“Historically, geographical distances have shaped economic cooperation,” Education Minister Chan Chun Sing said. “By virtue of Southeast Asia’s geographical position, goods, capital, people and culture have flowed between Southeast Asia and China for thousands of years. Physical proximity was a natural enabler of the development of interdependencies.”
But is Geography still Destiny?
Speaking at the FutureChina Global Forum on 12 July, Mr Chan said that three factors have changed and challenged this commonly held assumption.
The first is connectivity. The ease of connectivity may be the real determinant of economic relations, rather than geography per se. With technological advancements, the cost of transportation has come down, thus blurring geographical boundaries and enabling new and wider connections, Mr Chan said.
Secondly, new modes of connectivity have emerged. The modern economy rests on digital connectivity which transcends geographical distances. “Where COVID-19 has created physical separation, it has also deepened digital connectedness,” Mr Chan said.
The third factor are the rules and regulations for digital connectivity. The emergence of the digital economy makes the non-physical dimension of connectivity of rules and regulations even more important.
“They form the basis of economic cooperation and when businesses consider the issue, they commonly ask: are we on the same standards, the same platforms, and are we on the same trade agreements?” Mr Chan said. “Therefore, while geographical proximity can promote interdependencies, it alone will not ensure sustained economic cooperation,” he added.
Is Demography still Destiny?
Mr Chan said that the assumption that ‘Demography is Destiny’ is not a given either.
Many companies are pivoting to high-tech, and high-value goods and services.
“Mass production is giving way to mass customisation. Automation, access to skilled labour, Intellectual Property (IP) protection, and the ability to mobilise talent and capital will become more important factors as to where companies site their investments and productions,” Mr Chan said. “Quantity of labour alone will not be sufficient.”
Therefore the theory that labour-intensive industries will naturally re-locate to labour-rich countries will be increasingly challenged. “Hence, both ASEAN and China must find and develop new complementarities beyond labour supply or labour costs.”
Advancing ASEAN China economic cooperation
To advance ASEAN and China economic cooperation, Mr Chan suggests that countries take a long term view, build an open and inclusive regional economic architecture, and foster deeper interoperability, to be able to work with one other easily, efficiently and effectively.
“Different countries will have different priorities at different points in time. To meet evolving economic priorities, countries will look towards trusted partners in a world of flux and uncertainties to secure their IP and supply chains.
They will look for partners who can invest in them for the long term and have a vested interest in mutual success. These will be partners who adopt a “Prosper thy neighbours” policy, rather than those who extract or exact the maximum short-term interests for themselves.”