Transforming ASEAN into a knowledge-driven economy

Reading Time: 3 minutes
Arno Maierbrugger
By Arno Maierbrugger

The Association of Southeast Asian Nations (ASEAN) is at the crossroads. The vibrant economies of the majority of its 10 members are prone to an unprecedented change in their economic and societal structure, wealth distribution and nature of labour.

As per forecasts of global research company IHS in a recently published report, ASEAN’s economy will more than double by 2020, with the nominal gross domestic product of the regional bloc increasing from $2 trillion in 2012 to $4.7 trillion.

This, however, brings new challenges, starting from strategies to avoid the middle-income trap and leading to the necessity of adapting a completely new economic mindset of innovation and global thinking, including how to transform ASEAN economies from their manufacturing and service-based self-identity into knowledge-driven powerhouses. Beyond low-cost and high-output manufacturing, building a knowledge economy is increasingly seen as the most viable way to make growth sustainable in the region.

However, building a knowledge economy requires improvement in many sectors, such as creating accessible quality education, information infrastructure and knowledge transfer, more research and development to pursue innovation, as well as effective economic institutions.

But as it stands, except for Singapore, none of the ASEAN countries are yet innovation-driven. Cambodia and Vietnam are factor-driven. Indonesia and Thailand are efficiency-driven, while Brunei and the Philippines are between the two. Malaysia has gained ground and is transitioning to become innovation-driven, and Laos and Myanmar are still in the early stages of building functioning economic structures at all.

Let’s take the Thai education system. The Thailand Development Research Institute has recently voiced concerns that free labour movement after the establishment of the ASEAN Economic Community (AEC), probably in 2015, could lead to an influx of foreign workers that would decrease employment opportunities for lower or semi-skilled Thai people. The institute’s proposal to tackle this problem was more or less to shut borders down for foreign workers. This approach is wrong.

On the one hand, it is against the ideas of the AEC, while on the other hand, it is not very forward-looking. Instead of isolating its economy against foreign competition, Thailand should improve its poor education system that, among other shortcomings, currently produces uncompetitive graduates that hardly can speak English. A lot needs to be done in education and skills development, even more technological readiness and innovation. And Thailand is just one example.

Besides Singapore, none of the ASEAN countries ranks among the top 50 globally in technological readiness, which implies being a developed knowledge economy. Except for Singapore, Malaysia and Indonesia, innovation is likewise weak for the rest of the ASEAN. The small pool of skilled workers in the bloc needs to increase, otherwise the situation poses a serious threat to economic transformation.

Investments from the public and private sector need to be funnelled into knowledge-creating projects and initiatives need to be kicked off to nurture innovations, enabling ASEAN economies not only to absorb, but also adopt newest technological developments and develop them further. This is the only way ASEAN countries will be able to reap dividends of the current growth in the future.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

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Reading Time: 3 minutes

By Arno Maierbrugger

The Association of Southeast Asian Nations (ASEAN) is at the crossroads. The vibrant economies of the majority of its 10 members are prone to an unprecedented change in their economic and societal structure, wealth distribution and nature of labour.

Reading Time: 3 minutes

Arno Maierbrugger
By Arno Maierbrugger

The Association of Southeast Asian Nations (ASEAN) is at the crossroads. The vibrant economies of the majority of its 10 members are prone to an unprecedented change in their economic and societal structure, wealth distribution and nature of labour.

As per forecasts of global research company IHS in a recently published report, ASEAN’s economy will more than double by 2020, with the nominal gross domestic product of the regional bloc increasing from $2 trillion in 2012 to $4.7 trillion.

This, however, brings new challenges, starting from strategies to avoid the middle-income trap and leading to the necessity of adapting a completely new economic mindset of innovation and global thinking, including how to transform ASEAN economies from their manufacturing and service-based self-identity into knowledge-driven powerhouses. Beyond low-cost and high-output manufacturing, building a knowledge economy is increasingly seen as the most viable way to make growth sustainable in the region.

However, building a knowledge economy requires improvement in many sectors, such as creating accessible quality education, information infrastructure and knowledge transfer, more research and development to pursue innovation, as well as effective economic institutions.

But as it stands, except for Singapore, none of the ASEAN countries are yet innovation-driven. Cambodia and Vietnam are factor-driven. Indonesia and Thailand are efficiency-driven, while Brunei and the Philippines are between the two. Malaysia has gained ground and is transitioning to become innovation-driven, and Laos and Myanmar are still in the early stages of building functioning economic structures at all.

Let’s take the Thai education system. The Thailand Development Research Institute has recently voiced concerns that free labour movement after the establishment of the ASEAN Economic Community (AEC), probably in 2015, could lead to an influx of foreign workers that would decrease employment opportunities for lower or semi-skilled Thai people. The institute’s proposal to tackle this problem was more or less to shut borders down for foreign workers. This approach is wrong.

On the one hand, it is against the ideas of the AEC, while on the other hand, it is not very forward-looking. Instead of isolating its economy against foreign competition, Thailand should improve its poor education system that, among other shortcomings, currently produces uncompetitive graduates that hardly can speak English. A lot needs to be done in education and skills development, even more technological readiness and innovation. And Thailand is just one example.

Besides Singapore, none of the ASEAN countries ranks among the top 50 globally in technological readiness, which implies being a developed knowledge economy. Except for Singapore, Malaysia and Indonesia, innovation is likewise weak for the rest of the ASEAN. The small pool of skilled workers in the bloc needs to increase, otherwise the situation poses a serious threat to economic transformation.

Investments from the public and private sector need to be funnelled into knowledge-creating projects and initiatives need to be kicked off to nurture innovations, enabling ASEAN economies not only to absorb, but also adopt newest technological developments and develop them further. This is the only way ASEAN countries will be able to reap dividends of the current growth in the future.

 

This comment is part of Inside Investor’s weekly column series in Brunei’s leading newspaper Brunei Times and is published every Monday.

Brunei Times logo

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