Embrace the circular economy: a requirement for Southeast Asia

The development model of Southeast Asia is preparing for the historic turning point of the circular economy. This is how the countries of the ASEAN bloc are moving to incentivize a system that will bring advantages on profits and the environment

Increase profits, reduce waste and save the world: these are the objectives of the circular economy, the economic system based on the concept of eco-sustainability and waste reduction, which could become the ace in the hole for Southeast Asian countries in the coming years.

In fact, the ASEAN countries have been affected for years by serious problems of pollution, waste of unused resources and the accumulation of plastic debris in the sea. Problems that ASEAN itself dealt with in a 2019 report entitled "Asean Framework of Action on Marine Debris", which lists the problems of the Asian region in terms of marine waste and possible environmental policies to be adopted to curb them.

According to the World Economic Forum, by 2050 an economy based on the consumerist model of "take, make, dispose" will no longer be sustainable and the circular economy could be the best tool to combat pollution and waste. The data show that only 20% of all materials produced globally are reused, while 80% are not recycled: today we can afford it, but tomorrow this will not be possible. Demographics are a further cause for concern in Southeast Asia: by 2050 the urban population will increase by over 260 million inhabitants and it is, therefore, necessary for these countries to start introducing environmental policies aimed at implementing, within companies, a circular economic structure that will allow an estimated 80 to 99% material recovery.

The countries of Southeast Asia are not only concerned about population growth but also about the damage caused by pollution and climate change, which could affect them deeply. According to the consulting firm Maplecroft, by 2050 the damage caused by climate change could result in a loss of 3% of the GDP of the Southeast Asia region, compared to an estimate of 1-2% for global GDP. In the report, two of the cities at particularly high risk are Jakarta and Manila: Indonesia and the Philippines- as reported by the 2015 research 'Plastic Waste Inputs from Land Into the Ocean' - are the second and third largest countries in the world in terms of production of plastic waste dispersed into the sea.

In order to combat pollution, Indonesia published a report at the beginning of the year conducted by the Ministry of National Development Planning analysing the potential effects of adopting a circular economy on five key sectors of the economy. The effects are twofold: on the one hand, an improvement in environmental conditions and, on the other hand, a considerable increase in profits. According to the report, in fact, by 2030 Indonesia could boost its economy by $45 billion</a, and create almost 4.5 million new jobs.

In 2020, another major project was set up to kick-start the green turn in Asia: the "Closing the Loop" project, supported by Japan and involving four cities in Malaysia, Indonesia, Thailand and Vietnam. The aim of the project is to create an organisational plan to combat plastic waste by identifying areas at risk in cities, where large amounts of plastic waste are most likely to form and accumulate so that municipal authorities can adopt circular economy strategies for waste management.

Despite the good intentions, probably dictated more by the possibility of GDP growth than by environmental reasons, the road for the Southeast Asian countries is still uphill and there are many measures that still need to be implemented by their respective governments.

Although Indonesia was joined by Vietnam, Singapore and the Philippines, which announced in 2021 that they intend to implement new green policies and ad hoc strategies to embark on the path towards the circular economy and its 5 Rs "reduce, reuse, recycle, regenerate and renew”, several risks remain for governments.

According to some experts, the biggest risk for Southeast Asian countries would be the lack of involvement of small and medium-sized enterprises (90% of registered companies in the region) in the ecological transition.

Even if it is theoretically easier for a small company to change its policies compared to a large company, the lack of adequate incentives and economic support to implement programmes focused on the circular economy risks leading many SMEs to abandon the green turn. A good solution to this problem has been implemented in Vietnam, where low-interest loans are offered to companies that want to develop carbon-neutral projects.

Numerous studies, especially those carried out by the Ellen-MacArthur Foundation for the past ten years on the circular economy, show that a change of direction in the countries of Southeast Asia is necessary because following a linear economy will no longer be sustainable in the near future.

The sooner measures are taken to bring about concrete changes in the environment, the sooner there is a better chance of achieving the results these countries have set for 2030 in terms of reducing pollution and plastic waste. All this together with a dual incentive for transition and economic growth.

Green finance leads decarbonization of Southeast Asia

Decarbonization and energy transition are key issues in Southeast Asia. The major players on the ground are Japan and China, whose rivalry in green finance can positively affect the region

On 7th May, the Asian Development Bank (ADB) announced that it would cease funding coal-fired power plants, fossil fuel extractions and activities for the production and exploration of oil and natural gas. The news is part of the ADB's Strategy 2030 published in 2018, in which the bank committed to cumulatively invest USD80 billion in sustainable financing between 2019 and 2030.

Since the second half of the 18th century, mankind has used fossil fuels to produce energy. Technological development gave impetus to the second industrial revolution in Europe, enabling the creation of the steam engine, which cut down the costs of transport and began to weave the first webs of what would soon become the globalised economy. Human progress continues to be measured in revolutions: now, it is the turn of a global renewable energy industry revolution and production processes that drastically limit our impact on the planet.  

For developing countries such as the economies of Southeast Asia, this is a major challenge. On the one hand, these areas are particularly exposed to environmental disasters caused by anthropogenic climate changes; on the other hand, the economies of Southeast Asia are still in an undeveloped but emerging stage. For this reason, the tension between national choices and international sustainability imperatives plays a crucial role. In fact, coal remains the favourite source in the regional energy mix, for governments and businesses. The demand for electricity is growing fast in emerging markets, which is why it is a priority for governments to ensure supply at affordable prices. There is a misalignment between the political need to stimulate domestic demand while maintaining the production process competitive, and the need of foreign investors who stop financing activities that use obsolete technologies. In this regard, Tim Buckley of the Institute for Energy Economics and Financial Analysis said that if these banks stop financing it, coal is dead: "Coal is not bankable without government subsidised finance."

Indeed, the latest annual report from the International Energy Agency (IEA), published earlier this year, highlights how the massive population growth in Southeast Asia will play a crucial role in shaping global energy policies. In this regard, the Asian Development Bank had already scheduled with ASEAN a plan for sustainable infrastructure projects in April 2019: the ASEAN Catalytic Green Finance Facility, a green finance mechanism in the hands of regional governments, focused on developing climate-friendly projects, under the ADB supervision.

However, ADB is not the only one to have focused on Southeast Asia for its sustainable investments. The Japanese-based bank is called upon to compete with the Chinese-led Asian Infrastructure Investment Bank (AIIB), a multilateral financial institution focused on promoting infrastructure projects in Asia "with sustainability at its core".

China's role in Southeast Asia's decarbonization programs is ambivalent. As reported by Channel News Asia, the IEA claims that more than 80% of the growth in coal use will come from Asia and that this increase will be driven by China. In order to accelerate the post-pandemic recovery, Beijing increased the use of coal, aiming at stimulating its economy by fueling domestic demand. In addition, China remains faithful to the Marxist assumption that it is good to use the material tools available to the status quo before carrying out a revolution, in this case, an energetic one. The leadership's medium-term plans include an ambitious ecological transition, which aims to make the country carbon-neutral by 2060. Tim Buckley commented, in this regard, that China is a leader in every industrial sector that is critical for the decarbonization of the world, and this should allay Western fears about the reliability of the Party-State's commitments.

The substantial antagonism between China and Japan would seem to point towards virtuous competition in Southeast Asia, with the emphasis on sustainable infrastructure investments aligning with the urgency of environmental concerns in the region. For structural reasons such as geographical, economic and political-institutional issues, Southeast Asia remains a context particularly exposed to the consequences of the climate crisis, exacerbated by the irresponsible use of obsolete energy resources. Therefore, for national governments, the tension between unsustainable growth imperatives and the disruption of environmental disasters remains a historical challenge. This is why green finance can take on the role of game-changer in the region, shifting the balance in favour of more sustainable policies and practices in the near future.

The AEC Blueprint 2025 and its opportunities for the EU

While the ASEAN Economic Community (AEC) sums up the results achieved with its AEC 2025 plan, the European Union would better protect the special space it has carved out in its relations with Southeast Asia.

The mid-term review of the AEC Blueprint 2025 was held on 28th April, with the participation of an EU delegation in ASEAN. The activities of the ASEAN Economic Community (AEC) are coordinated through this development plan, designed relying on the studies on regional economic environment provided by the Economic Research Institute for ASEAN and East Asia (ERIA), the S. Rajaratnam School of International Studies (RSIS) and the Institute of Southeast Asian Studies (ISEAS), which helped define the AEC guidelines for the coming years. The AEC Blueprint 2025 was developed on the basis of the previous AEC 2015 and it aims at achieving some general objectives: an integrated and cohesive economy; competitiveness, innovation and dynamism in ASEAN; sectoral connectivity and cooperation; greater inclusiveness and people-centered approaches; and finally an ASEAN that aspires to become a relevant global player. Furthermore, it is not only a significant document for the economies of Southeast Asia but also for international partners such as the EU.

The review evaluated the results obtained in the first years of implementation. According to Secretary General Dato Lim Jock Hoi, who spoke at the meeting, it would be appropriate to shed light on three fundamental dimensions. First of all, despite the positive performances, these results are not enough: the Association needs to improve the responsiveness to cross-cutting issues and cross-sector coordination. Secondly, even if the primary goal remains to achieve greater economic integration, ASEAN must always keep in mind that the external environment is evolving and that if urgent challenges such as climate change intensify, it is necessary to adjust the 2025 plan accordingly, incorporating these new instances. Third, ASEAN needs to consider the material characteristics of its markets and address gaps and complexities through regional cooperation.

A delegation from the European Union was also present at the launch of the mid-term review, which welcomed the constancy that the Association has shown in maintaining these economic and commercial commitments. Just ten days earlier, on April 19th, the EU had inaugurated its Strategy for Cooperation in the Indo-Pacific, which recognizes the growing economic and geopolitical importance that the region has been demonstrating in recent years. The European Union and ASEAN share the most mutually advantageous relations, having worth to the latter around 123 billion euros in exports in 2020, according to estimates by the International Trade Center. Furthermore, not only does the Indo-Pacific region account for a significant share of world GDP and nearly two-thirds of global growth, it also has some of the biggest fractures in the global geopolitical mesh. Amidst issues relating to disputes with China in the South China Sea, a particular exposure to the most disruptive consequences of climate change, and the fact that regional actors have different preferences compared to countries with which to cooperate more actively, Southeast Asia is very much more than an economic hub for Europe.

Therefore, closely observing the political and economic dynamics of the ASEAN countries is essential to be able to glimpse the direction that the global economy could take in the future. Not only does the Southeast Asian region have a huge and developing market despite the pandemic but the way in which these economies react to the threat of environmental disasters, and to issues related to the inclusion of marginalized social categories, is the perfect synthesis of the global challenges that await us all. This is why the AEC Blueprint 2025, a proper regional project, has its own relevance also for the Union, which seems to have carved out a role as the main supporter of the economic development of Southeast Asia. Although they are regional organizations of a different nature, ASEAN and EU represent the most advanced economic integration projects in the world, and also share some of the value paradigms on which they are based: multilateralism, rule of law, free market. Hence, the Union should take the opportunity of these affinities to protect the advantage acquired over economic partners that are geographically closer, but ideologically much further away.

Looking for Start-Ups in the Southeast Asian market

Grab, Gojek, Sea and Tokopedia: international finance bets on start-ups made in ASEAN

Wall Street recognized the potential of Southeast Asian start-ups. It is a much larger and much more populous region than Europe or North America and its economy, despite the pandemic crisis, is growing at a rapid pace. Nevertheless, to be successful in this market you need to master its main characteristics. It is no coincidence that Uber's businesses were entirely bought out by its local variant, Grab, in 2018. As well as China's Alibaba has struggled long to outclass Lazada, a regional e-commerce company.

In recent years, the landscape of Southeast Asian tech start-ups has expanded more and more. Digital services such as ride-hailing or delivery have become increasingly popular. Since 2015, venture capitalists, technology groups (including Alibaba and Tencent, Google and SoftBank) and Wall Street veterans have invested $ 26 billion in the region. The capitalization of the Sea group, a Singaporean e-commerce company listed in New York, has quadrupled in the last year, reaching USD 125 billion. Grab also recently went public for nearly USD 40 billion, backed by BlackRock, the world's largest asset manager. Gojek, the Indonesian ride-hailing alternative has been valued at over USD 10 billion and could merge with Tokopedia, an Indonesian e-commerce company, before accepting being listed in New York. Traveloka, a company specialized in airline reservations, is also about to go public on Wall Street. The most valued and used e-commerce services in the region together exceed the value of USD 200 billion.

All of these companies started by carving out a niche market. Then, they evolved to become direct competitors of the American and Chinese companies of the same kind. Grab is present in eight countries, and in addition to transport it offers food delivery services, digital payments, insurance, investments and health consultancy. It also plans to launch a digital bank in Singapore this year. One of its co-founders, Tan Hooi Ling, describes it as a mix of Uber, DoorDash (a US-made food delivery app) and Ant (Alibaba's financial branch). In short, a super app that includes services normally distributed on multiple platforms. Same goes for Gojek, which offers a similar catalog of services.

However, the exponential growth of these platforms is not predetermined. If the quality of the infrastructures and communication networks does not improve, many of the potential users will be cut off. Especially if companies find it unprofitable to offer their services in certain areas. The problem was raised in reference to the particular geographic conformation of Indonesia which hosts more than 6,000 islands and does not have the infrastructural network of neighboring China. Not to mention that a large part of the population has a very low income, with little money available to shop online. And even if the emerging platforms managed to overcome these obstacles, sooner or later, they would inevitably find themselves overlapping one another. Grab and Gojek already compete for the same market. 

Risks that are amply justified by the excellent results. After all, high growth translates into tolerant investors; Sea's revenues increased by 101% last year and Grab expects to reach a balanced budget by 2023. Indeed, many investors argue that the Southeast Asian market is so vast and varied that it is impossible to form monopolies. This confirms the words of Gojek founder Kevin Alawi, "it is not a market in which whoever wins takes everything". A prospect that presents many opportunities for Western investors, especially in a post-pandemic context and the recovery of domestic consumption.

Sea: an ASEAN model for e-commerce

The largest e-commerce platform in Southeast Asia combines Amazon, Alibaba and TenCent in a new formula

When Sea was founded in 2009 as a ‘communication platform’ for only ASEAN video gamers, founder and CEO Forrest Li did not imagine his company in 2020 to be ahead of Uber for market capitalization ($120 billion), nor that its growth would have overcome Alibaba’s backed Lazada by far.

Sea has grown dramatically since 2016 (+750%), with revenues now reaching $4,37 billion (+101% from past year), becoming the most vivid example of Southeast Asian online success. Today Sea’s stocks are considered one of the most attractive on the tech global scene, only second to Tesla’s.

What is, then, Sea? How it has become a global digital power? And why its motto is ‘connecting the dots’?

Let’s start from the beginning. Sea was founded in 2016 based on the Chinese TenCent business model (which is indeed mentor and 21% stock owner): first the focus on gaming, then the expansion into e-commerce, social networks and digital payments.

Sea’s objective in 2016-2017 was to conquer video gamers: it first was a communication platform, then a publishing company, finally a game developing firm. Garena Free Fire, the most successful and acclaimed video game in ASEAN, allowed Sea to gain momentum in the online market, and symbolized its initial success in the e-conomy.

Later on, Sea decided to expand in e-commerce by building an internal platform, named Shopee. The latter choice however differentiated it from TenCent, which decided in the last decade instead to expand in e-commerce by acquiring JD and Pinduodo. 

At last, this strategic move has brought enormous advantages to Sea: today, Shopee is the first e-commerce platform in ASEAN, with a 2020 record of $2,16 billion in revenues.

Lastly, Sea has recently invested in the financial technology industry (fintech), this time following TenCent’s business approach. SeaMoney, a financial platform similar to Mercado Libre in South America, has grown more than 282% in 2020, and it is literally revolutionizing digital payments in ASEAN, also due to social distancing effects among the populations. This transformation is most of all similar to what happened in 2003 in China during the outbreak of the SARS epidemic, when Alipay and WeChat pay saw a dramatic growth. In addition, Sea has acquired an Indonesian bank, the BKE bank, to better address its enduring liquidity issues, and it has recently created a fund, Sea Capital, to funnel investments in the fintech industry (loans, mobile wallets, SPayLater).

Ultimately, Sea’s competitive advantage is rooted in two factors, together essential and complementary: the focus on local needs and the exploitation of economies of scale.

Differently from other e-commerce players, indeed, Sea has decided to massively invest in research and development in order to collect, analyze and create marketing insights to better respond to local market demands throughout the region. In the words of Forrest Li, CEO odd Sea, continuous investment is the crucial factor and key mean for growth, even though it causes increasing losses in the short term.

On the other hand, this steep development has only been possible thanks to the size of the company: by continuously expanding, both externally and organically, Sea has been initiating new and fresh synergies between businesses, eventually creating a virtuous cycle echoing the Amazon business model.

Perhaps, the latter is indeed what truly differentiates Sea and makes it appealing in the international arena: the sight of a potential enormous data powerhouse which could transform the lives of hundreds of millions, not by just providing e-commerce services, but also ‘business as usual’ services.

To conclude, recent rumors have suggested an imminent merge between Gojek and Tokopedia, the other two ASEAN giants, and the next months will be crucial to address the future of the most dynamic industries in Southeast Asia. 

Marine pollution: an imperative for Southeast Asia

The ASEAN countries must solve the problem of marine pollution

Da diversi anni l’inquinamento marittimo è diventato uno dei dossier principali per gli Stati e per le  organizzazioni internazionali che si occupano di ambiente. 

A 2015 study highlighted an inconvenient truth for the countries of Southeast Asia: today they are the reason of over 60% of total marine pollution. Among the 20 countries in the world with the highest rate of pollution caused by plastic waste dispersed at sea, 11 countries belong to SEA: after China, we find Indonesia (2nd), Philippines (3rd), Vietnam (4th), Thailand (6th), Malaysia (8th) and Myanmar (17th).

According to statistics, every year the greatest amount of plastic pollution comes from the packaging industries and the textile sector, which are increasingly present in China and in Asian countries: of about 300 million tons of plastic debris in the sea, more than half of them come from the textile and packaging sectors.

These numbers do not only put Asian countries in a bad light in front of the public opinion, but also demonstrate the inefficiency of these countries in implementing policies suitable for recycling plastic waste: according to World Bank data, about 75% of plastic in Malaysia, Thailand and the Philippines is not recycled, causing Southeast Asian countries to lose $ 7 billion each year.

Such a high rate of plastic waste pollution is mainly caused by two factors: on the one hand, sea currents transport waste from other countries to the Pacific coasts, on the other hand the dominant factor are rivers. Among the ten most polluted in the world, eight are found in Asia: the most important, by pollution rate, are some rivers in China (Yangtze, Xi Jiang, Huangpu), followed by Brantas (Indonesia), Pasig (Philippines), Irrawaddy (Myanmar) and Mekong (China, Myanmar, Laos, Thailand, Vietnam and Cambodia) which considerably increase the already large amount of pollution in the seas of Southeast Asia.

To overcome the issue of plastic waste, in recent years the ASEAN countries have found agreements for the reduction of marine pollution: for example, in Bangkok in 2019, the Bangkok Declaration on Combating Marine Debris in the ASEAN Region was adopted with the goal of “a href="" target="_self">“reinforcing actions at national level and collaborative actions so that marine pollution would be prevented and drastically reduced”.”. Currently, the greatest efforts have been undertaken by Malaysia and the Philippines, where major international companies and brands are trying to reduce plastic consumption. Thailand, where plastic plays an important role in the country's economy, has joined these two countries: in fact, in Thailand the plastic manufacturing companies alone account for 7% of the country's GDP.  

Important projects have recently been developed in the Asian region: the most important of these is the "Closing Loop" set up by ESCAP, the UN Economic and Social Commission for Asia and the Pacific, in collaboration with Japan and ASEAN. The project, which involves Kuala Lumpur (Malaysia), Surabaya (Indonesia), Nakhon Si Thammarat (Thailand) and Da Nang (Vietnam), aims to provide the essential tools and know-how to strengthen policies and strategies of investment, in order to develop an approach towards circular economy to better manage the process of plastic recycling within the countries involved.

In the coming years, the countries of Southeast Asia will have to conduct environmental policies increasingly aimed at the transition towards a circular economy, a factor that could play a decisive role in the future. 

Through the circular economy, these countries have the opportunity to expand their respective economies, improving on the one hand the conditions of the fisheries sector, which play a fundamental role for the countries’ economy bordering the South China Sea, and on the other hand by increasing the demand of marine tourism. 

Combining gender equality and digital economy in ASEAN

Economic digitization in Southeast Asia is an opportunity for ASEAN countries to achieve an economic recovery that include gender equality

The Economic Research Institute for ASEAN and East Asia recently published a policy brief entitled "Women’s Participation in the Digital Economy: Improving Access to Skills, Entrepreneurship, and Leadership Across ASEAN". The authors, Giulia Ajmone Marsan and Araba Sey, observed that among economic trends found in the aftermath of the Covid-19 pandemic progressive digitalization of the economy is to be considered a real opportunity for Southeast Asian female workers.

Lately, during a webinar organized by ERIA, Araba Sey emphasized how difficult dealing with these topics is, arguing "it is difficult to legislate gender equality because it comes from the heart". Indeed, addressing issues related to the systematic exclusion of women from certain economic sectors, especially that of digital technologies, is always complex. It is difficult to understand the plurality of issues included in the notion of gender equality, as the battle for greater inclusion is played out on material and immaterial levels – from wage gap to social discrimination.

In general, the objective of the report is to indicate a paradigm of strategies to promote integration of Asian female workers in a regional economy that is recording ever-growing performances. Indeed, we should keep in mind that some ASEAN countries, despite having experienced collapses in GDP in 2020, have shown exceptional resilience in recent months. With this regard, focusing on a more inclusive digital economy can further contribute to the post-pandemic recovery of the national economies. 

The report’s authors argue that in order to include female workers in the digital economy of Southeast Asia, it is necessary to develop targeted political strategies and implement regional action plans. The women have been particularly hit hard by the economic consequences of Covid-19, since in percentage they are over-represented in sectors such as tourism, retail and clothing: the first sector has almost completely stopped for a year now, the latter areas are at high risk of automation. Furthermore, they point out how profound is the connection between low wages, low-skilled jobs and the risk of automation. That is why they suggest investing in the creation of a more qualified female workforce, which favors greater opportunities for access to the digital economy.

During the webinar, Araba Sey stressed that a coordinated economic strategy at a regional level must also be combined with a commitment to deconstruct gender stereotypes and prejudices, which symbolically support the systematic exclusion of women. As an instance, while men are rewarded for devotion to work, women are frequently called upon to choose between family and work devotion, with the result that the desire not to give up either of them involves resorting to low-skilled and therefore underpaid jobs. Finally, the report shows that ASEAN countries perform well in terms of access to basic digital technologies and tools, such as tablets and smartphones. But women are left behind when it comes to providing access to more advanced technologies and leadership positions in digital sectors, which would ensure integration of a gender perspective in the sector, and therefore a more inclusive economic environment. Considering that by 2025 nearly half of the world's population will reside in Asia, the fate of female workers in Southeast Asia has great relevance for the condition of women around the world.

The economic benefits of the RCEP for Southeast Asia

The RCEP is the world’s largest free trade agreement. What will be the economic benefits for Southeast Asia?

A report published recently by the United Nations Conference on Trade and Development (UNCTAD) argues that the implementation of the Regional Comprehensive Economic Partnership (RCEP) could be harmful to many participating states. This report states that the ASEAN countries’ balance of trade could be affected as a result of the RCEP ratification, since their imports of goods to other countries participating in the agreement will be greater than their exports. This is particularly true for China that -thanks to its efficient export capacity- could benefit most from trade diversion. According to Deborah Elms, Executive Director of the Asian Trade Center in Singapore, the conclusions drawn from this report are most likely wrong. By participating in the world’s largest free trade agreement (FTA), ASEAN will experience a new economic boost.

An inadequate model often results in poor judgments about the impact of trade agreements. Elms notes that it is very complicated to obtain valid estimates of the impact of any trade agreement. The simplest element to evaluate in a FTA is the reduction in tariff rates. All FTAs ​​aim to lower tariff rates at the border in order to provide benefits to member States and reduce costs. A reduction in tariffs rates should stimulate greater trade flows. However, not all goods are eligible for tariff cuts, which must be designed to meet the criteria of each trade agreement and include sufficient content from participating countries. Even if a product is eligible, companies have to apply for lower tariff rates since the FTA preferences are not automatically granted. As a result, no FTA has ever achieved full tariff liberalisation, in which free or discounted tariffs are granted to all goods entering the country.

Economic models are usually also based on existing trade profiles. Thus, in order to analyse the economic impact of tariff reduction and elimination, a model starts from the existing trade information. However, a key point of a FTA is to provide new opportunities for trade and to improve existing trade agreements or frameworks. Therefore, the new trade flows generated by the RCEP will not be seen in the economic models of the existing FTAs, as reported in the UNCTAD report, as they are new and will only affect trade later.

Determining the economic impact of the RCEP, like any FTA, continues Elms, also depends on other existing conditions. Asian governments, including ASEAN members, have been enthusiastic participants in FTAs. The RCEP itself was built on the basis of five pre-existing ASEAN+1 trade agreements. In fact, the region joins many different types of agreements, from bilateral commitments to large regional agreements. The benefits of the RCEP, even if only assessing tariff reductions, depend on the comparison of the RCEP with the other existing trade agreements. Companies could already benefit from duty-free access for their products under other FTAs, such as the one between ASEAN and China. Economic models that look at RCEP by isolating it from other processes, as the UNCTAD study did, struggle to grasp this level of complexity.

Furthermore, all FTAs include phased commitments. Tariff cuts are not granted immediately to all product categories but adapted over time. Elms points out that comparing the benefits of the FTA with the commitments of the RCEP requires careful consideration of timing. On the first day it comes into force, the RCEP may not be comparable to the benefits of existing FTAs, but after the tariffs are fully implemented the differences could be significant. 

In addition, the RCEP, as well as other global FTAs, includes more than just tariff reductions. Changes in customs procedures may have an even wider impact on companies, as the cost of delays at the border can be quite high, affecting returns much more than changing a tariff rate. The commitment to transfer commercial documentation online or clear cargo within six hours could end up being the most significant element of the RCEP for many companies. The services and specifically the investment commitments included in the RCEP are substantial, but difficult to show through economic models.

According to Elms, the reduction in tariffs on goods, which benefits China, is often overestimated, while the reduction of barriers affecting services, in favour of ASEAN, is dismissed too quickly. Excluding the analysis of these aspects of the agreement does not give a full picture of the overall benefits provided by the RCEP. It seems clear -Elms concludes- that the RCEP will offer significant economic benefits to member States, which will be appreciated even more by companies.

Carlo Urbani, the new hero of two worlds

The Italian doctor discoverer of the SARS virus, who operated in Cambodia, Laos and Vietnam

It is March 29, 2003 when Italy learns that his citizen, Dr. Carlo Urbani, died at the Bangkok hospital due to SARS (severe acute respiratory syndrome), an atypical form of pneumonia appeared in the South-East Asia that same year. 

Only then, people become aware of the extraordinary work carried out by the Italian doctor, the first who has isolated the virus and one of the first SARS victims. As the Superior Health Institute declares, "its early SARS report has placed the global surveillance system in alarm and it was possible to identify many new cases and isolate them before the hospital health personnel were infected. Thanks to the isolation of the virus, it was possible in a short time to develop a vaccine and place effective care measures to reduce its diffusion ".

Urbani, married with 3 children, after his specialization in infectious diseases at the University of Ancona, was immediately attracted by the challenge that international health launches to humanity, first in Mauritania with the WHO and then in Cambodia with Médecins Sans Frontières (MSF). In April 1999 he was elected president of MSF Italy and joins the delegation that collects the Nobel Peace Prize awarded to the organization. After Cambodia, his commitment takes him to Laos and then, in April 2001, Urbani moves with his family to Hanoi as coordinator of WHO health policies in Vietnam, Cambodia, Laos, Thailand, China and the Philippines.

Despite the organizational responsibilities, fighting forgotten diseases and saving human lives always remains Urbani's main mission. On February 28, 2003, the doctor is called by a French private hospital in Hanoi to deal with a case of atypical pneumonia that had hit an American businessman. From the ascertained symptoms, he immediately understands that the man is facing a new type of contagious virus.

The main suspicion falls on an epidemiological outbreak already observed in Guangdong, a southern China region where the SARS virus had spread for months, kept hidden by the Beijing authorities from the world community. A delay that proves fatal and contributes to the uncontrolled spread of the virus. 

Urbani senses the threat of the new virus, completely unknown to the human body, without a therapeutic protocol or vaccine, and therefore capable of evolving in a very short time into severe bilateral pneumonia, potentially lethal. Thus, the Italian doctor, by raising the alarm to the Government and the WHO, convinces the local authorities to adopt preventive isolation and quarantine measures to limit its spread.

Unfortunately, he did not imagine that to have been already infected. Urbani learns about this on March 11, during a flight from Hanoi to Bangkok, Thailand. He asks to be hospitalized in solitary confinement and 18 days later he dies, leaving the provision that a sample from his lungs is taken after his death, in order to analyze it and test a vaccine against SARS.

Urbani's researches are still relevant today, and in these months of health emergency, they acquire even greater importance. The information provided by the doctor on how to contain the infection - including the measure of quarantine - are the basis of today’s WHO protocol against pandemics.

His commitment and dedication to work were recognized by Kofi Annan himself, the former Secretary General of the United Nations, who after his death testified as follows: "We will never know how many millions of deaths SARS would have caused because Dr. Urbani made sure to avoid it. He leaves an illuminating example in the community and we will remember him as a hero in the highest and truest sense of the term”.

The post-Brexit UK is looking Eastward

In rebuilding its political and trade relations after Brexit, London looks to the Indo-Pacific, and in particular to the emerging economies of Southeast Asia

In March, Prime Minister Boris Johnson presented the document Global Britain in a competitive age 2021 to the British Parliament. The British foreign policy report shows London's intention to rebuild autonomous post-Brexit international relations, particularly with the Indo-Pacific region. The idea of a United Kingdom mediating between the European Union and the United States is indeed history. Today, the country looks at East Asia, and in particular at the emerging economies of Southeast Asia, to celebrate its renewed international autonomy. In reality, despite the declaratory tones of Global Britain 2021, the country is nothing more than a middling power in a multipolar world, but it seems to have understood that the center of gravity of the new global order lies precisely in Asia.

During the last months of 2020, Prime Minister Johnson began to weave the ranks of new trade agreements with Japan and Australia, but also Singapore and Vietnam. The country has in fact rushed to regulate trade ties with two of the most prosperous ASEAN economies. The agreement with Singapore, signed last December, essentially replicated the previous one with the EU. The country is a key financial and commercial hub for many multinational corporations operating in the region, and the UK is the main destination for Singaporean FDI. Also in Vietnam, the free trade agreement with the EU has been replaced by a new bilateral agreement that gives the UK access to preferential tariffs. Education, energy, infrastructure and health care offer much opportunities for British exporters, but most of the trade between these two countries takes place in terms of imports of clothing, footwear, rice, seafood and wooden furniture from Vietnam.

In addition, Foreign Secretary Dominic Raab has visited several countries in Southeast Asia, such as Singapore, Malaysia, and most recently Indonesia. His aim was to strengthen economic relations with emerging economies, but also to reaffirm that the United Kingdom is available to cooperate for regional security. Finally, International Trade Secretary Liz Truss said negotiations for Britain's membership of the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) will take place this year. The British participation in the agreement that establishes one of the largest free trade areas in the world would be to the full benefit of relations with ASEAN countries.

So, unlike France, Germany and the Netherlands, the UK has not planned an official strategy for the Indo-Pacific yet, but it is working on it. A series of signs hint at the country's posture, particularly interested in the emerging economies of Southeast Asia, and by joining the CPTPP, Great Britain could finally graft the future of its trade relations in this region. The British foreign policy of 2021 is therefore a litmus test of an economic order that is now mainly played out in East Asia.

5 years in 1: The new ASEAN e-commerce

Not only China: e-commerce is also gaining momentum in ASEAN, with a specific emphasis on everyday consumables.

In the last months we witnessed the gradual disappearance of specific industrial sectors, while others have experienced rocketing growth. E-commerce is clearly the best example of success, and specifically e-commerce in Asia.

McKinsey has found that 2020 has seen two examples of international successful companies: the ones that focus on Asia (+9%) and that massively invest on enhanced digital infrastructures and commerce platforms (+76%).

China has been, for years, the leading actor in this sector. In 2020 Chinese e-commerce grew to a record $2.090 billion, up 26% from the previous year. Total active customers are now 900 million over a total population of 1,4 billion people. However, it is important to shed a light on the two underlying changes that Chinese e-commerce has seen in the last months.

First, Chinese are still not allowed to leave the country out of necessity matters, and they cannot access the most important global commercial and fashion hubs. This has been the end of the so called ‘shopping tourism’, which has brought nationals to purchase online and from their homes. Now, 73% of retail purchases are online, versus 35% of 2019, the trend to endure up to 50% in 2025. Second, Gen Z (the ones born after 1995) are increasingly gaining prominence in purchases, especially the ones living in lower tier cities.

Gen Zs and Millennials account for roughly 300 million consumers, and their presence is literally reshaping the e-commerce landscape by emphasizing the importance of uniqueness and omnichannel experiences.

Although less skyrocketing, ASEAN has also witnessed a historical evolution in its e-commerce industry. Studies have found that the e-conomy in the region has grown five times more than in a business-as-usual year before 2020.

Users grew from 360 to 400 million, while active consumers have grown 33%. If keeping this rate, ASEAN e-commerce market will value $300 billion in 2025. 

The key for this growth has been massive investments in digital infrastructure and architecture and traditional business model innovation, which have all spurred the way for new industries to grow in the long term. In particular, ICTs development and education have also been crucial in successfully facing Covid-19 related challenges. Moreover, the growth of digital conglomerates, together with innovation in digital payments methods, have allowed millions of retailers to access international marketplaces. Similar to the Chinese case, most of the new consumers are young, live in rural or less important urban areas, and are highly sensitive for customization, peer-to-peer confrontation and quality omnichannel integration. Notably, 94% of Southeast Asians internet users will continue to purchase online after the pandemic has ended, a remarkable share even when compared with China (around 40%). 

Though similar to other global ecosystems, ASEAN e-commerce is fundamentally different, due to an intrinsic characteristic.

Indeed, before 2020 the great majority of retail purchases were made offline: like others, ASEAN economies are traditionally ‘communal’, meaning that physical daily contact is an inseparable part of social and economic structures. In this sense, the region has pioneered a new approach to digital commerce, centered on exchange of consumable goods and food. Online purchases of groceries and food deliveries has increased 35%, reaching $6 billion, one of the most consistent increases. However, here the key is that online Asian users are willing to purchase high-quality consumables as well as best-in-class groceries.

These numbers highlight a unique chance for Italy and for Made in Italy products, which have historically been able to represent quality, focus on style and on personality in everyday life, being it with fashion products or food. 

Asian e-commerce has been the key for companies’ prosperous growth in 2020 but will by all chances be also the key for growth for years to come: Italy, if takes it on time, can not only be an accelerator of this commercial shift, but also a global leader promoting a new cross-national e-conomy model.

ENRICO LETTA LASCIA IL TESTIMONE A ROMANO PRODI: cambio di Presidenza all’Associazione Italia-ASEAN


Il Prof. Romano Prodi sostituisce Enrico Letta alla presidenza dell’Associazione Italia-ASEAN. L’ex Presidente della Commissione europea ha accettato l’invito del neosegretario del Partito Democratico a guidare l’associazione da lui fondata nel 2015 per favorire e stimolare le relazioni tra l’Italia e i 10 paesi del Sudest asiatico, nel quadro delle relazioni tra Unione Europea e ASEAN.

Nel suo commiato, il presidente uscente Enrico Letta ha sottolineato che “in questi sei anni di attività, il livello di relazioni politiche ed economiche è cresciuto grazie al lavoro dell’associazione, che si è sviluppato dalle intuizioni di Francesco Merloni – alla guida di uno dei primi gruppi industriali italiani a guardare all’Asia sudorientale – e del Presidente della Repubblica Mattarella, primo capo di stato europeo a visitare il Segretario Generale dell’ASEAN”.

Enrico Letta nel motivare la scelta di Romano Prodi – con esperienze di governo italiane ed europee – ha ringraziato i vice presidenti Romeo Orlandi e Michelangelo Pipan, il tesoriere Oliver Galea, il direttore Valerio Bordonaro e la Segretario Generale Alessia Mosca, che assumerà la carica di Vice Presidente esecutivo.

Il professor Prodi ha accettato con entusiasmo spingendo sulla necessità dell’Italia di rafforzare quelle strutture che si occupano di creare relazioni internazionali economiche e politiche che siano di sistema, informali e profonde.