While there is broad public awareness that the Asean Economic Community (AEC) is making progress, especially with respect to lowering trade tariffs, the benefits of this progress are not always recognised on a day-to-day basis by the people of Southeast Asia.
Yet the potential of Asean should not be underestimated. For Thailand, with its already accomplished manufacturing, services, finance and tourism industries, Asean offers the possibility of economies of scale, closer cross-border operations and a larger region for its economic activities. The establishment of the AEC Vision 2025, which strives to create a more holistic and globally competitive Asean, can further magnify the springboard effect that could help Thailand's economic plans take off.
As the first edition of our special report on the region -- Reimagining Asean -- outlines, Asean is already in a strong position. But, for a highly prosperous and deeply integrated Asean to materialise, ongoing efforts to advance critical reforms have to be intensified -- particularly if the results are to be felt and seen by 2025.
How can Asean become a highly integrated and cohesive economy? Integration involves both the economic and financial markets; breaking down cross-border barriers for an enlarged market with higher economies of scale.
In this respect, there has been major progress -- especially when it comes to trade in goods. By early 2010, Thailand -- along with Brunei, Indonesia, Malaysia, the Philippines and Singapore -- had cut tariffs to between zero and 5% on 99.7% of their tariff lines. As of early 2015, Cambodia, Laos, Myanmar and Vietnam had reduced or eliminated tariffs on 98.9% of their tariff lines.
Alongside the removal of tariff barriers, regional supply chains are flourishing, and multinational companies in Asean are supporting smaller domestic firms' participation in global value chains.
In a significant complementary move, Thailand's National Legislative Assembly reformed the secured transaction law -- the Business Collateral Act -- to expand the range of security interests for financing. This could introduce greater acceptability of supply chain finance techniques, such as receivables financing, and further widen access by SMEs to finance for trade.
Indeed, market adoption of such techniques is something that industry bodies such as the Thai Bankers Association have been working tirelessly to improve, alongside global collaborators such as the World Bank and the Financial Infrastructure Development Network of the Asia Pacific Economic Cooperation (Apec) forum.
We are also seeing cross-border utilisation of currently restricted currencies being encouraged. The Bank of Thailand has announced its intention to promote the use of regional currencies for trade and direct investment settlement; the central banks of Indonesia and Malaysia have done the same.
More corporations are also hedging their foreign-exchange exposure -- facilitating integration -- with financial institutions launching innovative cross-border forex payment services for cost-effective currency transfers.
Guided by the blueprint of the Asean Capital Markets Forum, which deserves to receive more attention, the region's capital markets are also a focus for closer integration to build scale and liquidity. Early attempts by regulators and the private sector have yielded invaluable experience as to how this can be better achieved -- as well as highlighting clear opportunities to streamline certain unnecessary duplicative costs.
In the banking sector, the central banks of the Philippines, Malaysia and Thailand have signed agreements that can open doors for domestic Qualified Asean Banks (QABs) to expand cross-border -- also setting the stage for banks to better support, and follow, their local SMEs in their Asean cross-border ventures.
Yet, despite obvious progress in some areas, our discussions with leading spokespeople in Asean highlighted some headwinds, with an increase in non-trade barriers an important issue.
How do we address this? Better regional customs and trade facilitation infrastructure such as the Single Window, for one, would help cross-border trade, while better and broader educational and resource support for local companies could help elucidate the scope of the opportunities and facilitate their regionalisation.
E-commerce and digitisation of services are fast becoming tools that can quicken the pace of integration and boost trade in services. This is a key area where banks can work with regulators and corporations -- both local and multinational -- to contribute to resilient foundations for accessible digital trade and finance, efficient and robust financial supply chains and cost effective regulatory compliance.
A competitive, innovative and dynamic Asean: what's next? The low-wage advantage enjoyed by a number of Asean economies will not last forever. So how will Asean economies future-proof themselves?
China's economic model is one proven template. The Chinese economy had to transition from one centred on low wages to one driven by greater automation, higher value-added and mass manufacturing.
Therefore, it is extremely encouraging -- and important -- to see the establishment of Asean master plans that put digitisation and connectivity at the very heart of regional policy. Across Asean, member states are also establishing national strategies, while the private sector forms its own fintech associations and initiatives.
Yet, when speaking to experts from across the region, one long-term challenge kept cropping up: inclusivity. For Asean as a whole to benefit from digitisation, we need fast, affordable and accessible internet for as many as possible. We need smaller companies to be able to easily invest in technology. We need skills-based education that can prepare successive generations for a more digitally enabled Asean. Otherwise, we are staring at a potentially large digital divide.
Similarly, e-commerce must be easy to tap into, with data flowing across borders, and regional cybersecurity standards and cooperation.
It is therefore imperative that Asean policymakers, regulators and the private sector all come together now to create sustainable and resilient economic, industrial and financial sectors before the dividends arising from Asean's young demographic run out. In this respect, an Asean regional fintech and innovation advisory council would be a significant step forward.
Why is a resilient, inclusive, people-oriented Asean so important?
Enhanced human capital raises output and productivity as skilled workers are able to leverage technological advancements and innovate further.
Yet, closer engagement among government, employers and training providers is needed to meet evolving skill demands as many Asean countries recalibrate their economic models. Increased mobility of skilled personnel within the region would also help develop skills and plug gaps, such as in the areas of data management and cybersecurity.
The Thai government's commitment to establishing a sustainable "smart" economy -- which has been dubbed "Thailand 4.0" -- is therefore hugely promising, with the focus on human capital development and local industry, while also welcoming the involvement of foreign capital and expertise.
With its other ambitious initiatives such as its national e-payment system that promotes financial inclusiveness, Thailand is clearly reimagining, planning and acting on how it can meet its goals in the face of rapid global and regional changes.
As with Asean as a whole, it is only at the start of this new stage of its journey, which, to be navigated successfully, will require greater inclusion of the private sector, clarity of action and determination. What will Asean, and Thailand, look like in 2025? Let's reimagine.
Boon-Hiong Chan is the head of market advocacy in Asia Pacific for the Global Transaction Banking division of Deutsche Bank, and head of its Reimagining Asean special report.