Global Lens

In recent years, bilateral trade and direct investment have increased exponentially, thanks in part to the HLD. Now there is room for further growth

Economic relations between Italy and ASEAN are continuously deepening. The High Level DIalogue on ASEAN Italy Economic Relations 2024, which took place on November 5 and 6 in Manila, was an opportunity to highlight the current state of relations and discuss how to further strengthen them. As shown in the position paper published by The European House Ambrosetti at the event, the ASEAN-Italy trade interchange is worth more than $20 billion, of which $9.7 billion is represented by Italian exports to ASEAN and $12 billion refers to ASEAN exports to Italy. In the past six years, the total trade interchange between Italy and ASEAN has grown by 38 percent, more than the United Kingdom, Germany and France, highlighting the great dynamism of Italy-ASEAN economic relations.

The instruments of economic cooperation between ASEAN and Italy are diverse and multifaceted. They include trade agreements, investment treaties, joint ventures and economic and technical cooperation programs. These instruments aim to reduce trade barriers, promote investment, foster technology transfer and strengthen economic ties between the two regions. Together, they build resilient and mutually beneficial economic partnerships. To date, Italian FDI in ASEAN is worth 7.7 billion euros, while ASEAN FDI amounts to more than 800 million euros. These are exponential increases since the HLD editions began and since the Italy-ASEAN Association was founded. 

As Lorenzo Tavazzi, Senior Partner and Board Member of The European House Ambrosetti, points out in his position paper, the concrete results achieved in recent years are remarkable. A few examples? The opening of production units, design and service centers in Vietnam, Thailand and Indonesia by an Italian company operating in the metallurgical sector; the opening of a production plant by 2 Italian motorcycle manufacturers in Thailand and Indonesia; the inauguration of a new tire production plant in Thailand; the acquisition of a minority stake in an Italian cosmetics manufacturer by a sovereign wealth fund owned by the Singapore government; the increase in exports of Made in Italy products to ASEAN, particularly to Singapore, Malaysia, Thailand and Vietnam; and the introduction of training and business courses for access to the ASEAN market offered by Italian government agencies.

There is enormous potential for growth in some areas. For example on digital. ASEAN today has different levels of digital and environmental preparedness and is prioritizing green growth and technology adoption, with the goal of improving regional competitiveness, especially through the deployment of artificial intelligence, a robust startup ecosystem, and 5G infrastructure. Italy, with its strong industrial base and advanced technologies, is focusing on clean energy, sustainable practices and digitization to boost economic growth and resilience and can help increase ASEAN competitiveness. As ASEAN countries continue to prioritize resilience and innovation, high-tech sectors such as space offer critical support to ensure business continuity, regional stability, and cooperation in a highly strategic sector. Italy, renowned for its expertise in advanced technology and research, has much to contribute to ASEAN's growth in these areas. The potential for joint projects, technology transfer and knowledge sharing is significant and offers both regions unique advantages of collaboration. Not surprisingly, just in the past few weeks the ASEAN-Italy Cooperation Initiative on Space and Smart Technologies project was concluded with an event at the headquarters of the Italian Space Agency (ASI) in Rome. The initiative, financed by the Ministry of Foreign Affairs and International Cooperation, Directorate General for Globalization and Global Issues, is part of the formal framework of the partnership stipulated between MAECI and the ASEAN Secretariat and called ASEAN-Italy Development Partnership (2022-2026). And it aims among other things to create business opportunities, increase international presence, and improve scientific knowledge based on shared experiences, best practices and lessons learned.

We publish here the excerpt of an analysis by Joshua Kurlantzick for the Council on Foreign Relations

After the debate for the United States presidential elections, even in South-East Asian countries people are starting to wonder about the possible meaning of a possible return of Donald Trump to the White House. In recent years, with the exception of the Philippines under Ferdinand Marcos Jr., who strongly sided with the United States, the countries of the ASEAN area have attempted to maintain their traditional multipolar approach between the two great powers. This is demonstrated very well by the actions, always based on the principle of neutrality, of Indonesia and Vietnam. But a second Trump administration could increase tensions between the United States and China to the point that even Southeast Asian countries, long adept at striking a balance, may find it difficult to avoid taking sides. A second Trump administration is unlikely to focus much on the region. In his first term, Trump forged personal ties with some Southeast Asian leaders, such as former Philippine President Rodrigo Duterte. Overall, however, Trump has given the region a relatively low priority. Furthermore, his protectionist approach to trade stood in stark contrast to the economic integration that had occurred throughout East Asia. In this vacuum, however, it was the great powers such as Japan and China that led the economy. Trump gave many speeches in the 2023-2024 election season and talked a lot about China. He made little, if any, mention of a future approach to Southeast Asia. In addition to trying to keep the Philippines firmly in the U.S. camp, a second Trump administration would likely put enormous pressure on states like Indonesia, Malaysia, Vietnam, Singapore and perhaps others to go along with U.S. efforts to push multinationals, including those based in Southeast Asia, to leave China, moving their supply chains. Trump, intensely focused on the belief that virtually all foreign countries trade unfairly with America, may be even less shy, in a second term, about imposing tariffs on the same Southeast Asian states.

Back in November is the High Level Dialogue on ASEAN Italy Economic Relations, the initiative that The European House - Ambrosetti and the Associazione Italia ASEAN have been implementing since 2016

Di Lorenzo Tavazzi, The European House – Ambrosetti

The landmark event for bilateral relations between Italy and ASEAN countries is back: the High Level Dialogue on ASEAN Italy Economic Relations, the initiative that The European House - Ambrosetti and the Associazione Italia ASEAN have been carrying out since 2016 and this year reaches its eighth edition.

Each year the High Level Dialogue is hosted by an ASEAN country: this year it will take place in Manila, Philippines, at the Dusit Thani Hotel, on Tuesday, November 5 and Wednesday, November 6, 2024, with the support of the Philippine government, through the Department of Trade and Industry (DTI), as co-organizer of the event.

The Dialogue, since its first edition in 2017 in Indonesia, and subsequent editions in Singapore, Vietnam, Malaysia, and Thailand, along with two digital editions in 2020 and 2021, has brought together more than 3,500 presidents, CEOs, and government and institutional leaders from ASEAN countries and Italy. The 2023 edition alone, held in Bangkok, was attended by more than 450 high-profile delegates.

This year's Dialogue will address a number of priority issues for the development of Italy-ASEAN relations with a dual character in partnership opportunities between Italian companies and their counterparts in Southeast Asia. These include: the supply chain of critical raw materials for the strategic sectors of the future, artificial intelligence and digital innovation, the role of the blue economy for economic cooperation, the evolution of the creative industry, opportunities for technological and industrial collaborations in space, defense and high-tech manufacturing, financing and services to support the development of sustainable businesses and infrastructure. 

Within this framework, the specificities and opportunities offered by the Philippines, with which Italy celebrated 75 years of bilateral relations in 2022, will also be explored.

Participation in the High Level Dialogue is free and by invitation only. 

To register for the event: Registration

To get more information about previous editions of the event: High Level Dialogue website

We publish here an excerpt from an article by Maria Siow published in the South China Morning Post

The prospect of Southeast Asian countries joining BRICS has sparked heated debate among analysts: supporters argue that membership could unlock lucrative trade and geopolitical opportunities, while skeptics warn that it risks dragging the countries into the orbit of China and Russia and further eroding regional unity. Thailand and Malaysia have announced in recent weeks that they will apply to join the platform, following in the footsteps of Laos and Myanmar, which declared their interest last year. Contrary to fears that BRICS membership will erode ASEAN's unity and centrality, several Asian analysts believe the Association has the flexibility and resilience to maintain its relevance to member states. Many ASEAN members also belong to other organizations such as the Organization of Islamic Cooperation, the Indian Ocean Association and the Asia-Pacific Economic Cooperation forum. Other multilateral institutions to which Asean members already belong are the Asian Development Bank, the World Bank, the International Monetary Fund and the Asian Infrastructure Investment Bank. "BRICS membership will provide access to a new source of financing for the many development needs of countries in the Southeast Asian region," said Jayant Menon, senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, referring to the New Development Bank established in 2015 by the BRICS countries. Indonesia and Vietnam also said they are considering the benefits of BRICS membership. Joining the group of emerging economies could provide better access to lucrative markets, increased foreign investment, and opportunities for collaboration on infrastructure projects. BRICS membership can also be seen as a strategic move to diversify economic partnerships and reduce dependence on Western-led financial institutions. The move, if managed effectively, could strengthen Southeast Asia's voice and influence in global affairs. Indonesia also aims to join the OECD within three years, as reiterated by the country's coordinating economy minister in May after the organization's secretary-general visited Jakarta and met with President Joko Widodo. According to OECD projections, Indonesia's gross domestic product will reach $10.5 trillion by 2050, making it one of the largest economies along with China, the United States and India.

Among the Indian PM's third term goals is to strengthen relations with Southeast Asia

Can Narendra Modi's third term as prime minister bring India and ASEAN closer together? A commentary by Syed Munir Khasru, published in the South China Morning Post, wonders. India's "Act East" policy is poised for recalibration. New Delhi's economic and strategic engagement with Southeast Asia soared during its first two terms, albeit with some shortcomings that require course correction. Modi may now reinvigorate this key foreign policy as India seeks to establish a stronger presence in the Indo-Pacific. On the economic front, trade and investment ties with Southeast Asian countries have received a major boost, with annual bilateral trade soaring from about $80 billion in 2014 to more than $110 billion by 2021-22. However, the existing trade agreement with the Association of Southeast Asian Nations-the Asean-India Free Trade Area-is seen as strongly favoring the Asean side, frustrating India. India's exports to Southeast Asia increased moderately in FY2023 to $44 billion from $42.3 billion in the previous year. Meanwhile, imports from ASEAN countries increased at a faster pace, from $68 billion to $87.6 billion, resulting in a substantial trade deficit of $43.6 billion for India. The need to address the trade imbalance is even more urgent considering that in 2011 the trade deficit was only $5 billion. But the Modi government has not seized all opportunities for economic rapprochement with ASEAN countries due to reluctance to undertake market reforms and tariff liberalization. On the strategic front, India's efforts under the Act East policy helped bring seven Asean members into the Indo-Pacific Economic Framework, an initiative to strengthen economic cooperation between the two regions. Participation in these complementary Indo-Pacific strategies allows for greater coordination of respective interests in this strategically vital region. Initiatives involving connectivity, such as the $484 million Kaladan multimodal transport project linking India to Myanmar and the trilateral India-Myanmar-Thailand highway, are examples of what collaboration between ASEAN and India can achieve in this area.

Southeast Asian countries are the most active and willing to avoid nuclear weapons proliferation in the region

By Francesca Leva

At a United Nations speech delivered last March, the United Nations Secretary-General Antonio Guterres declared that the risk of a nuclear war is at “its highest point in decades” and that nuclear weapons are “growing in power, range, and stealth,” adding that “an accidental launch is one mistake, one miscalculation, one rash act away.”

Asia makes no exception: there, nuclear weapons had a profound influence on both public health and the environment, resulting in the displacement of people and hindering development, education, cultural preservation, and economic stability.

Nuclear weapons first arrived in Asia in 1945 with the tragic events in Hiroshima and Nagasaki. A few years later, the URSS also announced its nuclear weapons programs: during the Cold War, from 1950 to the 1990s, the MAD – “Mutual Assured Destruction” – phrase was used to describe the nuclear build-up phase between the US and the URSS. As a result, in 1957, the UN established the IAEA - International Atomic Energy Agency - recognizing the need for peaceful development of nuclear power. In 1968 the UN also adopted the NPT – Non-proliferation Treaty -, whereby only the five nuclear States of the time, the US, China, Russia, the UK, and France, were allowed to possess nuclear weapons, but would also agree to the peaceful application of nuclear technology and the reduction of their nuclear arsenals. However, several non-signatory countries of the NPT started to develop nuclear weapons on their own: among them India, Pakistan, and Israel. As a matter of fact, in 1988, India detonated three bombs close to the border with Pakistan, an action that was immediately followed by Islamabad’s nuclear tests.

What seems to be the pattern is that when a country develops a nuclear weapon, its threatened neighbors and enemies will also start nuclear testing, both for self-preservation and national pride. This dilemma poses a concrete threat to Asia, where China, Pakistan, India, North Korea, and the Russian Federation are all nuclear countries.

One of the main flashpoints in Asia is the so-called “nuclear triangle,” constituted by China, India, and Pakistan. In this case, the risk is ignited by regional competition, domestic situations and tech developments. The development of Pakistan’s full-spectrum deterrence has, in fact, led to India’s development of a preemptive counterforce nuclear system. This nuclear threat is further enhanced by US-China competition. While Beijing tries to match Washington’s nuclear capabilities, India is also incentivized to maximize its nuclear arsenal, shifting away from its traditional “no-first-use policy.” Pakistan's devolving domestic situation, as well as the increasing Pakistan–India competition, add to the risk of accidental use, inadvertent escalation, and nuclear brinkmanship. 

A further potential flashpoint is constituted by North Korea and South Korea; the risk is not only the one of a war between Seoul and Pyongyang but also the fact that both South Korea and Japan might feel pressed to develop their own nuclear arsenals. Finally, other possible tension areas are in the South-China Sea, where regional competition as well as national priorities collide.

In 1995, the ASEAN member States signed the Treaty of Southeast Asia Nuclear-Weapon-Free Zone - SEANWFZ, also known as the Bangkok Treaty – which was originally devised to reaffirm the importance of the NPT and to establish a nuclear weapons-free zone (NWFZ). There are currently five NWFZs in the world, and they all represent a regional approach to strengthening nuclear nonproliferation and disarmament. In the designated areas covered by the NWFZ treaties, it is explicitly prohibited to engage in activities related to the acquisition, possession, placement, testing, and utilization of nuclear weapons. Furthermore, the States that have ratified these treaties are actively working towards establishing legally binding agreements to ensure that nuclear-armed nations refrain from deploying nuclear weapons against any of the countries within these zones.

However, there has been growing preoccupation and skepticism among the NPT signatory countries, as the five NPT states have continued to develop their own nuclear arsenals; the NPT was unable to integrate non-signatory countries – especially India, Pakistan, and Israel – and it was also ineffective in bringing back North Korea. As a consequence, in 2017, the Treaty on the Prohibition of Nuclear Weapons (TPNW) was crafted to reinforce the NPT and signed by all ASEAN countries besides Singapore. Although the outcome of these measures remains uncertain, it is evident that the nuclear threat represents an unacceptable risk for Asian countries, especially considering the number, the density, and the proximity of urban and inhabited areas.

The inauguration of new President Lai Ching-te in Taipei and the possible economic and political repercussions in Southeast Asia

By Luca Menghini

On May 20, Lai Ching-te will officially become the new President of Taiwan. This event is significant not only for the island but also for the geopolitical context of the entire Southeast Asia. Taiwan is indeed preparing for a significant change with the inauguration of a leader from the Democratic Progressive Party (DPP), known for its leanings towards the island's independence from China. Lai secured 40.1% of the votes, surpassing candidates from the Kuomintang (KMT) and the Taiwan People's Party (TPP). Despite the DPP's victory, the party lost control of the legislative assembly, forcing the new president to seek broader consensus which will lead him to moderate his more extreme policies.

The loss of the parliamentary majority could be seen by ASEAN as an element of stability, as it might mitigate Lai's policies, thus reducing tensions in the Taiwan Strait. This area is of vital strategic importance, being a crucial maritime corridor for global trade. ASEAN, which traditionally follows a policy of non-interference and consensus, reacted cautiously to Lai's election. The member countries, located in a region crossed by various trade routes and spheres of influence of major powers, strive to maintain a balance to avoid conflicts. The stability of the strait is essential not only for regional security but also for the global economy.

During the period leading up to the elections, tensions between Taiwan and China grew, especially during the presidency of Tsai Ing-wen, who sought to strengthen ties with the United States. China responded by increasing military and diplomatic pressure on the island, which it considers a rebel province to be reunified in the future. While the reaction of ASEAN and most of its member countries to Lai's election was generally subdued, with most countries avoiding taking strong public positions, the same cannot be said for Filipino President Ferdinand Marcos Jr. Marcos was the only leader to break from this line, publicly congratulating Lai and referring to him as president, highlighting the hope for close collaboration and strengthening of mutual interests. This move was not viewed favorably by China, which, claiming Taiwan as part of its territory, does not recognize Lai's title as president. Even more critical was China's reaction to the congratulations extended by the United States through Secretary of State Antony Blinken, accusing the U.S. government of sending "a seriously wrong signal to the separatist forces for Taiwan's independence."

On the economic front, the New Southbound Policy, initiated by former President Tsai Ing-wen starting in 2016, aimed to reduce Taiwan's economic dependence on China, promoting economic cooperation with 18 countries, including ASEAN members, six South Asian states, Australia, and New Zealand. This initiative sought to enhance economic and commercial cooperation, as well as the exchange of talents and resources. However, despite the efforts, reactions have been mixed, also influenced by the caution of various governments trying to avoid irritating China. Taiwan's Minister of Economic Affairs, Wang Mei-hua, indicated that in 2022, investments by Taiwanese companies in Southeast and South Asia surpassed investments in China, reaching $5.2 billion. This increase was driven by trade tensions between the United States and China, but the geopolitical proximity to China continues to represent a significant obstacle for a freer expansion of Taiwan's trade relations.

Now, with the inauguration of Lai, it is expected that Taiwan's commitment to Southeast Asia will continue to increase and even intensify further, with particular attention to cooperation in the high-tech industry. However, the growing influence of China in the region represents an imminent challenge. A recent survey showed that most Southeast Asian countries favor China over the United States. The complex situation will indeed require Lai to carefully balance the promotion of Taiwan's economic interests with the need to navigate the political and diplomatic sensitivities of Southeast Asia.

In conclusion, the inauguration of Lai Ching-te as president of Taiwan represents a significant moment for the island's politics. Faced with the loss of the parliamentary majority and growing tensions with China, Lai will have to navigate an increasingly complex geopolitical context, trying to balance his party's independentist aspirations with the need to maintain stability and peaceful relations in the region. His policies, particularly the strengthening of relations with Southeast Asian countries and beyond, will be crucial for Taiwan's security and economic progress. In this delicate balance, Lai's ability to conduct effective diplomacy and promote sustainable economic growth, while managing external pressures, will define the success of his tenure and potentially influence the regional order of Southeast Asia for the coming years.