This year marks the 55 th anniversary since the incorporation of the Association of Southeast Asian Nations (ASEAN). The group was established to expand and accelerate economic, cultural and social development of its member states and to expand their international trading opportunities as the old adage goes, there’s strength in numbers.

As a region of growing economic significance, it is estimated that ASEAN could become the world’s fourth-largest economy by 2030 behind China, India and the USA.

Several major forces will likely drive this growth within the upcoming decade: digital and technological advances, increased Foreign Direct Investment (FDI) and rising incomes due to strong demographic shifts that will see 65 percent of the region’s population identify as middle class and above.

This growth can be attributed to the ASEAN’s utilisation Free Trade Agreements (FTAs), both as a bloc and as independent countries. As a trading bloc, ASEAN has signed six Free Trade Agreements with China, Hong Kong, Japan, Korea, Australia & New Zealand and India. Such agreements, I believe are the key to promoting innovation, facilitating investment and securing growth.

Long ago, or so it feels at least, back in 2020, all 10 ASEAN countries, alongside several other Asia Pacific nations, including China, Japan, South Korea, Australia and New Zealand signed the Regional Comprehensive Economic Partnership (RCEP). This particular FTA not only accounts for almost 30 percent of the global population, but it also has a trade value of almost $30 trillion, equal to almost 30 percent of global GDP, the largest ever single trading bloc in the world, and more than twice the size and trading power than the European Union. Among the ASEAN signatories, many member countries also have their own bilateral FTA’s; Singapore unsurprisingly leads, with 26, Malaysia has 16, Indonesia 12 and Brunei with 10.

It is expected that under the RCEP, import & export tariffs on around 92 percent of goods in the bloc will be removed within the next two decades, a staggering number which will have significant financial implications for the better. Additionally, a fundamental feature of the RCEP is the model of ‘regional cumulation’ in consolidating rules of origin (ROO) among signatory nations. As a result, companies will only require one certificate of origin for trading across the region, this will greatly simplify the ease of doing business, particularly for manufacturers and industries with high production costs.

Such FTAs like the RCEP and other networks, offer a myriad of opportunities, not only to regional ASEAN businesses looking for growth, but also for foreign investors; from reduced import fees, tax deductions and holidays and easier custom clearance to low-cost manufacturing and access to Singapore’s financial services, which in recent years has become not only a regional but also a significant international financial hub. I believe these benefits will lead to greater co-operation, which in turn will lead to technological development and knowledge transfer, which results in increased investor confidence and long-term sustainable growth. With future FTAs, this cycle can evolve to meet changing economic and social requirements.

Southeast Asian countries have a long history with FTAs; throughout my career, I myself have seen many come and go, and Asia as a whole, leads the world in FTA activity, outnumbering the Americas in FTAs per country. There were several factors at play that led to the proliferation of such initiatives, the main being strengthening economic integration across the continent bolstered by the success of European and American economic integration, as demonstrated by expansion of the European Union as well as the historic success of NAFTA. Those examples served to highlight the mutually beneficial potential if Asian countries were to come together rather than apply an ‘every man for himself’ attitude.

Although FTAs are by no means a new tool, as we know, in recent years, they’ve come to play an increasingly political as well as economical role. FTAs play a significant role in strengthening democracy, across both domestic and foreign relations. Given that we live in a fragmented world of growing instability and disruption, democratic nations are likely incentivised to sign FTAs not only to foster sustainable economic growth (especially vital in a post Brexit, post Covid world), but also as a means of keeping the peace at a time when geopolitics has seemingly become a game of Jenga, where the next move could bring down the whole order. Are we therefore in a period of peak ‘FTA activity? Only time will tell.

While we are likely living in the ‘age of FTAs’, disparity in economic strength and power among ASEAN countries means there are a multitude of social, political and legal issues that frequently arise during negotiations and implementation. And so, in a world where we are likely to see more and more FTAs, what can we learn from the challenges they present? The issue of improving awareness of these FTAs among the wider business communities, not only for MNC’s, but down to the grassroots SME and market trader level, is, in my opinion, a critical element that needs addressing if FTAs in the ASEAN are to achieve the lofty ambitions we hold. Only when socially disadvantaged people and communities benefit as much as the international MNCs, will ASEAN countries really see the benefit FTAs bring towards eliminating social inequality and increasing access to capital and opportunity for all.

In my opinion, FTAs have proved to be successful in the past and recent expansions, and the move away from simple bilateral agreements to plurilateral agreements like the RCEP, are a huge step in the right direction. What’s left to determine is how the ASEAN can best implement these initiatives to ensure maximum benefit and impact.