Southeast Asia: green economy for the relaunch

Green infrastructure development can drive the post-pandemic economic recovery. But huge funding is needed.

ASEAN needs new green infrastructures. Not only to improve the ecological approach of the region, but also to improve connectivity, reduce poverty and increase development. From this point of view, infrastructures are the backbone of the economic growth of each country, but the environmental costs are not low. That is the reason why the Asian Development Bank has estimated that Southeast Asia will need at least 210 billion dollars a year, for the period 2016-2030, to support the costs of green infrastructures.

If in the pre-Covid-19 era investments in that area were far below the necessary levels to get close to a significant ecological-environmental change, the global pandemic caused an economic contraction in the region of 4%, further reducing the infrastructure investments. In contrast, however, it has become even more urgent for ASEAN to engage in this direction, to build a more resilient economy in the medium and long term.

The Asian Development Bank has proposed itself as a platform for dialogue between the countries of Southeast Asia to understand how to mitigate the negative effects of the pandemic, balancing economic growth with the protection of natural capital. How? Making the most of government funds, encouraging private financing and protecting natural resources. In order to do this, national governments can rely on various strategies: imposing a price on environmental externalities, subsidizing products and services with a low environmental impact, financing technological innovation and encouraging virtuous individual behavior.

However, all this is not enough. For an effective green recovery, the actions of governments of the ASEAN bloc must convey a structural change in ecological and energy policies, increasingly integrating green objectives into government policies. In the report prepared by Bain & Company, Microsoft and Temasek, “The Green Economy of Southeast Asia: Opportunities on the road to net zero”, it is highlighted that about 40% of infrastructure investments in Asia will have to come from the private sector. It is then necessary to continue with a series of targeted interventions concerning sustainable agriculture, green urban development and transport models, the transition to clean energy, the circular economy and the protection of the oceans and marine biodiversity. Finally, governments will have to rely on sustainable sources of finance, introducing green taxes such as the Carbon Tax and removing fossil fuel subsidies.

The will for a green recovery is also visible in the regional strategies. The ASEAN Comprehensive Recovery Framework emphasizes environmental sustainability as a key component of the region's post-pandemic economic recovery process.

It will not be an immediate change, much less easy, also because it will require the allocation of huge amounts of resources. It is estimated, however, that in this way over 30 million new jobs will be created, stimulating a virtuous circle that could bring positive results in the long term.

Tensions in the South China Sea urge ASEAN countries to invest in air forces

Beijing's manoeuvres stretch across water and air. The air forces of ASEAN countries require huge investments to balance China's growing air power.

The South China Sea is one of the most concerning hotspots on the planet and tension does not seem to be scaling down soon. The disputes between some ASEAN countries and China over the control of the waters around the Spratly Islands, an archipelago of micro-islands of high strategic value, have pushed all the players to increase their military spending, especially on the navy. The more suitable pieces for this chessboard, we might think, are ships, submarines, or even artificial islands. In fact, what is at stake are access to seabed resources and control over the maritime trade routes. The most recent development from the Indo-Pacific region seems to confirm this idea: the much-debated AUKUS Agreement made to the headlines for a multi-billion dollar procurement contract for submarines. However, we cannot forget that influence over the South China Sea also means projecting power over its sky, not only its waters. A recent contact between Malaysian and Chinese aircraft was a wake-up call for the region, effectively putting the air arms race back at the centre of the ASEAN governments' agendas. 

The waters of the South China Sea are disputed between some ASEAN countries (Vietnam, Malaysia, Brunei, the Philippines), China and Taiwan. More specifically, these states declare to varying degrees their sovereignty over the Spratly Islands, in order to extend the perimeter of their territorial waters into the open sea. The contested features are small reefs and cays, unsuitable for human settlement. Yet their strategic value is immense. In 2016, $3.37 trillion worth of trade and almost 40% of global liquefied natural gas transited through these waters. However, the importance of the South China Sea to the world's energy supply is not limited to its transit: at least 7 billion barrels of oil and approximately 25 trillion cubic metres of natural gas lie on its seabed. Fisheries represent another resource of the area.

The stakes are high. For several decades now, the states bordering the South China Sea have been challenging each other by building new outposts, claiming uninhabited atolls, or organising naval exercises in the waters under their control. Vietnam controls the most features (21), followed by the Philippines (9), China (7) and Malaysia (5), while Brunei and Taiwan occupy one island each. Some of these geographical features have been transformed into artificial islands to host military bases, in particular by China and Vietnam. The growing presence of military fleets in the area has also led to exchanges of gunfire between China and ASEAN countries’ boats in the past. The confrontation with Beijing over the Spratlys is an interesting case study in understanding the evolution of ASEAN. Taken individually, each state of South-East Asia would have little negotiating power with the much larger China - indeed, the Chinese have always tried to negotiate bilaterally, without success. The ASEAN countries have always opposed China's divide et impera strategy and agreed to negotiate with Beijing only multilaterally, as a bloc. These diplomatic exercises made possible in 2002 to define an ASEAN-China Code of Conduct for the South China Sea

Chinese manoeuvres are closely followed by the US, which is determined to reinvigorate its presence in the region. Other actors are Japan, India, the EU (more recently) and Australia. The latest piece of news in the Indo-Pacific scenario comes precisely from Canberra – whose relationship with Beijing is currently strained, after a phase of convergence: the AUKUS strategic agreement with the US and the UK. The Agreement has caused concern among ASEAN governments, as it could push Beijing to increase its military presence in the South China Sea. The new Malaysian Prime Minister, Ismail Sabri Yaakob, has commented harshly on AUKUS, expressing the fear that it could ‘provoke other powers to act more aggressively, especially within the South China Sea region’ and pave the way ‘towards a nuclear arms race in the Indo-Pacific region’. Kuala Lumpur's alarm can be explained in the light of some recent incidents with Beijing's vanguards. On 31 May, there was a contact between Malaysian jets and a squadron of Chinese aircraft, which was carrying on a training manoeuvre at the border of the Malaysian airspace. This incident reminded all ASEAN governments that the dispute over the South China Sea involves a strong air force, too - and that China holds a sizable lead.

Efficient air defence requires the development of an integrated system of modern aircraft, detection networks, missile installations and trained personnel. And significant investments, too. According to analysts, Singapore and Vietnam are the only ASEAN countries with an adequate air force. Hanoi is also investing heavily in modernising its fleet. Malaysia, on the other hand, maintains a reduced air force, armed with obsolete aircraft - and in its budget, still struggling due to the Covid crisis, does not offer the needed resources to strengthen the sector. Even the Philippines seem unprepared. Indeed, Manila is putting its own military procurement rules in order to prepare for future investments. Indonesia seems better equipped, although investments are still insufficient and not much effective. The country has no demands over the Spratlys, but the nine-dash line that delimits Chinese claims passes close to Indonesian territory and is not looked upon favourably by Jakarta.

Considering these elements, it is possible to expect large investments in the air forces by ASEAN countries in the years to come. However, it is difficult to make predictions about the scale and effectiveness of this effort by each state. As we have seen, while some governments have managed to achieve good results in the past, others seem ill-prepared to allocate efficiently the huge resources needed and build up their military capacity alone. Other international actors interested in balancing Chinese influence - the United States, the EU, Japan - could support these governments in capacity building. The defence industry will also play an important role since ASEAN countries will necessarily need reliable partners in their arms race. Italian companies in the sector already collaborate with ASEAN governments. To give a few examples: Leonardo with Singapore, Malaysia, and Thailand; Fincantieri with Indonesia.

The 76th UNGA: ASEAN and the 2030 Agenda

By Clara Lomonaco

In recent weeks, the long-awaited annual appointment with the United Nations General Assembly took place. It was an opportunity to take stock of the climate change policies adopted by the ten countries of the Southeast Asian bloc. Here is an overview

In recent weeks, the Glass Palace has hosted the United Nations General Assembly: the highly anticipated annual meeting in which Member States strengthen the continued relevance of the 2030 Agenda for Sustainable Development and to build momentum ahead of major summits and intergovernmental meetings, such as COP26 on climate change, G20 and COP15 on biodiversity.

António Gyterres, the United Nations Secretary General, identified five areas where urgent action is needed to maintain the promise of the SDGs (Sustainable Development Goals): (1) the mobilization of comprehensive vaccination plans, (2) the implementation of sustainable and equitable recovery for all through courageous investments in human development, (3) equal rights for women and girls through investment and representation, (4) the end of the war to the planet and the affirmation of zero emissions by 2050, (5) and multilateral cooperation to put people first in the budgets and recovery plans.

Also this year, one of the hot topics of the international debate was the pandemic from Covid-19. Each State has expressed itself in its own internal situation promoting the concept of “Leaving No One Behind”: a phrase that has now become the motto of the entire international community, the meaning of which refers to the strong will to emerge from the crisis as a united and strong group. The heads of Governments and Ministers present have once again renewed their promise and their commitment in the battle against Covid-19 and in the promotion of vaccination campaigns.

Nevertheless, the virus was not the sole and only protagonist of the General Debate. Climate change is another forthcoming challenge that continues to catalyze global attention and requires urgent and concrete global actions at all levels. In this contest, ASEAN countries expressed their commitment to increase their involvement in the process of adaptation and mitigation of the Paris Agreement, in line with the principle of “common but differentiated responsibilities”.

The world community looks to the United Nations General Assembly to respond to major global concerns. There were different ideas and opinions on the issue of environmental sustainability, but what proposals have been made by ASEAN countries in this regard, and what progress has been made in the implementation of Agenda 2030?

From the outset, the path to achieving the UN Development Agenda 2030 for Sustainable Development has not been easy. There has been steady progress over time, but Covid-19 has undone many hard-won victories. The pandemic amplified inequalities and pre-existing uncertainties; widened the gap between “who has and who has not”; and different degrees of deficiencies in governance and social security have pushed the most vulnerable populations back into poverty. 

We are far from reaching Agenda 2030 now than we were before.

Indonesia’s commitment to climate resilience, low-carbon emissions development and green technology is firm and clear. In 2020, Indonesia has reduced forest fires by 82% compared to the previous year and deforestation rates have decreased significantly, reaching the lowest percentage in the last 20 years. However, the process of energy and technology transformation must ensure the (previous mentioned) principle of “Leaving No One Behind”, facilitating the participation of developing countries in the growth of industries and technological production. In 2022, Indonesia will assume the presidency of G20, with the topic “Recover together, recover stronger”, committing itself to work for the benefit of all, from developed countries to developing ones, from the north to the south, from the archipelagos to the small island states of the Pacific.

The People’s Democratic Republic of Lao has highlighted the importance of tackling climate change by complementing the commitment of the Paris Agreement. From 2000 to 2020, Laos’ greenhouse gas emissions were reduced by 34%. By presenting the Nationally Determined Contribution (NDC) on Climate Change to the UN community on the same occasion, the Government of Laos has renewed its commitment to reduce 60% of greenhouse gas emission by 2030.

For Malaysia, the integration of sustainability is the key to ensuring a smooth transition to a greener socio-economic ecosystem. The Malaysian government has set ambitious plans to facilitate the transition to a more sustainable and low-carbon future. New policies focused on the circular economy have been introduced to deliver on the promise of making Malaysia a low-carbon nation by 2050.

The Philippines presented the first Nationally Determined Contribution, promising to achieve the goal of reducing greenhouse gas emissions by 75% by 2030. The Philippines government has called for urgent climate action, especially by those who can really tip the balance needle. Developed countries must meet their long-standing commitment to climate finance, technology transfer and capacity-building investment in developing countries. This is a moral obligation that cannot be avoided. The transition of our world toward a green economy must not be at the expense of the economic viability of developing countries.

For small island nations such as Singapore, climate change remains a clear and present danger and recent extreme weather events remind us that we have no time to waste. Singapore has always been a strong supporter of the Paris Agreement and this year presented the “Singapore Green Plan 2030”: a well-structured action plan outlining a national approach to sustainable development, setting ambitious and concrete targets for the next 10 years in new areas such as green finance and clean energy.

Singapore also stressed the need for urgent multilateral action on the oceans. The oceans support our global ecosystem; they are a repository of biodiversity and a buffer for climate change. They are a critical artery for trade and a source of work and livelihood for billions of people. Singapore is a great supporter of the United Nations Convention on Law of the sea: UNCLOS, a document which forms the basis of ocean governance, establishes rules for maritime rights and provides the general framework for the peaceful resolution of maritime disputes. The 40th anniversary of the adoption of UNCLOS next year is an opportunity to reaffirm our commitment to this vital legal instrument for ocean governance, and to do more to ensure its effective implementation.

Thailand is preparing the National Energy Plan with the aim of achieving carbon neutrality by 2065-2070. At the same time, the government set the objective of increasing the proportion of renewable energy to at least 50% of the total amount of electricity generated. The speech of the Thai delegation urged the developed countries and invited the entire global community to take collective action and ensure constructive and concrete results for the next COP26.

Vietnam looks forward to COP-26, a time of international harvesting in which each Member State must renew its efforts and commitment to reducing greenhouse gas emissions. The Vietnamese government has also stressed the need for increased funding in developing countries, which require more accurate assistance in technology transfer and capacity building to facilitate the transition to a green and circular economy. Only through collaboration and cooperation between the North and the South of the world, will it be possible to reach all 17 of the sustainable development objectives contained in the Agenda 2030.

Whether it is rising sea level or melting Himalayan glaciers, hurricanes, storms, floods or fires, climate change has become an existential threat to humanity. We need a globally supported and ambitious collective response to tackle climate change.

It is now clear to the entire international community that we need to focus world attention on achieving a lasting commitment to the Agenda 2030, that puts climate change at the heart of international efforts. The world cannot allow COP26 to be inconclusive. It is necessary to adapt the SDGs to the new reality of the post-pandemic world. To do this, we need greater and stronger solidarity and cooperation between all types of entities. Advancing the implementation of the Sustainable Development Goals (SDGs) in all areas is a key tool to respond to the challenges the world is facing, and to address the inequalities exacerbated by the COVID-10 pandemic. 

La competizione tecnologica globale si gioca nel Sud-Est asiatico

I giganti tecnologici cinesi e statunitensi guardano ai mercati emergenti dell’area ASEAN, investendo ingentemente nel settore dell’archiviazione dati.

For Chinese and U.S. tech giants, no place is more promising than Southeast Asia. The region involves rapidly growing economies and a consumer market of nearly 700 million people. The economic digitization process took off with the Covid-19 pandemic, creating favorable conditions for local e-commerce players to thrive and attract foreign investment. Several exogenous factors are also contributing to the attractiveness of investing in Asia's tech sector, including tight regulations for companies in China and revenue opportunities that are pushing U.S. multinationals to expand further and further "East." 

Chinese tech titans Tencent and Alibaba were among the first foreign companies supporting the incipient growth of e-commerce in the region, with investments in Sea Limited and Lazada. As an instance, Sea Ltd. is the flagship of Southeast Asia and thanks to foreign lenders' enthusiasm for the region's opportunities, it recently earned about $6 billion in new funding. It is a listed company in the gaming, finance, and digital commerce sector. In early September, it entered a deal with China's Tencent Holdings Ltd. which now owns 23% of it. Indeed, it's not an easy time for companies in the sector in China, where a tightening of regulations has resulted in a major reduction in their room for maneuver. According to The Economist, in August Chinese authorities released draft antitrust measures that would hurt the business models of domestic giants Alibaba and Tencent. Foreign markets account for a relatively small share of these Chinese groups' sales. But if everything continues in this direction, it seems that Southeast Asia will play a major role in the expansion process of Chinese companies. 

The opportunities presented by Southeast Asia's fast-growing digital markets have not been ignored by U.S. investors. A particularly competitive industry, where much of the financial competition between China and the United States is played out, is cloud computing. This is the industry that provides data processing and storage services - a vital function for both small and large companies and government institutions of the third millennium. According to experts, the total size of the cloud market in the region is still modest at less than $2 billion per year, but the encouraging fact is that it appears to be growing by more than 50 percent by 2020 and doesn't seem to be showing any signs of letting up. Amazon, Google, Microsoft are already involved in the sector. Facebook has recently invested in the construction of a massive 170,000-square-foot facility un the outskirts of Singapore, which will be Zuckerberg's first custom data center in Asia. But it's not the only one: the stable political system, abundance of highly skilled tech workers and its super-sophisticated infrastructure make Singapore a reliable location for big tech players targeting cloud services. Amazon, for its part, is still the undisputed global leader among providers of these storage services: its Amazon Web Services (AWS) controlled more than 30 percent of the global market in the second quarter of 2021, according to experts. It is currently expanding, thanks to the construction of infrastructure in Jakarta, Indonesia, which should be operational by the end of 2021 or early 2022, according to Nikkei Asia

Chinese and U.S. digital giants are riding the antagonism of the world's two superpowers. Between pull factors, such as the expanding digital market and promising demographic potential, and home country push factors, such as the renewed regulatory zeal promoted by Chinese authorities, Southeast Asia is set to be the battleground of global technology competition, led by Chinas and the United States.

A united ASEAN is needed against illicit waste trafficking

The waste crisis triggered by China has awakened the hope that developed countries would eventually move towards more virtuous forms of waste management, but these hopes quickly failed to see some relevant results.

It all (or almost) started with the ban on imported waste to China. It was 2018, Beijing had already achieved the economic and political status that made it one of the most powerful nations. And it was time to say "enough" to the dirty practice of dealing with other people's waste. Now it’s 2021, and the illegal or non-illegal trafficking of waste has shifted to other countries, where different actors still consider it a profitable business. The Chinese strategy "National Sword" has suddenly poured billions of tons of waste arriving from all over the world into the rest of the region, jamming a mechanism that has been active for decades.

The waste crisis triggered by China has awakened the hope that developed countries would eventually move towards more virtuous forms of waste management, but these hopes quickly failed to see some relevant results. The attention of exporters has, in fact, shifted to the countries of Southeast Asia, where waste from Europe, the United States and Australia is now accumulated or recycled. Among the most exported waste are disposable plastics, but also electronic waste, which is very dangerous if treated improperly.

• The data

The alarm was launched in a report published in August 2021 and written by the EcoWaste Coalition group for health and environmental justice in collaboration with the International Pollutants Elimination Network (IPEN). According to the latest estimates, the Asia Pacific region will receive up to 714 million tons of waste every year by 2050. A problem, that is already affecting those countries where there is a lack of adequate structures for managing solid waste. The document underlines how the pandemic has contributed to exponentially increase the amount of waste arriving in ASEAN countries, while the economic crisis linked to the health emergency has aggravated the economic situation of countries dependent on exports, willing to do anything to do not aggravate the budgets.

Together with the EcoWaste Coalition alarm, there are other problems, such as household waste. In Indonesia, for example, only large cities have implemented a modern system for the collection and management of waste, while it is totally absent in rural areas. People can live with it by reusing what can be useful, or by deposing all kind of waste in inappropriate places or burning it in makeshift fires. In some cases, waste becomes the most used fuel in the kitchen. At other times, the chemicals in the garbage enter the food chain of local inhabitants through the soil and aquifers near crops and aquifers.

From the perspective of environmental policies, the ten Asian countries have sufficient leadership to respond to the waste crisis. A notable example was that of the Philippines in 2019, when President Rodrigo Duterte began his battle (certainly not without populist tones) against the waste arriving from Canada. During the same year, Indonesia also responded to the invasion of foreign waste by "sending back" part of the 58 containers that arrived from the US. However, the situation is much more complex: where Jakarta said "no", 38 of those containers ended up in South Korea, Thailand, Vietnam, Mexico, the Netherlands, and Canada.

• The solutions

Among the many tasks of ASEAN, that of waste management represents a complex challenge to face. According to the latest report from the United Nations Environment Program (UNEP), published in 2020, the ten nations of Southeast Asia already have their own national strategy to manage the waste problem. What is missing, the document emphasizes, would be a conceptual step: no longer "where" to deposit or eliminate waste, but "how" to transform it into resources.

The call for all nations in the world, of course, remains to scale the problem at its root, eliminating single-use plastic and waste wherever possible. But the creation of a common policy, a harmonious and cooperative management of waste between the various actors involved could transform problems into opportunities.

This should not exclude a unitary action on the international level, the strong point of any union between countries. “ASEAN needs a unanimous declaration calling for a clear and concrete position on the waste trade. Among other things, it will have to ask the Member States themselves to immediately ratify the amendment on the ban on exports within the Basel Convention, take measures to ban all imports of waste into their countries and improve the implementation of these laws, together to others that go in the direction of zero waste”, said environmental law expert Gregorio Rafael P. Bueta on the EcoWaste Coalition / Ipen report of 2021.

The Basel Convention is the most important global agreement on waste management and has been signed by all ASEAN countries except Laos. The 1994 amendment banning the transboundary movements of hazardous and other waste, by contrast, was ratified by only three of the member states. A sign that, despite the more determined positions of governments against waste trafficking, the interests at stake are still very complex.

India and ASEAN: A synergy on financial innovation

Diversi giganti del fintech indiano sono ora focalizzati sui mercati e-commerce ASEAN. Obiettivo: modellare insieme la futura infrastruttura finanziaria della regione.

Digital payments are a driving growth factor for the online economy. Alipay has allowed China to establish millions of economic relationships based on the essential factor of trust. The latter has been possible thanks to the innovative approach of “pay now, get a refund if not satisfied”. Several studies indeed have shown how the development of these platforms has been a key factor enabling the skyrocketing Chinese economic boom in the last 20 years.

ASEAN, thus, is now home to a multitude of international B2C e-commerce leaders such as Sea, Tokopedia and Grab, apart from a myriad of ever-growing scale ups now also offering B2B services.

Sea company’s stocks have become extremely appetible on international markets, while Gran continues to evolve into a super-app (valued at an astonishing $40 billion), now virtually touching all dimensions of its users’ daily lives.

In this sense, South east Asia is soon believed to complete its exploit in the digital economy, thanks to its dimension, population (651 million up to now), and intrinsic scalability in the productive system which creates the basis for knowledge spillovers and knowledge transfer to happen. Correctly evolving into a knowledge-based economy, in this sense, could mean sure success in the long term.

However, every super app must ensure itself and its users a solid financial and payment infrastructure, enabling not only safety but also trust as already mentioned.

India represents a clear virtuous example of this: the country is home to 51 unicorns, of which 30% happen to operate in the financial sector of the economy. In other words, Indian industries are massively benefiting from the rising of a best-in-class fintech cluster: here, digital payments hava been increasing from 3 to 32 trillion rupees, in 4 years.

With this entrepreneurial spirit, some Indian fintech scaleups namely Pine Labs, Zeta and Razor Pay, have recently acquired some medium-sized B2B and B2C ASEAN companies. As in the words of Amrish Rau, Pine Labs CEO, ‘Some ASEAN markets are now believed to be where India was almost three years ago: there is a great opportunity in solving their fragmentation and ultimately conferring them a solid financial echo-system’.

The firm has now acquired Fave, a Malaysian scale up specialized in promo codes and discounts available for e-commerce, while RazorPay is paving the way for the imminent acquisition of some noteworthy food delivery players. Harshil Matur, its CEO, has repeatedly declared its intent to invest in Vietnam, Philippines, Malaysia, and Indonesia. Indeed, these markets are ‘alike the Indian one, but with remarkable margins of improvement’.

Bottom line: South East Asia confirms its market attractiveness for foreign direct investments, thus signaling solidity and prosperity of its economic system. However, we must notice that most of these capitals come from best-in-class international players, being fintech, tech or just food delivery in e-commerce: this, ultimately, can be further claimed to be an indisputable sing of its rising power in the global geo-economic equilibrium.

Not just security. The US-ASEAN economic cooperation.

If Washington wants to reaffirm its role in South-East Asia, trade policy is also a key element in competing with Beijing.

America is back. Especially in South-East Asia. Less than a year after taking office, the Biden administration seems to have devoted most of its attention to the region. President Biden has revived Obama's Pivot to Asia strategy after the shakes of the Trump era, deploying all the key figures of his cabinet: Vice-President Harris travelled to Vietnam and Singapore, Secretary of State Blinken took part in high-level meetings with his ASEAN counterparts and Secretary of Defence Austin also visited Singapore. Moreover, the US strategy involves reviving strategic cooperation with its other regional partners, by reaffirming the 'unbreakable alliance' with Japan and inaugurating the AUKUS three-way partnership with Australia and Great Britain - a move that has caused tensions with China and even Francia. But security is not the only area that has seen a renewed US engagement. In times of Covid and climate crisis, cooperation with ASEAN also touches on health and sustainable development. What about trade?

If we look back to just two years ago, the U.S.-ASEAN Business Council lamented the absence of the Trump administration at a time of great shifts for the Asian bloc's trade policy: the negotiations for the historic RCEP agreement were in its advanced stages and the EU was strengthening its economic ties with Singapore and Vietnam through two ambitious free trade agreements. With the change of administration in Washington, we can expect major changes in US-ASEAN trade relations. The starting point is significant: ASEAN is the fourth largest market in the world (with a GDP of almost 3 trillion and 647 million consumers) and, by current trade volume, the eleventh largest trading partner of the United States. US companies export about $86 billion worth of goods to ASEAN countries and import about $206 billion worth of products. The trade balance is thus clearly in favour of the ASEAN countries ($120 billion). Comparing the US-ASEAN trade relation with the EU-ASEAN one, it emerges that European companies export goods for a higher value (almost $100 billion) and import goods for a lower value ($146 billion), with a trade deficit of about $47 billion in favour of ASEAN. These figures should be read together with the difference in GDP between the US and the EU. We will explore the reasons behind the higher volume of European exports in a future article. To complete the picture, it should be kept in mind that the total volume of trade between ASEAN and China is about $298 billion.

Economic cooperation between the US and ASEAN has to reckon with the growing Chinese influence in the region. Washington does not want to lose ground to Beijing in the infrastructure investment race. Last June, Biden and the other G7 leaders launched the Build Back Better World (B3W) plan with the stated aim of vying with China's Belt and Road Initiative (BRI). In addition, the US administration is funding many projects to develop connectivity in the region, for example a partnership for the Mekong Basin (again, an initiative that came a few years after its Chinese counterpart). Looking at the degree of trade liberalisation, China will continue to see its trade figures with ASEAN growing thanks to the RCEP agreement, while the US benefit from a limited and somewhat dated network of trade agreements (notably the 2003 US-Singapore Free Trade Agreement and the 2001 US-Vietnam Bilateral Trade Agreement). Actually, these existing agreements can be the backdoor for American companies to benefit from the RCEP, by taking advantage of the very favourable conditions for establishing their subsidiaries in certain countries of the region. In any case, Washington needs to strengthen its trade ties with ASEAN countries, perhaps by reconsidering its withdrawal from the TPP project or by exploring other options. Waiting for a more courageous and comprehensive project, there is excitement on both sides of the Pacific for a possible agreement on digital trade. After years of Trump-style muscular trade policy, all observers expect a policy shift from Biden, consisting in a more cooperative and ambitious approach to ASEAN countries. The new administration has yet to fully unveil its plans. Even in international trade, America is back. Let's see how.

Aukus and Quad seen from ASEAN

Multilateral initiatives multiply in Asia-Pacific. Hopes and fears of Southeast Asian countries

Editorial by Alessia Mosca

Secretary General Associazione Italia-ASEAN

On the one hand Aukus and Quad, on the other RCEP and CPTPP. Multilateral initiatives and acronyms in the Asia-Pacific area are multiplying. New ones are born, while those that already exist are renewed. A trend that demonstrates once again the centrality of a region in continuous commercial, technological and geopolitical rise. As our President Romani Prodi said at “Mezz’ora in più”, “it is the definitive seal that the only thing that matters is Asia”. It remains to be seen whether development can proceed on tracks of substantial serenity or elements of tension will increase. Among the governments of ASEAN member states, not everyone welcomed the birth of the new US-UK-Australia agreement. In particular, Malaysia and Indonesia have warned of the possible risks to the stability of the region after the announcement of Aukus. Jakarta expressed “deep concern about the arms race and the demonstrations of force in the region, referring to nuclear-powered submarines that will be equipped in Australia. The Minister of Defence of Kaula Lumpur has instead launched the proposal to open a dialogue between ASEAN and Canberra to understand what the intentions of the trilateral agreement are. In contrast, the Philippines, which after the approach to China operated in recent years by President Rodrigo Duterte have resumed relations (even defensive) with the US of Joe Biden. Manila welcomed the Aukus as a novelty able to “equalize” the balance of power in the region and therefore to ensure greater stability. The Australian government, meanwhile, claims that it is not a “military alliance” and tries to reassure Southeast Asia about its support for the regional infrastructure represented by ASEAN. On Friday, September 24th, the first physical summit between the leaders of the Quad, the platform that unites the US, Australia, Japan and India, takes place in Washington. As in the case of the Aukus, most ASEAN countries would like these initiatives to look beyond the defensive aspect and, if anything, to include incentives for commercial, infrastructural, digital or environmental cooperation. On these issues, Asian countries have shown that they know how to dialogue, as on the closing of the negotiations on the RCEP in 2020. Be “pro Asia”, and not against someone: here is the key.

UE-ASEAN, il Blue Book 2021 sul partenariato strategico

Associazione Italia-ASEAN pubblica il Blue Book 2021. Oltre cento pagine di analisi, prospettive e dati sulla cooperazione bilaterale

Lo scorso maggio, la missione europea nell’ASEAN e il segretariato dell’ASEAN hanno presentato l’EU-ASEAN Strategic Partnership Blue Book 2021. Il Blue Book è ormai giunto alla sua sesta edizione e la pubblicazione di quest’anno è incentrata sulla cooperazione nell’ambito della ripresa post-pandemica, la sicurezza, la cooperazione economica la crescita green e la sostenibilità ambientale. “Come partner strategici ci attendiamo una cooperazione sempre maggiore, volta a rafforzare la stabilità regionale e globale, ripristinare la fiducia nel libero scambio e lavorare insieme per uno sviluppo sostenibile dell’area”, ha dichiarato presentando il documento Lim Jock Hoi, Segretario Generale dell’ASEAN, esprimentro tra l’altro la speranza di “promuovere un accordo di libero scambio capace di contribuire in modo significativo alla crescita di entrambe le regioni”. Speranza ribadita dalla strategia UE sull’Indo-Pacifico comunicata solo pochi giorni fa. Nell’implementare più profonde relazioni economiche con l’ASEAN, l’UE si aspetta inoltre di consolidare i rapporti diplomatici e dare nuovo impulso al proprio soft power nel Sud-Est asiatico, andando ad inserirsi come uno dei pochi interlocutori internazionali di tipo democratico nella regione.



Security and the relationship between EU and ASEAN

The European Union and ASEAN are the two most advanced integration projects in the world, and it is in their interest to collaborate on the issue of security to strengthen multilateralism

As stated by the High Representative of the European Union for Foreign Affairs and Security Policy, Josep Borrell, speaking about the EU-ASEAN partnership, neither the European Union nor ASEAN are ready to become part of spheres of influence. For this reason, from Europe’s point of view, it is essential to promote a multilateral view of the world. Following the decision of the EU and ASEAN to increase their bilateral cooperation to the level of strategic partnership, Federica Mogherini, former High Representative of the Union for Foreign Affairs and Security Policy, commented that this decision emphasizes the strong belief of the two most advanced and successful integration systems in the world to support multilateralism and a rule-based global order. In order to strengthen block-to-block integration, efforts are also being made to increase cooperation on security. The European Union has committed itself to play a "Capacity building" role towards ASEAN countries and, in this context, it could also share its "strategy on maritime safety". Indeed, in recent years, the shared security objectives between the EU and ASEAN have been broadened to topics such as maritime security and the fight against terrorism.

Maritime safety and compliance with the law of the sea play an important role in the relationship between the European Union and ASEAN. Stability in the South China Sea is vital for the economic interests of the European Union in the region. In fact, almost 40% of the European Union’s foreign trade passes through those waters. For this reason, the EU has always encouraged a constructive debate between China and the ASEAN countries interested in territorial disputes, in order to find an effective Code of Conduct. However, no agreement has yet been reached. In the latest "Brussels' Indo-Pacific strategy paper" drawn up by the Council of the European Union on 16 April 2021, it is written that the Council of the European Union notes with concern the dynamics that have been created in Indo-pacific and which have given rise to intense geopolitical competition that adds up to the increasing tensions over trade and supply chains as well as in the areas of technology, policy and security. In the last period, the European military presence in the region has also increased. Until a few months ago France was the only member state of the EU to have sent military ships in the area. However, this August also a German military reached the area, officially there for a UN mission to supervise North Korea. Now it may soon be the turn of the Netherlands, while the EU is about to release its Indo-Pacific strategy.

Also the exchange of military technologies is part of the security dimension of the relationship between the EU and ASEAN. For example, of the approximately 124 billion investments announced by the Ministry of Defence in Indonesia in five years, which is three times the budget normally allocated by Jakarta, a large part is for European defence producers. Indonesia has in fact decided to buy 8 military ships from Fincantieri, an Italian public building company engaged in the naval field. Of these 8 military ships, 6 will be constructed ex-novo by Fincantieri while the other two are ships "in retirement" of the Italian Navy and so they will be renewed. As also Fincantieri has declared, this agreement is not only advantageous from an economic point of view but is also of extreme importance for the collaboration between Italy and Indonesia in a strategic area like the Asia Pacific. In addition, Indonesia also decided to buy 36 French military fighters. Many European countries, in fact, see Southeast Asia as a promising market for the sale of armaments and military technologies.

Indo-Pacific, the EU seeks its own way

The US announces a new defensive pact with the UK and Australia. Brussels also relaunches its presence in the Indo-Pacific

Editorial by Valerio Bordonaro, Director Associazione Italia-ASEAN

The first reactions coming from the EU regarding the new pact of defense Aukus have been substantially negative. The agreement brings together the US, the UK and Australia in the Indo-Pacific area and provides for the sharing of technologies in cybersecurity, artificial intelligence, underwater systems and long range attack capability and plans to equip Camberra with a fleet of nuclear-powered submarines. Peter Stano, spokesman for the High Representative for the EU’s Common Foreign and Security Policy, said that Brussels had not been notified in advance about the decision. France was especially complaining, considering that, with the birth of Aukus, a contract signed in 2019 for the supply to Australia of 12 conventional submarines for an amount of EUR 56 billion was cancelled. Foreign Minister Jean-Yves Le Drian spoke of a “brutal” decision. Several EU officials point out that this is, after the withdrawal from Afghanistan, the second important strategic decision taken by Washington without consulting its European partners. The timing between the announcement of the trilateral agreement and the expected publication of the EU strategy for the Indo-Pacific should also be noted. The document, presented by Josep Borrell, the High Representative for Foreign Policy, contains many ideas on the ASEAN area. Indeed, the conclusion of Partnership and Cooperation Agreements (Pcas) with Malaysia and Thailand, the assessment of a possible resumption of trade negotiations with Malaysia, Philippines and Thailand and the possible negotiation of an interregional trade agreement with the entire block of Southeast Asian countries are expected. It also aims to expand the network of digital partnerships with Indo-Pacific partners, as well as exploring the possibility of new digital partnerships with Japan, South Korea and Singapore. In addition to Quad and Aukus, the EU can try to carve out the space for a regional presence with its specificities and devoted to cooperation, not to contrast. 

The protection of EU Geographical Indications in ASEAN

Italian agri-food exports to Asia are worth millions. The EU model of geographical indication protection is spreading to ASEAN countries.

Prosecco, parmigiano reggiano, pecorino romano. Italian agri-food products are a national treasure. Food and drink exports were worth almost €38 billion in 2019, around 8% of Italian exports. This is not just an economic matter, though. Food is a serious topic for Italians, and we may get upset when we see it poorly cooked or even 'usurped' by foreign companies abroad. Italian sensitivity about food surprises people of other countries - and amuses them: Italians mad at food is a popular thread of memes in international social media. This double value of food, as an economic asset and a symbol of lifestyle, drives Italy to be particularly careful when it comes to the protection of its food products through the recognition of geographical indications (GIs) at the European level. The EU regulates GIs and protects them in foreign markets too, pushing dedicated chapters in its free trade agreements (FTA), as in the treaties with Singapore and Vietnam.

GIs fall into the broader category of intellectual property rights (IPR), alongside trademarks and patents. Names registered as geographical indications are protected against imitation and misuse within the European single market. Each registered name is linked to a territory, but also to a production method and specific raw materials. If a company wishes to sell its product using the name protected by a geographical indication, it must scrupulously adhere to the production rules registered at the European level. In concrete terms, GIs then become a mark on the label of many products we find on the shelves, guaranteeing the link between that product and its territory. This is the so-called sui generis legal protection: GIs provide a different level of protection in comparison with ordinary trademarks. Other jurisdictions, such as the United States, use trademarks to protect the economic interests of producers from a specific geographical area. The trademark referring to a specific geographical origin is owned by a company or an umbrella organisation, and it may be then granted by that company to other producers. To give an example, Parmigiano Reggiano is a geographical indication in the EU, while it is a registered trademark owned by the Italian Parmigiano Reggiano consortium in the USA. This difference in protection raises many implications and just as many controversies. Both instruments are compatible with the TRIPS Agreement of the World Trade Organisation.

In ASEAN countries, both types of protection are used, although most Member States have now switched to the sui generis system. Using GIs instead of trademarks makes harmonisation with the EU protection system easier too. Indeed, Brussels pushed for the inclusion of a section on GIs in its FTAs with Singapore and Vietnam, leading the partners to strengthen their domestic legislation in this area and ensuring full mutual protection of registered names. Mutual recognition of GIs is achieved by annexing a list of products to be protected to the FTA: at the time of their conclusion, the Agreement with Singapore protected 196 EU GIs, while the one with Vietnam protected 169 EU GIs and 39 Vietnamese GIs. These lists can be updated in the future, too. The European negotiators are always resolute on the GI issue, which comes up again and again in every new FTA negotiation. It is often a difficult chapter to tackle. Europe recognises a large number of indications (over 3300) which are in great demand among consumers and, therefore, imitated abroad. On the other hand, our partners often do not have a comparable number of GIs to protect. The disparity between the lists of protected products in the EU-Vietnam FTA is obvious: we immediately realise that just the number of Italian products protected by the Agreement is greater than the number of Vietnamese products – and then there are the products of all the other EU Member States. The Commission's negotiators have often to find a compromise with the partners, sometimes by making concessions on other chapters of the Agreement and by selecting a limited number of ‘strategic’ European GIs with the help of the EU national governments and the producers’ consortia. The results of EU trade policy on the subject are satisfactory and mainly benefit those Member States with widely recognised GIs (e.g., Italy, France, Spain, Greece).

Sometimes the GI issue becomes a major obstacle for negotiations: we have seen this in the TTIP negotiations (although they certainly did not fail for this reason alone) and in the ongoing negotiations with Australia and New Zealand. In addition to the differences in legal protection (sui generis vs. trademark), there are clashing commercial interests. On the contrary, the EU seems to have been particularly lucky with ASEAN, which has internalized the protection of GIs among its institutional objectives, and it is building its capacity with the help of Brussels thanks to the ARISE+ project. This process will lead to valuable products from all over South-East Asia being effectively protected in ASEAN and European markets - such as, for example, different varieties of Indonesian Arabica or Sarawak black pepper from Malaysia. We may be witnessing a new case of the so-called Brussels effect, the EU's ability as a 'regulatory superpower' to circulate its standards and impose them on other actors (private and public) of the global economy. The EU now seems to have consolidated its model of GIs protection as the most relevant at the international level, also thanks to the conclusion of an historic agreement with China, which protects its leading GIs in a key market. It is also interesting to note that the European model is not only moving in one direction: it is precisely from Asian partners that the European regulator is receiving more and more encouragement to extend the GIs regime to non-agricultural products and to expand the lists annexed to the existing FTAs. The Commission is already working on a reform of the GIs framework. In a few years, we could see Carrara marble and Murano glass receiving enhanced protection in the European market, as well as in Asia.

However, there is also resistance to the spread of the European model. For example, dairy companies from all around the world, particularly from the United States and Australia, look with irritation at the Brussels' moves in Asian markets on the GIs issue. These producers are sometimes the descendants of Italian immigrants who have brought with them and adapted traditional know-how from Italy. They believe that the GIs scheme is disguised European protectionism, a tool to hinder competition in the countries where the EU has secured an FTA. The consortia of these companies are just assertive as their European counterparts and very vocal in persuading their governments to react to the encirclement by the EU GIs system and guarantee the right to commercial use of 'common names' (parmesan, gorgonzola, chardonnay, bologna, etc.). The battle is open and is being fought with no holds barred. It is no coincidence that the US tariffs of the Trump era mainly hit EU and Italian food products that enjoy greater protection in third-country markets, or that the consortia of both sides have sometimes signed what appear to be non-belligerence agreements. The EU does not intend to back down and it will certainly seek the broadest possible protection for the GIs of both sides in the FTA it is negotiating with Indonesia.