ASEAN countries should diversify into new industries such as electric cars © VCG/VCG via Getty Images
ASEAN countries should diversify into new industries such as electric cars © VCG/VCG via Getty Images

Five steps for ASEAN to bounce back from Covid

28 October 2020

Southeast Asian states have been advised how to build resilient global value chains in the face of a coronavirus-related economic slowdown.

In a report, Resilient Global Value Chains (GVCs) for ASEAN and its Relationship with Partner Countries, the ASEAN-Japan Centre set out five steps states should follow to mitigate risk.

The first strategy urges states to use pandemic-related policy measures and actions implemented by fellow ASEAN member states.

Measures cited in the report include opening up new border checkpoints to maintain the flow of goods and services – measures initially adopted by Brunei Darussalam and Cambodia.

It also cited how Indonesia and Cambodia had eased border controls by introducing electronic certificates of origin and customs clearance.

Other measures included providing fiscal incentives for port operators and shipping companies, as put into practice by Malaysia and the Philippines, and adopting Thailand’s policy of incentivising production of raw materials for medical and health-related products.

The second strategy is to improve risk management in the private sector, an area which required capacity building by many ASEAN countries, the report noted.

Thirdly, it called for a strong push for digital transformation by both public and private sectors.

“The pandemic has proven that the industries using, or based on, digital technology defy the crisis and even continue to grow,” the report said.

It said some ASEAN countries were ready to stimulate digital transformation by providing online platforms, facilitating e-commerce and e-payment and accelerating capital allowances for IT equipment.

For example in Malaysia businesses can claim tax allowances on machinery and equipment and Bank Negara Malaysia has established a fund for SMEs to upgrade, modernise and rejuvenate digital assets.

The fourth strategy was promoting new and crisis-resistant industries. The fifth was reconsidering company strategies for international production such as offshoring or reshoring.

“Many companies have already announced or may announce plans to curtail production, lay off workers and cut capital expenditure, all of which have implications for trade, investment and tourism,” said the report.

“Thus, there is a need to shift attention to a different set of industries – so-called new industries.”

These industries should be risk resistant, such as life sciences, agro-food industries, electric cars, hybrid motors, automotive logistics, innovative materials and outsourced logistics services.

When it came to stimulating international production the report cited Japan’s policy of encouraging firms to strengthen and diversify their value chains abroad by providing financial assistance.

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