Asean needs deeper trade pacts, domestic reforms for economic resilience: World Bank economist

KUALA LUMPUR: Deeper trade agreements and domestic reforms are needed to build economic resilience in the Association of Southeast Asian Nations (Asean) and East Asian Pacific regions, especially during extreme change and uncertainty.

The World Bank’s East Asia and Pacific Chief Economist Research Centre senior economist Aakash Mohpal said the conflicts resulting from the ongoing geopolitical crisis have significantly impacted the global economy.

He said this includes disruptions in transport, including shipping and travelling from Asean to the West and vice versa, requiring a longer winding route than the previous Suez Canal route, causing a 40% increase in cost.

“At the same time, China’s slower growth rate will affect other developing economies, including Asean, to slow down as well.

“Policy uncertainties worldwide, (such as) an increase in trade-distorting measures in the forms of subsidies and other tariffs, are also impacting economic growth,” he said in a panel session titled “The World Bank’s Economics Outlook for Asean” at the Asean Economic Opinion Leaders Conference: Outlook for 2025 event here today.

Aakash said Asean could do better than its peers in pursuing deeper structural reforms and exploring new markets and opportunities for trade beyond traditional ones, similar to China’s diversification.

He also said there is a need to boost productivity, especially in light of technological and artificial intelligence (AI) advancements, and to address wage growth without corresponding productivity gains in countries like Malaysia and the Philippines.

“Emphasis should also be given to the small and medium enterprises to create resilient local economies and drive job creation.

“We need to invest and promote local home-grown SMEs to make local economies more resilient,” said Aakash.

Elaborating on the matter, he stressed that it is important to create favourable market conditions, including access to capital, inputs, labour and human capital.

He said this is also in line with the social policies to foster a culture in which failure is seen as part of the entrepreneurial process and not discouraging.

Besides, he noted the need for policies to protect SMEs from anti-competitive practices by larger players so that SMEs can compete effectively.

Meanwhile, Aakash posited that despite technological shifts creating winners and losers, there would be more job creation overall, and existing skills would need to be reskilled or upskilled.

“It is crucial to ensure that the benefits of AI are maximised through workforce preparation.

“The basic digital skills in the labour force are vital, even for well-established jobs that now require basic computer abilities,” he said.

He added that there is a need to revamp university curricula and incorporate digital skills. – Bernama

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