this project into real actions by exchanging assistance through trainings and sharing information between experts. Additionally, Australia should reconsider its prioritisation of ASEAN states rather than following other countries’ footsteps. Second, Australia should consider diversifying its investment, from where not only enhances state-level relations, but also business to business relations. It should support small and medium enterprises looking for joint-venture and funds as well as the technical assistance. Third, as Australia is working closely with ASEAN local governments and commercial banks, it is suggested that Australia should take this opportunity to create links between ASEAN local banks and Australian banks to facilitate monetary transactions between countries to become fast, easy, and free. And, this will largely contribute to enhancing investment and remittance outflow of documented workers.
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