Lippo Group chief executive James Riady called on member states of the Association of Southeast Asian Nations to work together to close the income gap and reduce economic disparity within the bloc if they want to harness the full potential of its people.
James was speaking in Hanoi, Vietnam, on Monday (24/10), during the first day of a two-day World Economic Forum event in the Mekong region.
The forum brings together 180 participants, consisting business leaders from multinational companies in Asean and the Asia-Pacific region, academics as well as civil society.
The host “Mekong” nations, which are Vietnam, Cambodia, Laos, Myanmar and Thailand, had their heads of state, heads of government and senior ministerial delegations, participating in the forum.
The following is an excerpt from James Riady’s speech:
“If Asean were a single country, it would be the seventh largest economy in the world with a combined gross domestic product of $2.4 trillion. The other six are the United States, China, Japan, Germany, France, and the United Kingdom. With a youthful population of 600 million people, Asean has the third-largest labor force in the world after China and India.
Asean is also a manufacturing powerhouse and a major global hub for trade. It also has one of the fastest growing consumer markets in the world. As the region seeks to deepen its ties under the Asean Economic Community [AEC] it will capture an even larger share of global trade and raise its economic profile.
There are some 67 million households in Asean countries that are part of the consuming class with income levels that allows them significant discretionary spending. That number could almost double to 125 million households by 2025, making Asean a pivotal consumer market of the future.
Asean is home to 227 of the world’s largest companies, making it the seventh largest host of such companies. As the largest economy in Asean, Indonesia is the undisputed leader, accounting for 40 percent of Asean’s GDP. It is a member of the G20. How Indonesia acts and behaves, impacts the rest of Asean. It is thus imperative that Indonesia remains an open, integrated and committed to free trade and investments. If Indonesia closes its borders, there would be no Asean.
We must close the income gap and reduce economic disparity within Asean if we are to harness the full potential of its peoples, maintain stability and enhance the sense of community. Over the past 60 years, Asean has been a remarkable region of peace and economic progress.
But economic inequality has been growing globally since the 2008 financial crisis. Societies across the globe, including in the developed West, are rebelling against unequal access to goods and services, education, financial services, health care and decent housing.
Different Asean countries have had mixed success in lowering income inequality. Indonesia has seen its Gini coefficient rise from 1999 to 2015 while other countries have seen it fall.
A recent survey conducted by the Asean-Canada research partnership revealed general perceptions on Asean and inequality, although answers were based on respondents’ own definitions of each term. The overwhelming majority, 92 percent, of respondents considered Asean to be inequitable but 85 percent felt the region was stable. Most respondents considered income inequality as a potential source of instability and a threat to regional development.
It is likely that the fourth Industrial Revolution and the rise of the digital economy will lead to severe disruptions and widen income inequality. Singapore and Malaysia stand to benefit the most from the rise of the digital economy given their highly advanced economies and efforts to integrate their economies. The recent announcement of the $17 billion high-speed train linking Singapore to Kuala Lumpur will further integrate these economies.
The other Asean countries must not be left behind, especially the nations of the Mekong Delta.
- Role of Private Sector
It is clear that there needs to be much closer partnership between the public and private sectors. Although the population of Asean in 2030 will be richer and largely urbanized, the majority of the region’s GDP will still be produced by the 30 percent of the population that remain in the countryside.
This means Asean as a whole will need to create more urban jobs. Governments and private companies much harness knowledge and skills. Access to technology, smartphones and the internet will create new opportunities but will also widen the income gap.
Asean is the world’s fastest-growing internet region with an existing Internet base of 260 million but that will double to 480 million by 2020. The region’s internet economy is also expected to exceed $200 billion by 2025.
This will lead to a seismic shift in consumer spending and the creation of new industries. Harnessing this vast market and in the process improving the lives of millions of Asean citizens is our biggest challenge but also an historic opportunity.
As a group, Lippo has been at the heart of contributing to the growth of the digital economy in Asean. We have invested in education, healthcare, media, broadband and providing high quality homes to a rapidly expanding middle class in Indonesia.
We can share this knowledge and business heritage with the other Asean members.”