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Free Trade Zones with the EAEU

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The EAEU–Singapore Free Trade Agreement was signed at the EAEU summit in Yerevan on October 1, 2019. The document constituted the first step towards the creation of a comprehensive free trade zone between the Eurasian Economic Union (EAEU) and Singapore and, in addition to trade in goods, it will also regulate trade in services and the terms of investment.

The agreement pays due consideration to the experience of working on previously signed documents and also covers possible trade risks in more detail. During the negotiations, particular emphasis was placed on goods that are sensitive for the EAEU market. EAEU Minister for Trade, Veronika Nikishina, stressed that goods such as “beef, cheese, spirits, baby food, dairy products, cars, planes – all these will be exempted from the agreement, we will not be reducing duties on these goods.”

The agreement with Singapore was the third such document the Eurasian Union has signed with third countries.

The Agreement with Vietnam

The EAEU signed its first ever free-trade area (FTA) agreement with Vietnam on May 29, 2015. The agreement entered into force on October 5, 2016. From the outset, the agreement was concluded in the FTA+ format, which stipulates both duty-free trade rules and other interaction formats. Simultaneously with this agreement, the bilateral Russia–Vietnam and Belarus–Vietnam intergovernmental protocols on supporting automotive manufacture in Vietnam entered into force. These agreements established a preferential regime for implementing investment projects for the industrial assembly of Belarusian and Russian automotive equipment in Vietnam.

Since the national economies of the EAEU states need to adapt to the free trade regime, transitional periods of five and ten years were stipulated for certain goods so that import customs duties could be gradually reduced.

According to Nikishina, the EAEU’s trade turnover with Vietnam has grown 40 per cent since the agreement went into force. “Some feared that our exports would remain the same, that we would not be able to take advantage of the Vietnamese market opening up to us; some feared that we would only open our market for Vietnam. These fears proved unfounded: our exports grew by 40 per cent, while imports from Vietnam grew by 34 per cent.” By 2025, duty-free imports of Vietnamese goods will account for 90 per cent of the EAEU’s Common Customs Tariff headings.

For Vietnam, the average customs duties on goods imported into EAEU member states are being reduced from 9.8 per cent to 2.5 per cent over 10 years. Additionally, there is a scale of duty rates for various goods. For instance, the duty on agricultural goods will be reduced from 9.9 per cent to 5.6 per cent, and the duty for industrial products will go down from 8.0 per cent to 1.2 per cent. By 2025, Vietnam’s average customs import duty for EAEU states will have been reduced from 10 per cent to 1 per cent. In particular, import duties on agricultural goods will have been reduced from 16 per cent to 0.2 per cent, and duties for industrial products will have dropped from 8.9 per cent to 0.1 per cent.

Vietnam’s trade with Russia and Kazakhstan is developing with particularly intensity. According to WTO data, the share of Russian exports into Vietnam has been growing dynamically over the past three years: +19.9 per cent in 2016, +34.0 per cent in 2017 and +12.9 per cent in 2018. This growth was due to a sharp increase in exports of grain, mineral resources, iron and steel, fish and seafood, as well as organic chemistry products. Kazakhstan significantly increased its exports to Vietnam in 2017–2018 by 39.0 per cent and 3.6 per cent, respectively. This is due in part to the fact that Kazakhstan started exporting iron and steel, grain, and lead and lead goods into Vietnam.

Vietnam’s exports to Russia grew at an even faster pace: by 53.2 per cent in 2016; 17.8 per cent in 2017; and 58.0 per cent in 2018. Vietnam mostly exported electrical and mechanical machinery and equipment, coffee and tea, shoes, textile goods, and fruits and nuts. Vietnam’s exports to Kazakhstan grew six-fold in 2016 before falling by 13.6 per cent in 2017 and then growing by 20 per cent in 2018. The growth was due to exports of electric machinery and equipment, fruits, nuts and dried fruit, and timber and timber goods.

At the same time, Vietnam would like to increase its trade with the EAEU. Speaking at the Eastern Economic Forum in September 2019, Deputy Prime Minister of Vietnam, Trịnh Dinh Dung, proposed a further reduction of customs barriers in order to improve the opportunities to realize his country’s economic potential.

Provisional Agreement with Iran

The second agreement was signed with Iran in May 2018 and entered into force on October 27, 2019. This is a limited agreement valid for three years. One year after its entry into force, the parties will enter into talks on a full-fledged FTA. The agreement is limited due to a low level of liberalization. Reduced customs duties cover only 50 per cent of the total volume of trade between the two countries. In terms of goods, this translates into 502 HS codes for the Union and 360 HS codes for Iran.

The parties agreed to reduce average customs import duties on industrial goods (Iran undertook to reduce such duties from 22.4 per cent to 15.4 per cent, while the EAEU agreed to cut duties from 8 per cent to 4.7 per cent) and agricultural products (from 32.2 per cent to 13.2 per cent in the case of Iran, and from 9.6 per cent to 4.6 per cent in the case of the EAEU).

The tariff preferences granted to the EAEU by Iran extend to meat and fat-and-oil products, certain types of confectionery products and chocolate, mineral water, grains, tobacco, metals, cosmetics, timber, and individual types of electronic and mechanical equipment. Iran will be granted tariff preferences on many types of foods (including vegetables, fruits and dried fruit), as well as on construction materials, kitchenware, carpets and certain products made of non-ferrous metals.

Armenia stands to benefit most from trade with Iran, as the country is under the economic blockade of Turkey and Azerbaijan and has no common borders with EAEU member states.

The Armenian leadership considered building a third high-voltage power line between Iran and Armenia, as well as the North–South highway, the Meghri hydroelectric power station, and the Meghri Free Economic Zone as the main incentives for Armenia–Iran trade relations. But these projects have stalled in recent years due to economic and domestic political reasons.

Expanding trade and economic cooperation with Iran is also beneficial for Russia. Trade turnover between the two countries totalled USD 1.741 billion in 2018. Russian exports into Iran are estimated at USD 1.208 billion, while Iranian exports into Russia totalled USD 533 million. Deputy Prime Minister of the Russian Federation, Dmitry Kozak, estimates that Russian business will earn additional USD 150 million annually when the provisional agreement is ratified. Other Eurasian countries are also interested in expanding their trade and general economic cooperation with Iran. Given the upcoming signing of the Agreement on Cooperation in Transport in the Caspian Sea and the emergence of a major transportation and logistical hub there, trade with Iran may continue to grow.

At the same time, the agreement with Iran entails certain political risks. In September 2019, the United States imposed sanctions on the Central Bank Iran and 25 Iranian companies. The United States also demands that its allies and the entire global community accede to these sanctions. Mostly likely, sanctions against Tehran will continue to expand.

Agreement on Trade and Economic Cooperation with China

The Agreement on Trade and Economic Cooperation between the Eurasian Economic Union and the People’s Republic of China was signed on 17 May 2018, and will enter into force in late October 2019. This is not an FTA agreement, but it does define a single format for trade cooperation between the EAEU and China. The agreement covers a broad range of issues, including simplified trade procedures (such as the availability of electronic customs declarations, clearing goods within the shortest possible time), which accords with changes enshrined in the EAEU’s new Customs Code: increasing transparency and working on the mutual recognition of standards, technical regulations and compliance assessment procedures; regulating e-commerce; and cooperation in public procurement.

The most important export items in the EAEU’s trade with China are crude oil, including natural-gas condensate (18.6 per cent of the EAEU’s exports), rip-sawn timber (48.3 per cent), coal (12.7 per cent), refined copper and copper alloys (26.3 per cent), turbojet and turbo-propeller engines, gas turbines (62.5 per cent), unprocessed timber (76.4 per cent), and ores and copper concentrates (68.6 per cent). The most significant imports include communications equipment and spare parts for such equipment (China accounts for 64.5 per cent of the imports of EAEU states), computers for automatic information processing (63.4 per cent), equipment for the thermal treatment of materials (47.6 per cent), car and tractor parts and accessories (15.3 per cent), toys (80.3 per cent), and shoes with rubber or plastic sole and top (84.9 per cent).

We can see that EAEU export to China is dominated by natural resources. Consequently, the EAEU as a whole faces the task of both increasing and diversifying the trade turnover. The only way that this can happen is if the production of high value-added products is increased and mechanisms of introducing them to China’s market are found. Connecting the EAEU and China’s “One Belt – One Road” programme should promote economic cooperation.

The agreement exceeds the scope of a mere trade arrangement. It also defines promising areas for developing cooperation, such as agriculture, energy, transportation, industrial cooperation, information and communications infrastructure, technologies and innovations, finance and the environment.

The issue of establishing an FTA with China has been discussed for many years, since 2006, when Beijing first proposed it to SCO states. The EAEU has adopted a cautious stance, since “the principal risk lies in the fact that China’s economic power will make China the main beneficiary of reduced duties; therefore, we want to see how non-preferential agreement will work first.”

The Prospects of Developing the FTA Format with other States

Negotiations are currently are underway on the establishment of FTAs with several states. Serbia will be the next country to sign an FTA agreement with the EAEU (the FTA Agreement was signed on October 25, 2019 – Ed.). Deputy Prime Minister of Serbia and the Minister of Trade, Tourism and Telecommunications, Rasim Ljajić, said that the EAEU–Serbia Free Trade Agreement is scheduled to be signed in Moscow in late October 2019. In May 2019, the Supreme Council of the EAEU issued the mandate to sign the agreement.

Nikishina also commented on negotiations with Egypt, which were launched in 2019 and are nearing the final stage.

Talks with Israel are progressing at a slower pace. The first round of negotiations was held in late 2018. It focused on trade protection measures, the rules for determining the origin of goods, customs cooperation, dispute resolution, technical barriers to trade, sanitary and phytosanitary norms, public procurement and commodity trading issues. The main problem is reconciling the positions of the parties. The political differences with Tehran, which already has an agreement with the Eurasian Union, have not significantly affected the course of the talks.

We can thus see that the Eurasian Union is working diligently to sign FTA agreements with interested countries. Such agreements bolster the EAEU’s positions in the regional and global economy and are conducive to expanding the markets for national economies. However, signing such documents is not the EAEU’s goal as such. The point is that they provide mutual advantages. The experience that the Eurasian Commission has gradually accumulated allows it to articulate the interests of its member states more clearly and neutralize the risks for national manufacturers when signing preferential trade agreements. This practice will continue.

From our partner RIAC

PhD in Political Science, head of the post-Soviet countries’ economic development section at the Institute of Economics, RAS

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China’s economic slowdown and its implications for the rest of Asia

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China’s economy has slowed down considerably since the past year. The key reasons for China’s slow growth are its stringent lockdowns, to achieve its objective of a zero covid policy. Here it would also be pertinent to point out, that many of Chinese President Xi Jinping’s policies especially tightening of credit for the real estate sector had an adverse impact on the real estate sector and the economy as a whole (according to estimates, real estate counts for 29% of the country’s Gross Domestic Product (GDP). A number of Chinese real estate developers have been downgraded by Moody’s. A number of companies, including Evergrande are part of the B3 category, which denotes “speculative and are subject to high credit risk’.

  In August 2022, Chinese Premier Li Keqiang while commenting on the slowdown said:

‘A sense of urgency must be strengthened to consolidate the foundation for economic recovery’

There is a growing realisation that a further slowdown could lead to serious social problems, the stringent lockdowns have resulted in growing unemployment.

A number of steps have been taken to prevent the slowdown, such as Real Estate Sector and steps for Small Medium Enterprises. In August 2022, the Chinese government offered support to the tune of US $29 billion to Chinese real estate developers so that they can complete stalled projects and deliver them to home buyers. Earlier this year, China’s government announced that it would provide fiscal concessions and tax exemptions to MSME’s to small businesses in China. One of the key factors behind this course correction by Xi Jinping  was the 20th national congress of the Communist Party will be held from October 16, 2022 (Xi Jinping is likely to secure a third-term and also consolidate his hold over the party and consolidate his position as the most powerful leader after Mao Zedong)

Challenges still persist for China’s economy

Reports of multilateral agencies clearly point to China’s growth in 2022 being well below earlier estimates and targets. According to a World Bank Report, growth in 2022 for the Asia-Pacific region is likely to be a little over 3% (3.2%), while China’s growth is likely to be 2.8%. China had targeted a growth of 5%, and even multilateral agencies had estimated that the country would grow at over 5%

An Asian Development Bank (ADB) report which estimated that China’s growth will be a little over 3% states that ‘developing’ Asia  (which includes Cambodia, Bangladesh, Nepal, Myanmar, Sri Lanka etc) will grow at over 5% and highlights a significant point, that the last time China grew slower than the rest of Asia was in 1990, when China grew at below 4% (3.9%) and the rest of the region grew at 6.9%. Emerging Asian economies which include China, India, Indonesia, Thailand, the Philippines and Vietnam are likely to grow at 4.3% in 2022 and 4.9% in 2023 again a drop from earlier estimates.

It would be pertinent to point out, that a number of foreign investors in China have also complained about the lockdowns and restrictions. While in the short run, it is unlikely that they will shift their operations in a big way, they are likely to look for alternatives.

In contrast to China, the rest of the region has benefited from easing out covid19 restrictions. Says the ADB report:

‘Easing pandemic restrictions, increasing immunization, falling Covid-19 mortality rates, and the less severe health impact of the Omicron variant are underpinning improved mobility in much of the region’

Can ASEAN and South Asia benefit from China’s slowdown?

    The case of Association of South East Asian Nations  (ASEAN) countries is especially important, because their policies with regard to covid have been fundamentally different from that of China. Opening up of borders has given a boost to the tourism sector in the region — especially Malaysia and Thailand.  This is important, because tourism accounts for a significant percentage of the GDP of these economies. Here it would also be pertinent to point out, that a number of companies have moved out of China, in the aftermath of covid 19, with Vietnam being a favoured destination due to its geographical location and other economic advantages (some companies have also moved to other ASEAN nations as well as India).

Even the stock markets of these countries have been doing reasonably well. In April 2022, analysts from JP Morgan and Goldman Sachs had picked Indonesia, Vietnam and Singapore as their favourite markets, while last month Credit Suisse said its favourite market in the region was Thailand.

In conclusion, while there is no doubt that China has been driving economic growth not just in Asia, but globally, it is unlikely that its economic challenges are likely to reduce in the short run. It is not just covid, but Xi Jinping’s economic policies which have been responsible for the slowdown. The biggest beneficiaries of China’s covid19 policies as well, as it’s slowdown in the longer run, would be the ASEAN region — especially countries like Vietnam and Indonesia —  along with South Asian nations – especially India and Bangladesh who with investor friendly policies could attract more companies seeking to relocate from China.

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Russia Struggling to Explore Africa’s Market

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Building on post-Soviet relations with Africa, Russia has been struggling for strategies on how to establish economic footprints, promote investment and deepen cooperation in Africa. Despite the road map adopted at the end of the first Russia-Africa summit held in October 2019, little has been achieved since then.

Late September, the Regional Chamber of Commerce and Industry welcomed the participants to another round of conference under theme: “Russia-Africa: Prospects for Cooperation” held in St. Petersburg. That gathering featuring a few interested Russian enterprises was part of a series of steps brainstorm and discuss opportunities, developments and challenges with regards to the preparation of the forthcoming Russia-Africa summit planned for July 2023.

Additionally, the goal of this St Petersburg conference event was in line with the priorities on how to engage with credible investors who can partner with the government and private sector to exploit the market. It discussed the possibilities of strengthening partnership between Russia and Africa, as well as issues related to export/import, logistics and peculiarities of working with African partners.

Vice President of the Chamber of Commerce and Industry of the Russian Federation Vladimir Padalko welcomed the participants via video link from Moscow. In the video, Padalko emphatically reminded that “preparations for the second Russia-Africa summit, scheduled for July 2023 in St. Petersburg, are in full swing and we should come to it with concrete results in the form of agreements ready for signing.”

According to him, the Coordinating Committee for Economic Cooperation with African Countries should focus on conducting business missions that would identify specific areas for conducting business cooperation with African countries. It is necessary to help Russians to learn what the African market is, so that they are not afraid of taking investment risks in Africa. 

Padalko said that the prejudices that Russians have regarding Africa should be overcome. He referred to his own experience, emphasizing that the first trip to the African continent made him change his mind significantly about the opportunities offered by cooperation with Africa. Russia is trying hard to improve its commercial relations with its African partners. In 2009, it established the Coordinating Committee for Economic Cooperation with sub-Saharan Africa to assist in promoting Russian business interests in Africa.

Senator Igor Morozov, Chairman of the Coordinating Committee for Economic Cooperation with African Countries, called for increasing the pace and level of cooperation with African countries through, as he put it, “bringing small and medium-sized businesses to Africa.” 

According to him, Russia is far behind in its activity on the African continent from such countries as the United States, Britain, China, France and even India and Turkey. These countries are developing a network of technology parks, working in the continental free trade zone, participating in the development of the infrastructure of African countries, the construction of roads, bridges and railways.

Senator Morozov noted that “Russian business does not have the tools to enter Africa ​​and, above all, in the field of the banking system. No other banks give guarantees to Russian business. According to him, African countries are interested in the supply of agricultural machinery, and in this sense, the Kirov Plant in St. Petersburg may have good opportunities. And in this sense, we should take an example from our Belarusian friends.” 

That was not the first time analyzing the development of business and trade elations with Africa. The African market is competitive and complex, therefore Russian business needs to work thoroughly and systematically in it in order to achieve success.  It is necessary to help interested businesses willing to navigate African realities, find a niche for their work, learn about the conditions for entering certain markets.

According to Morozov, there is really the need for a specialized investment fund to support entrepreneurs. In general, with the prospect of working with African partners for many years, more serious state support is needed, and finally suggested that it is necessary to return to barter trade and concessions, which will make it possible to obtain minerals from Africa.

“We need to develop our international payment instruments – sanctions are already being imposed against the Mir system,” he said. A great deal of hope is being placed on the working group for developing new mechanisms in currency regulation and international settlements led by Kremlin aide Maxim Oreshkin, “which is supposed to work out these mechanisms soon,” Morozov said.

“We need to see how we will work within the framework of national currencies” and use them for settlements with African countries, he said. “We need to work in this direction, understanding that SWIFT will never again be [the main system for interbank payments] for us,” Morozov, who also serves on the Federation Council’s Economic Policy Committee, said.

Talks on options for settlements between Russia and African countries in the current economic circumstances are already being held, but “we shouldn’t get ahead of events. African central banks are already beginning to come [to Russia]. Everyone understands that we are leaders in grain exports, leaders in sunflower oil, mineral fertilizers, and it is necessary to settle up,” Morozov.

Other options for settlements could be barter and concessions. The outlook for cooperation and possible Russian projects in Africa, Morozov said Russia can offer its competencies in hydropower, electric passenger transport, automobile manufacturing, farm machinery and pharmaceuticals. Afrocom operates with the support of the Russian Chamber of Commerce and Industry, the Federation Council and government institutions, according to the committee’s website.

Associate Professor Ksenia Tabarintseva-Romanova, Ural Federal University, Department of International Relations, acknowledges huge existing challenges and perhaps difficult conditions in the current economic cooperation between Africa and Russia. Creating African Continental Free Trade Area (AfCFTA) is the most important modern tool for the economic development of Africa, and this is unique for exploring the market and to get acquainted with the opportunities that it offers for business cooperation.

She, however, maintains that successful implementation requires a sufficiently high level of economic development of the participating countries, logistical accessibility, developed industry with the prospect of introducing new technologies. This means that in order for African Continental Free Trade Area to effectively fulfill its tasks, it is necessary to enlist the provision of sustainable investment flows from outside. These investments should be directed towards the construction of industrial plants and transport corridors.

Speaking earlier in an interview discussion, Tabarintseva-Romanova pointed to the fact that Russia already has vast experience with the African continent, which now makes it possible to make investments as efficiently as possible, both for the Russian Federation and for African countries. In addition, potential African investors and exporters could also explore business collaboration and partnerships in Russia.

Local Russian media, Rossiyskaya Gazeta also published an interview with Professor Irina Abramova, Director of the Institute of African Studies under the Russian Academy of Sciences, focusing on the economic cooperation with Africa. In this interview, Abramova reiterated explicitly that Russians have to do away with negative perceptions and attitudes toward Africa. The change in attitudes has to reflect in all aspects of the relationship with Africa and Africans.

“In Russians’ minds, Africa is synonymous with backwardness, poverty and hunger, which is not true at all. It is currently one of the most promising regions for foreign investment. In fact, it is a tiger ready to pounce. Africa today is in the same situation that China was in the 1990s. Today, China is the world’s number-one economy in purchasing capacity, a strong power which largely determines global development,” she explained.

“Africa is the zone where all big players overlap since its geographic location between the east and the west puts it at the peak of controversy and big game between all players, meaning between Europe and America, on the one hand, and China, India and other countries, on the other. And if Russia poses as a superpower it will lose its global influence without indicating its position in Africa as well,” she said.

According to her, seven African countries specifically Egypt, Algeria, Morocco, South Africa, Tunisia, Nigeria and Sudan, account for nearly 90% of Russia’s trade. “At the same time, China is present in almost all African countries. Millions of Chinese work in Africa today. It is a good moment for Russia now, because Western partners are trying to impose their values on the Africans, while China is dealing with its challenges at the expense of Africa,” the expert stressed.

The middle class is expanding very fast there, already amounting to 250-300 million people and this constitute a huge consumer market for products and services, according to her estimation.

Professor Abramova noted that it is a very good market for Russian products. The Chinese understood that long ago and are tapping the African market, having flooded it with their products, though Russia also has opportunities as it is fairly competitive in the energy, infrastructure and agriculture sectors, and exporting products such as fertilizers, trucks and aircraft supplies.

The fact that many prominent politicians and businessmen of the African continent graduated from Russian universities and speak Russian well contributes to strengthening of Russian-African relationship, the expert said, adding though that a new generation is about to take over in Africa, which is also reason why Moscow should maintain the existing solid social and cultural ties.

Senator Igor Morozov and Professor Irina Abramova are both members of the Kremlin’s Committee assigned the responsibility for coordinating and preparations for the next Russia-Africa summit in July 2023. Both Russia and Africa had problems finding a suitable African venue for the summit. The joint declaration adopted in Sochi says the summit be held every three years and the venue alternated between Russia and Africa.

Sampson Uwem-Edimo, President of the Nigerian Business Council and General Director of Trailtrans Logistic LLC, delivered a report “Nigeria as a Window to Africa” and further stressed that Russia does not have a common strategy on how to enter African markets, which exists, say, in China or France.

By removing barriers to trade in the region will create new entrepreneurial activities and spur innovations in technology. Now the African Continental Free Trade Area (AfCFTA) seeks to create better conditions for investment. On the other hand, Russian corporate directors most often have problems with their business in Africa. The key obstacles ranging from their inconsistencies in approach, poor knowledge of the local political and business environment. Russians must also invest more in R&D collaborations with their African partners.

According to him, while Russians hope for brisk business, many African business leaders today are still Western mind-oriented, have various support from the United States and Europe. But the practical reality, Russia could still steadily transfer technologies for local processing of raw materials as a catalyst for Africa’s development.

Uwem-Edimo noted that such former colonial powers as France and Great Britain, although they left their colonies, keep control panels in their capitals. The Nigerian businessman, who spoke in Russian, introduced the conference participants to the opportunities and vast potential of the African continent, focusing on Nigeria, which makes up 18 percent of the continent’s population – 240 million people.

President of the St. Petersburg Chamber of Commerce and Industry, Vladimir Katenev, also addressed the conference participants with a greeting. The moderator was Ekaterina Lebedeva, Vice-President of the St. Petersburg Chamber of Commerce and Industry Union, who called on representatives of the business community, in spite of the emerging challenges, to consistently work towards prioritizing Africa.

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China-ASEAN Comprehensive Strategic Partnership: A Shared Future for Pursuing Regional Economy Integration

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For ASEAN, China is a neighboring country as well as a strategic partner in various fields, especially in the economic field. China has become the largest ASEAN trading partner for 13 consecutive years since 2009 (Global Times, 2022).

A survey conducted by the ISEAS-Yusof Ishak Institute to more than 1,600 ASEAN citizens said that 76.7% of them chose China as the most influential economic power in ASEAN (Heijmans, 2022). China has also grown to become an economic giant in the Asian region and is predicted to surpass the US as the world’s strongest economy by 2030 (Jennings, 2022).

This mutual relationship between China and ASEAN is getting stronger after the agreement of the Comprehensive Strategic Partnership (CSP). In the economic aspect, the implementation of the CSP is carried out in line with the Belt Road Initiative (BRI) and the Regional Comprehensive Economic Partnership (RCEP) project. Both projects are grand plans that have been prepared for economic integration and encouraging a more inclusive trade between two parties.

On the other hand, ASEAN also has a similar agenda in the region, which is to build an economic community that regulates trade as well as delivers economic benefit to its members. The common vision between China and ASEAN certainly smoothes the process of this cooperation. Then, how can China and ASEAN achieve their common goals? Are there any obstacles and challenges that they will face in implementing this CSP?

China-ASEAN: Sharing The Same Economic Vision

In pushing its foreign policy agenda, China has made visits to various neighboring countries in recent years. Rather than building an image as an economic great power, China focuses more on a friendly approach by promoting “a community with a shared future” to its neighbors (Wei, 2022). As a close neighbor and strategic partner, ASEAN become the one whom China wants to share the future with.

For ASEAN, BRI and RCEP itself have an aligned purpose with the establishment of the ASEAN Economic Community (AEC). AEC aims to promote a single market and product base, a highly competitive region, with equitable economic development (ASEAN, 2020a). Through AEC, ASEAN also commits to a freer flow of goods and services, and eases the distribution of skilled labor and the flow of capital in the region (Asian Development Bank Institute, 2015).

ASEAN’s ambition to build an integrated regional economy sounds promising. However, building an integrated economy ecosystem doesn’t only require geographical proximity, but also an adequate infrastructure (Donghyun et al., 2008).

Even though Southeast Asia is rich in resources and manufacturing, some areas still suffer from infrastructure lack and slow industrial development. Several ASEAN countries still have poor transportation infrastructures. In fact, transportation is a key factor in fastening economic distribution.

At this point, China came up with a BRI project plan which mainly prioritized large investments in transportation infrastructure (Donghyun et al., 2008). This long-term project has ample potential to provide infrastructure and other development facilities, hence promoting the growth in the region (Iqbal et al., 2019).

The CSP also regulates the Regional Comprehensive Economic Partnership (RCEP) agreement that aims to broaden and deepen free trade activity between ASEAN-China, Japan, Korea, New Zealand, and Australia (“RCEP: Overview and Economic Impact,” 2020). The RCEP later marks the birth of the world’s largest FTA which surely opens up wider trade and market access for ASEAN.

The RCEP will also help both China and ASEAN forge mutually beneficial industrial chain and supply chain partnerships, also to shape more inclusive trade cooperation in the future (Bo & Jing, n.d.). This opportunity is expected to be an open door for ASEAN integration with global trade, which is also the initial mission of AEC. Also can attract other countries to plant their foreign investment in ASEAN countries (ASEAN, 2020b).

For China, BRI and RCEP are essential to strengthen China’s position in the region. China is contriving to build “literal and metaphorical” bridges as a connector and a highway to greater influence in global politics and economy (Lockhart, 2020).

Overcoming Challenge

Both China and ASEAN share great economic interests in the CSP agreement. This makes both parties find a smooth path in the negotiation and agreement process. However, in the implementation process, ASEAN and China need to be more serious and committed.

ASEAN is currently in the process of compiling the ASEAN Economic Community (AEC) Blueprint 2025. The mid-term review criticized the uneven implementation of the AEC blueprint, with “easier” initiatives prioritized over challenging commitments. Both policy-making processes at national levels and practice need to be in line in order to reach common goals (Chen & Jye, 2022).

The Covid-19 pandemic becomes another obstacle to realizing economic integration in the region. The pandemic hits ASEAN quite heavily, where currently the members are still concerned about restoring the stability of the domestic economy. The cooperation with China is used well by ASEAN countries at the national level, such as the proposal submission for building several economic infrastructures by Indonesia, encouraging digital development in Thailand, signing economic bilateral relations with Vietnam, etc. Yet for the regional purpose, it still needs to be maximized.

The CSP begins a higher level of relationship, as reflected in the deeper cooperation, shared normative frameworks and institutionalized cooperative mechanisms, and high-level political commitment and priority from China and ASEAN (Ha, 2022). It will be less than optimal if ASEAN only sees CSP as a bridge to strengthen bilateral relations with China. ASEAN needs to view CSP as a strategic relationship for an ideal future of regional economic integration.

For optimizing the common goals for both, mutual political trust is the basis and safeguard (Bu, 2015). CSP does not happen overnight, building connectivity and an integrated ecosystem is a large-scale and long-term project. In order to reap the rewards of this investment and agreement, active dialogue, healthy relations, and stable growth of the upbringing of China-ASEAN relations must be strived by both parties.

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