Potential for Economic Cooperation in Indo-Pacific

9:56:18 AM | 10/28/2020

With nearly 50% of the world's population, rich resources and many important sea routes, the Indo-Pacific region increasingly dominates the global political-economic map.

Forming a high-speed network at sea

Indo-Pacific is an area located on the coasts of the Indian Ocean and the Western Pacific Ocean with the waters connecting these two oceans, including countries in Northeast Asia, Southeast Asia, South Asia and many other countries in the Middle East and Africa. This area converges many arterial sea routes of strategic importance to world trade, such as the route through the Bering Strait and the Malacca Strait (25% of world trade goods must pass through the Strait of Malacca).

With nearly half of the world's population, the Indo-Pacific region is currently the largest global market. This is also one of the most economically dynamic regions, the majority of world trade transactions are concentrated in this area. The Indo-Pacific region also gathers many sea powers, including the world's three largest economies, the U.S., China and Japan. There are also 7 out of 8 fastest growing markets in the world, typically India, China, Australia, Indonesia. Therefore, the potential for cooperation between the developed and developing economies in the region is huge.

Similar to the Trans-Pacific Economic Partnership, the oceans play a crucial role in the development of the countries of the Indo-Pacific region, providing abundant marine resources and being the key factor to ensure economic prosperity in the region.

Focus of attention of major powers

The free and open Indo-Pacific region is the U.S. strategic choice as a key policy counterpart in Asia. This was mentioned by U.S. President Donald Trump at the APEC Economic Leaders’ Meeting in Vietnam in 2017. The U.S. goal is to increase FDI capital for countries in the region, focusing on three sectors including digital economy, energy and infrastructure.

On October 6, 2020, within the framework of the meeting of the four Diamond Quartets (QUAD group) in Tokyo, the U.S., Japan, Australia and India committed to share a common vision of the free and open Indo-Pacific and based on the rule of law. Some of the focus topics discussed in this event include: Connecting and developing infrastructure; regional stability and prosperity.

On the European side, the French and German governments have also adopted the Indo-Pacific strategy. The Indo-Pacific countries are important partners to the French economy, accounting for more than 33% of the country's exports and more than 40% of its imports. The German government also has a policy of diversifying and strengthening relations with ASEAN countries, Australia and India through the signing of additional free trade agreements (FTAs) in the region.

Together with the QUAD, Japan, India and Australia are working toward a “Tripartite Supply Chain” alliance under the Supply Chain Recovery Initiative (SCRI) in the Indo-Pacific to reduce global supply chain dependence on China. It is expected that the Supply Chain Alliance will be established in November 2020.

Central location advantage

Southeast Asia is of great strategic value because it is located on the trade route between East Asia to European countries, Africa, the Middle East and India. With a population of about 660 million and well-secured regional stability, ASEAN attracts the attention of superpowers as it lies between the Indian and Pacific Oceans. Implementing an open and balanced foreign policy, many forums and cooperation mechanisms initiated and led by ASEAN such as the EAS, ARF, ADMM + and ASEAN + have attracted the participation of domestic and foreign powers, and promoting efficiency in dealing with general security issues.

In particular, the "Indo-Pacific Vision" of ASEAN was approved by Southeast Asian leaders at the 34th ASEAN Summit in June 2020. Located in the central position of the Indo-Pacific region, ASEAN countries have many advantages to attract investment and promote trade in the coming time.

On the Vietnamese side, the country ranking 4th in ASEAN GDP (according to IMF statistics in October 2020) is facing many opportunities for development and cooperation with the economies of the Indo-Pacific region, especially in the marine economic sector. With its long territorial sea, Vietnam plays a role as a gateway to connect inland Asia with the Indo-Pacific. Vietnam has many areas for building seaports, including many deep-water ports, allowing Vietnam to provide logistics services to countries inside and outside the region. In addition, Vietnam is located on the Trans-Asia road, which is located on the main axis of the East-West Economic Corridor (EWEC) connecting the Pacific Ocean and the Indian Ocean, creating great potential for fast and effective freight transportation at low cost.

By Huong Giang, Vietnam Business Forum