Indonesia and ASEAN as a region has gone through various kinds of economic shocks that have different backgrounds and in the 1960s, 1998, 2008, 2020. The different characteristics of the crisis certainly require different policy responses. The 2020 economic crisis has an exceptional impact and transmission from the previous crisis. During the Asian monetary crisis and the global financial crisis, monetary policy played a major role in stabilizing the economic shocks that occurred. Meanwhile, during the 2020 crisis, the real sector was badly affected due to social restriction policies or lockdowns by many countries, resulting in an imbalance on both the demand and supply sides. In addition, there are obstacles in the distribution and logistics services sector, making them scarce and expensive.

The post pandemic recovery forecast highlights that the ASEAN region will remain one of the fastest-growing regions of the world in 2023 but economic growth will likely fall marginally from 2022. ADB (2023) lowered its prediction on ASEAN economic growth 2023 forecast to 4.7 percent while Indonesia economic growth will be at about 4.8% and 5.0% in 2023 and 2024, below the pre-pandemic trend of 5.3%. However, downside risks remain unchanged. The most immediate risk is the shock to global commodity prices as the Ukraine crisis escalates and economic sanctions are imposed. Russia and Ukraine play a role as the main suppliers of world energy and food commodities, so that the conflict between the two countries will have a very large contribution to fluctuations in world energy and food prices. Russia is a major exporter of energy and minerals such as oil, gas, coal, and palladium. Meanwhile, Ukraine is a world exporter of food such as sunflower seed oil, potatoes, corn, and wheat. In addition, tight financial conditions could also trigger a sharper US slowdown, resulting in significant spillovers to the rest of the world. In China, prolonged weakness in the real estate sector will put pressure on consumer and investor confidence and hinder the economy’s recovery, hence potentially decreasing ASEAN growth.  With consumer demand still recovering from COVID and prolonged rises in commodity prices, fears of ‘stagflation’ in the region have been revived. While the pandemic has halted efforts to reduce poverty and increased inequality, further deterioration in purchasing power among low and middle-income households raise concerns about achieving an inclusive and sustained recovery in all ASEAN member states.

In response to those challenges, ASEAN established ASEAN Comprehensive Recovery Framework (ACRF) to face escalating risks and uncertainties in the current global economic setting. This effort has served as the consolidated exit strategy that has been echoed and emphasized in the Indonesia’s ASEAN Chairmanship in 2023, consisting of three important pillars on recovery and rebuilding, digital economy, and sustainability under the theme of “ASEAN Matters: Epicentrum of Growth” Some of the key priority areas in the recovery and rebuilding pillars in the Indonesia’s ASEAN Chairmanship in 2023 cover enhancing services facilitation, fostering financial resilience, ensuring food security in times of anticipated crisis, flourishing creative economy, including MSMEs, and optimizing trade and investments

In light of the post pandemic recovery, in relation to trade, digitalization is increasing the scale, scope, and speed of trade. It has been identified that digitalization changes how and what we trade, but not why we trade. Trade is still subject to comparative advantage. Yet, technologies and reduction in the cost of sharing ideas (e.g. across borders, between chain actors) help overcome informational asymmetries and barriers to trade both at-the-border and behind-the-border.

Digital trade is crucial to foster and enlarge access for MSMEs participation in the economy. However, it has been evident that the digital trade at the regional level is increasingly fragmented in which technology and digital space are apparently concentrated in countries with better digital public goods.   Based on the ASEAN Digital Integration Index (ADII), it can be identified that Brunei, Malaysia, and Singapore have scores above the ASEAN average for all dimensions, while Cambodia, Laos and Myanmar are below the ASEAN average (Tham, 2021). Ing and Markus (2023) identified at least several contributors to the digital readiness disparity, namely internet speed, internet use, production technology, and the performance of trade in goods related to ICT. Indonesia tends to show sub-optimal performance on internet speed indicators and trade in goods related to ICT. Despite the fundamental challenges, Indonesia has demonstrated remarkable progress in digital economy. In 2021, the value of the digital economy will reach 70 billion USD with an estimate of 146 billion USD in 2025 and 315.5 billion USD in 2030. Currently, Indonesia has the highest number of startups in the ASEAN region with 2,345 startups in 2022 (Startupraking, 2022), the valuations of several Indonesian startups have reached decacorn status with a valuation of over 10 billion USD and Unicorns with a valuation of over 1 billion USD. The role of trade digitalization still has the potential to be increased, given the contribution of Indonesia's digital economy of 18 percent to GDP. The existence of micro, small and medium enterprises (MSMEs) during the pandemic has encouraged the digitalization of trade due to restrictions on people's mobility. As of June 2022, the number of MSMEs that have entered the digital ecosystem has reached 19.5 million business actors or 30.4 percent of the total recorded MSMEs of around 64 million business actors. The government's target of 30 million MSMEs can enter the digital ecosystem by 2024 (www.g20.org., 2022).

ASEAN's and Indonesia’s huge digital potential is also supported by several cooperation agreements in the digital economy  which have been implemented since the early 2000s. Collaboration in the digital field included in 2018 with the ASEAN Agreement on Electronic Commerce; in 2000 the e-ASEAN Framework Agreement was agreed; in 2021 with the ASEAN Digital Master Plan 2025 Bandar Seri Begawan Roadmap (BSBR) and in 2023 the Boracay Digital Declaration, and  the ongoing ASEAN Digital Economic Framework Agreement (DEFA). ASEAN Member States can discuss and agree on a significant contribution of digital trade to establish a sustainable and inclusive economic growth. ASEAN Member States need to emphasize that all countries should be able to participate in and take full advantage of digital trade and that concerted efforts are required to further close the digital divide.

Decarbonization policies and greening the trade are becoming vastly implemented in most countries. There are various opportunities have emerged to encourage greener trade (ADB, 2022; Clarke, 2022; and Soejachmoen, 2022). Among others on the (a) consumer side, including a shift in consumer behavior in developed countries that are more considerate of the carbon footprint in consuming a product, thereby increasing demand for eco-friendly products, (b) producers include increasing barriers in developed countries for products that are not yet environmentally friendly, and (c) regulations related to border-related measures, behind borders related to standardization, carbon footprint trade cooperation, and friendly trade diplomacy environment. The key priority for the region is to transition to green economy that involves moving towards a decarbonization pathway ASEAN to build back better and greener. This effort also supports the collective progress of achieving Sustainable Development Goals (SDGs) as six of the 17 SDGs are closely related to the green economy.

Objectives

Webinar Road to ASEAN Summit 2023 is expected to generate a set of policy recommendations to the Government of the Republic of Indonesia in shaping better economic deliverables in the Indonesia’s ASEAN Chairmanship 2023 that will support post pandemic recovery and promote strong regionalism in ASEAN. The main objectives are as follows:

1. What specific actions or initiatives can ASEAN Member States (AMS) states and Indonesia to implement collective efforts in reinvigorating post pandemic recovery?
2. What concrete actions can be taken by ASEAN Member States (AMS) and Indonesia to increase collaboration in digital economy to promote inclusive economic growth in ASEAN?
3. How has the progress of green transition in ASEAN Member States (AMS) and Indonesia contributed to the economic development and what is the way forward?

Event Details

Date: Monday, 4 September 2023
Time: 09.00 AM, Jakarta, Indonesia time (UTC +7)
Venue: Alila Hotel SCBD Jakarta | Hybrid

Agenda

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