The Brexit decision in late June was unexpected, and markets now worry that other EU members may use the political momentum to seek their own referendum. For ASEAN, we do not believe that the bloc is at risk nor will it face a similar EU crisis. However, the lessons of Brexit are too important to ignore.
Compared to the EU, ASEAN is plagued with political inefficiencies, which ironically, protects the fate of the bloc nations. The ASEAN Secretariat lacks true authority over member countries, while ASEAN foreign ministers often fail to reach communication statements that reflect the common viewpoints. Referred to as the ASEAN way, members avoid interfering into neighboring affairs, preferring generally paltry statements. Less hapless, ASEAN countries maintain individual fiat currencies and independent central banks. Avoiding the creation of an ASEAN currency, the bloc escaped political instability that European Central Bank (ECB) now experiences.
Politically contentious, the euro is economically efficient, as it effectively further integrated trade and augmented trade partners within the bloc. ASEAN intra-regional trade is about a quarter compared to the EU, reflecting the huge growth potential.
Though unlikely to see an ASEAN member exit from the bloc, the Brexit vote echoes concerns globally. Specially, the Brexit voice of frustration that integration and economic prosperity are not shared equally underscores the important lesson for ASEAN in hopes to avoid destabilization. Wealth disparity, evident not just across the bloc but among individual members as well, is pernicious and leads to populism. Labor immobility also hinders growth potential and produces frustration.
Christopher Chu
Assistant Fund Manager - Asia