ASEAN and Indonesia's Role in Securing Global Economic Cooperation

By: Kiki Verico, Senior Advisor on Industry and International Trade to the Finance Minister and Tenure-Track Lecturer at Dept. of Economics of the University of Indonesia.

Global economic cooperation works effectively at the regional level, such as the EU (European Union), NAFTA (North American Free Trade Agreement) and ASEAN (Association of South East Asian Nations). Former Director-General of the WTO, Pascal Lamy, on January 17th 2007, mentioned that regional agreements are completing multilateral economic cooperation like pepper and curry. There are at least two shreds of evidence that confirmed this. Firstly, the ability of the EU to achieve the ultimate objective of multi-country economic cooperation, the single currency in 2002. Secondly, ASEAN can set up the economic community as a substitute for Custom Union (CU) to transform its economic cooperation from intra-trade to intra-investment. The world is now witnessing a new phenomenon in which ASEAN economic cooperation principles can contribute an essential ingredient for globalization: inclusive.

In many discussions, including a book discussion entitled “Permacrisis: A Plan to Fix a Fractured World” co-authored by Gordon Brown, Mohamed A. El-Erian and Michael Spence with Reid Lidow broadcasted by Bloomberg Television had echoed that inclusive is the essential ingredient to cure the recent fractured globalization. The inclusive principle is the essential ingredient that works appropriately to cure the fractured global economic cooperation as it applies a non-discriminative, pragmatical and practical approach that effectively achieves and secures win-win situations across countries worldwide. Globalization has used the open principle as a necessary condition, but it is insufficient as it needs to adopt and apply the inclusive principle. The latter means that global economic cooperation must work under the same common ground interests without discrimination or excessive nationalism that abuses other countries’ interests.

The ASEAN Secretariat Report entitled the ASEAN Outlook on the Indo-Pacific (AOIP) shows that ASEAN promotes the inclusive principle that has been adopted for a long time in ASEAN's cooperation development architecture. ASEAN utilizes this principle in the context of ASEAN's centrality and enhancement of cooperation with other countries, particularly in the Indo-Pacific. The Outlook contains the inclusive element that equipped ASEAN with a non-discriminative approach that secures it from ruining globalization. This inclusive approach element is essential to cure the current fractured global economic cooperation. It will contribute to international economic cooperation after the soft practice of Musyawarah (Consultation) and Mufakat (Consensus) complete the 'voting-based' decision-making process. Inclusive and consultation-consensus decision-making approaches are prevalent in Indonesia as one of its native cooperation culture values.

Historically, Indonesia held the first big-scale conference after the end of World War from 18 to April 24th 1955, entitled the Asian-African Conference. This conference released a Ten Point of Declaration entitled Dasasila Bandung, three of which are the building blocks for the inclusive principle. They are principles number two, four and nine: respect for the sovereignty and territorial integrity of all nations, abstention from intervention or interference in the internal affairs of another country and promotion of mutual interests and cooperation, respectively. The principle of non-intervention or interference in the internal affairs of another country next became the foundation for ASEAN's member-state relationship, entitled the Treaty of Amity and Cooperation (TAC). The essential ingredient for ASEAN economic cooperation is “inclusive free”, and completed by sufficient condition of "open". The latter works in ASEAN as the crucial foundation for the ASEAN Plus Frameworks of ASEAN Plus One FTA, ASEAN Plus Three, ASEAN Plus Six, ASEAN Plus Eight, and so on.

The TAC was declared in Bali on February 24th, 1976, and was further known as Bali Concord I. This non-intervention principle is the basic ASEAN's free principle to build relationships within member states and between ASEAN and non-ASEAN member states. This principle makes ASEAN member states build cooperation regardless of their partner's domestic political preferences, either democratic or otherwise. The recent inclusive value of ASEAN is to secure ASEAN's fundamental free principle at its original, which allows ASEAN to have a relationship without any discrimination. It ensures a stable and peaceful relationship within Southeast Asia and between Southeast Asia and other countries. The inclusive principle is essential to secure the smooth movement of current globalization to its new equilibrium, rooted in ASEAN centrality and Indonesia's values.

Despite current geopolitical and geoeconomic instability, countries need a peaceful, prosperous and harmonized life. Therefore, the world has witnessed countries always attempt to preserve a 'steady-state' global economic equilibrium that is not discriminative and abusive. Countries want the world economy to work correctly at Pareto efficiency, a non-zero-sum game under a win-win situation. It is a situation where all nations feel globalization is "too big to fail", pushing them to handle it with care voluntarily. The latter is because there is no such thing as a "free lunch": it is not the benevolence of the butcher that we expect our dinner, but it is based on its own interest to its own benefit. Every country attempts to secure stable globalization as they need it.

In the 12th Annual International Forum on Economic Development and Public Policy on December 6th 2023, Prof Barry Eichengreen echoes that terms of reshoring have been toned down to near-shoring like de-coupling turned into de-risking. Hyper-globalization has turned down to globalization and slowbalization, surely not autarky. Globalization of economic cooperation is like sugar and our bodies; we cannot live without it, but we must maintain its healthy level. Global economic cooperation in trade, investment and finance can work correctly if free, inclusive and open principles are applied. These principles help globalization work in a win-win situation and remain stable amidst the current unstable and uncertain situation. It keeps the world economy convergent as it experiences a decreasing economic gap within countries.

Indonesia, the largest ASEAN member state in population and GDP size and the only Southeast Asian country that has become a G20-member country has a vital role in it. Comparing member states' GDP share in the last 20 years, only Indonesia, Vietnam, and Myanmar experienced increasing contributions. Someday, when Indonesia achieves a high income level, its economic role in the region and globally will be more impactful and enhanced. As part of an emerging country with average economic growth above global economic growth, Indonesia's economic growth is vital in boosting global economic growth. As a developing country that relies on manufacturing, Indonesia's involvement in the higher-value-added GVCs (Global Value Chains) is strategic. Indonesia has a critical and vital position in the global and regional economy regarding philosophical cooperation values and value-added creation.

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