Towards AEC 2025 and Beyond: Making the Most of Laos’ 2024 ASEAN Chairmanship

With the theme “Enhancing Connectivity and Resilience”, Laos has its work cut out to further ASEAN’s economic agenda in a world of growing fragmentation and complexity amid the megatrends of climate change and digitalisation to ensure greater inclusion. Apart from that, Laos begins its Chairmanship in the penultimate year of ASEAN Economic Community (AEC) 2025. As such, ASEAN will have its last chance this year to push the envelope in shaping a post-2025 AEC, before finalising the post-2025 Vision and strategic plans.

To do the above, Laos needs to continue the efforts of Indonesia’s 2023 Chairmanship, particularly in upholding ASEAN’s unity and relevance and in leveraging new growth drivers such as green transition and digital transformation. This is in line with Laos’ Prime Minister Sonexay Siphandone’s pledge to build on Indonesia’s efforts with “a stronger focus on the ASEAN Community, seizing opportunities amid geopolitical and geo-economic challenges”. In doing that, Laos will be focusing on enhancing connectivity, narrowing development gaps among ASEAN member states, promoting carbon neutrality, and driving digital transformation in the region.

Connectivity

Inspired to transform from a landlocked to a “land-linked” economy, Laos is well positioned to advance the ASEAN connectivity agenda. It is therefore a good time to revisit the Master Plan for ASEAN Connectivity (MPAC) 2025 launched during Laos’ 2016 ASEAN Chairmanship. ASEAN’s connectivity agenda may have its own master plan and governance body, but it must add value to technical bodies and implementing agencies in the broader ASEAN Community rather than operating in a disconnected ecosystem.  

The MPAC 2025’s mid-term review (MTR) highlighted uneven implementation progress, with seamless logistics and sustainable infrastructure lagging behind people mobility and digital innovation, as well as alignment issues with sectoral work, national priorities, and other relevant initiatives by dialogue and other external partners.

Moving forward, MPAC 2025’s successor should be better aligned with the ASEAN Outlook on the Indo-Pacific. It must also address the gaps identified in the MTR in logistics and infrastructure, value adding to ASEAN sectoral work by improving the visibility of relevant initiatives, facilitating prioritisation and coordination, and mobilising support and resources. Enhancing connectivity, within and beyond MPAC, is central to ASEAN Community building. Ownership and buy-in from implementing agencies and alignment with national development priorities are key. 

Priority should also be given to impactful initiatives, including by strengthening national regulations and institutional capacity for greater private sector financing of infrastructure projects. Robust travel and visa facilitation will likewise support the Laos Chairmanship’s focus on tourism regionwide. ASEAN could also leverage relevant initiatives within ASEAN such as the ASEAN Industrial Project-Based Initiative and the ASEAN Smart Cities’ Network and beyond, including projects by ADB, dialogue partners, and sub-regional initiatives like the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area  (BIMP-EAGA) and the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT).

Narrowing ASEAN’s Development Gap (NDG)

Currently, the Initiative of ASEAN Integration (IAI) is the main vehicle for narrowing the development gap between ASEAN’s older and newer members, namely Cambodia, Laos, Myanmar, and Vietnam. The landscape has significantly changed after two decades and four IAI work plans. The newer members are no longer ‘new’. Vietnam’s economy, for one, has developed at a remarkable speed while ASEAN is expecting an eleventh member – Timor-Leste – which is one of the poorest developing countries in the world. Meanwhile, some members are still grappling with challenges exacerbated by the COVID-19 pandemic. As Chair, Laos should take the lead in setting ASEAN’s post-2025 Narrowing Development Gap (NDG) agenda.

Lessons from IAI should inform the conversations. The latest IAI Work Plan is better linked to the AEC and ASCC Blueprints, focusing on five strategic areas: food and agriculture, trade facilitation, MSMEs, education, health and well-being, and enabling actions. However, implementation challenges remain, including the lack of coordination among national coordinators, line, and related agencies; lengthy approval processes; a disconnect between IAI projects, NDG objectives and AEC goals; and a lack of implementation capacity.

Post-2025, ASEAN’s NDG approach should consider the efficacy of IAI’s country-centric approach and its implementation gaps, particularly how to complement IAI with other initiatives, strengthen governance and enforcement, better map ASEAN NDG to ASEAN Community pillars and other cross-cutting agenda items such as digitalisation and climate change, and resource mobilisation. A more human-centric approach to NDG is worth considering, focusing on, among others, gender economic empowerment, disability and social inclusion, and the human impact of technology. These offer opportunities for cross-pillar collaboration. To monitor and measure progress, ASEAN NDG work must be better linked to the ASEAN Framework for Equitable Economic Development (AFEED).

Digital Economy

Until recently, ASEAN had fragmentarily pursued digital economy cooperation. It had separate initiatives for data governance, digital connectivity, e-commerce, MSME digitalisation, digitally enabled trade facilitation, and payment connectivity, but lack coordinated vision and approach. Though these initiatives have delivered some results, a more comprehensive approach is needed to unleash the full potential of the digital economy.

ASEAN members are at different levels of digital readiness, so arriving at harmonised regulations is a challenge. Further, frameworks and rules are insufficient to empower people and businesses to benefit from digital technology if infrastructure and skills remain wanting. Geostrategic competition has also spread to the digital technology space. Trade and investment restrictions are introduced in the name of security concerns, and competition in standard-setting abounds. Post-2025, ASEAN will need a community-wide platform to discuss and respond to cross-cutting digital technology-related issues.  

2023 saw a breakthrough with the commencement of the ASEAN Digital Economy Framework Agreement (DEFA) negotiations. Progressive rules in DEFA could double the projected value of ASEAN’s digital economy to US$2 trillion by 2030. While the nine agreed core provisions of DEFA will guide negotiations, the details will touch on many sub-provisions, some of which will be sensitive and difficult. Concluding negotiations by the end of 2025 could be challenging.

In this regard, Laos should work with Thailand as Chair of ASEAN DEFA to prioritise issues that can generate relatively fast consensus, while enhancing mutual understanding on difficult provisions to allow time for stakeholder consultations. Discussion with sectors across Community pillars should be encouraged for early and greater coordination among national focal points and line agencies.

But ASEAN DEFA remains insufficient for holistic digital transformation. Ideas around an ASEAN Digital Community 2045 have been floated though meaningful conversations have yet to take place. This signals the need for a complete understanding of the full potential and impact of digital technology and the fundamentals that are needed for an inclusive and participatory digital transformation.

Setting the Foundations for AEC Post-2025

Laos’ Chairmanship should make strides in achieving AEC 2025 and shaping the post-2025 strategic plan. On the former, Laos should deliver on AEC 2025 high-impact initiatives by addressing private sector concerns. It can pick up on its 2016 Chairmanship legacy of the ASEAN Trade Facilitation Framework when numerous trade-enabling instruments were advanced. Driving ASEAN’s trade facilitation and securing an ambitious substantial conclusion of ATIGA upgrade are two low-hanging fruits.

Moving towards post-2025, two studies have been launched: on the end-term review of AEC 2025 and AEC post-2025. The former needs to overcome the risk of death by detail while the latter of being thin in concrete recommendations. ASEAN cannot simply wait for the conclusion of these studies to develop the post-2025 AEC strategic plan. The substantive work should commence in parallel, including cross-sectoral consultations and thematic deep dives.

Laos should progress discussions on the content of post-2025 AEC. Beyond connectivity, NDG, and digital economy, Laos could also consider strengthening sustainable investment promotion and facilitation, MSMEs and start-up financing, and global supply chain participation and resilience. The AEC should also address cross-pillar coordination issues, impact-driven prioritisation, work process streamlining, as well as monitoring and communicating AEC work.

Conclusion

To leave its mark as Chair, Laos must venture beyond the incremental updating of ASEAN strategies and aim for big yet pragmatic deliverables while establishing relevant instruments, institutions, and processes.

It would be unfair to expect Laos to address all of ASEAN’s priorities. Nonetheless, it can focus on issues closest to its heart, from improving connectivity to narrowing the development gap, delivering high-impact wins under AEC 2025, and advancing the foundations for the post-2025 AEC.

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Editor’s Note:
ASEANFocus+ articles are timely critical insight pieces published by the ASEAN Studies Centre.