In the year 2024, ASEAN experienced a series of significant events. Developments in clean energy varied across different regions, and the tourism industry showed signs of gradual recovery from the pandemic. Countries like Thailand implemented large fiscal spending packages. However, the most significant trend to emerge from 2024 was the rise of protectionism and economic nationalism, a shift that appears to be here to stay.
This development can be divided into two main parts. The first involves nations promoting local manufacturing by direct intervention in the market via fiscal and tax policies. Thailand, for example, significantly incentivized consumers to buy electric vehicles and provided appealing terms to foreign investors in local EV production. The policy was so successful that the Thai market is now at risk of being flooded with EVs, primarily from Chinese companies.
The second part of the story involves the increase in the use of trade instruments like tariffs and bans to safeguard domestic industries and undermine foreign competition. This type of protectionism has been more prevalent this year, with Indonesia at the forefront. In 2024, the country continued its ban on nickel ore exports to promote downstream industrialization, and now the focus is on acquiring more direct ownership of nickel smelters.
Indonesia has also been assertively utilizing market access to obtain more favourable investment and trade conditions from foreign entities. For instance, the Ministry of Trade has prevented the latest iPhone from entering the Indonesian market unless Apple agrees to investment commitments. The same approach has been taken with Chinese e-commerce platforms, with Indonesian regulators excluding low-cost retailers like Temu from the market. Vietnam also recently banned Temu, indicating that this approach to trade and market access is becoming more common in the region.
This trend is not exclusive to Southeast Asia. The United States has its own industrial policy, as demonstrated by the CHIPS and Inflation Reduction Acts. The re-election of Donald Trump underscores the shift in American policy towards domestic interests over an open global trade system. Similarly, China has been leveraging various trade and industrial policy tools for years to spur economic growth.
The rise of protectionism and economic nationalism in Southeast Asia is a response to this larger global trend. Both Indonesia and Vietnam, for instance, have banned Temu due to Chinese consumer goods flooding the market at such low prices that local businesses cannot compete. By banning Temu, these countries are signalling their refusal to accept surplus Chinese production at the cost of their domestic economic interests. The message is clear: the priority is local businesses and consumers, and the government will utilize a range of strategies to protect them.
While economic nationalism is not new, ASEAN countries have been shifting towards more state intervention in markets, particularly in commodities, natural resources, and strategic industries. This suggests a movement towards a more transactional and inward-focused approach to economic development.
Despite this, some analysts may argue that Southeast Asia remains fundamentally dedicated to free trade and that economic nationalism is transient. While it is true that these countries are open to trade and investment when it benefits them, it is also clear that they are prepared to intervene in markets when they believe it serves their national interest. The year 2024 was a turning point that highlighted this reality, making it the most significant story of the year.
