On 31 January 2020, at 11pm London time, the United Kingdom formally departed the European Union. This comes after years of negotiations with the EU and the UK Parliament, hammering out a deal upon which terms the UK will depart the EU after 47 years of membership.
Since June 2016, when voters chose to leave the EU in a referendum, closing the terms of the divorce has been a messy process. It claimed the careers of prime ministers David Cameron and Theresa May. Economic uncertainty has seen the pound gyrate wilder than a pole dancer, while businesses fretted endlessly over the ‘Deal or No Deal’ situation that dragged on for nearly four years.
Eventually, it took a resounding general election victory to bring Brexit to a close. Prime Minister Boris Johnson has a commanding majority of 80 MPs – enough to pass the legislation required to implement the withdrawal agreement by 31 January.
Once the bill is passed, a new race will begin to secure a trade agreement and new partnership with the EU. Aside from trade, non-trade issues that must also be resolved include security and intelligence cooperation, fisheries, data, education and research collaboration.
Little is publicly known of the negotiation plans, but businesses have been clamouring for a tariff-free, quota-free deal. The Institute of Directors, a UK-based business organisation for company directors, senior business leaders and entrepreneurs, is urging the government to publish the negotiating objectives for the next stage of Brexit talks amid ongoing uncertainty surrounding the deal.
On the EU side, the EU will likely impose stricter regulations and restrictions on the UK’s goods and services as the EU does not want to reward the leaving party with favourable terms that its members enjoy. Hence, the UK is likely to look beyond Europe for alternative markets – namely Asia and the United States.
What’s In It for ASEAN?
For ASEAN economies, it will likely mean a reconfiguring of free trade agreements between the EU and ASEAN.
Since many of the FTAs were negotiated within the EU framework, the UK will likely seek to negotiate new agreements with individual ASEAN economies. Malaysia’s Deputy Minister for International Trade and Industry, Dr Ong Kian Ming thinks that this will spur the UK to look for new, favourable deals with ASEAN countries. “It is an opportunity as well for us to seek additional market access for our products. At the same time, I’m sure the UK would want to seek greater opportunities for trade and investment in Malaysia.”
It is also expected that the impact of Brexit on businesses in the region is minimal. Charles Hay, British High Commissioner to Malaysia regards that it will be business as usual, with a focus on growth. “I recently met a group of our investors in Malaysia, and it was clear from that conversation that the impact on British businesses in Malaysia will be minimal. Most of them are here to do business in Malaysia and/or the ASEAN region,” he said.
“Bilateral trade between the UK and Malaysia has increased 10 percent to £5 billion and we look forward to growing this further. We believe there’s excellent scope to do more in education, technology, healthcare and infrastructure development in particular, and we are looking forward to the establishment of a Joint Committee on Bilateral Trade and Investment Cooperation to explore how we can grow bilateral trade in these and other areas to the benefit of both British and Malaysian businesses,” he continued.
Though the UK is a relatively small trading partner with ASEAN, the EU as a whole is not. According to the World Trade Organization, 16.3 percent of foreign value added embodied in ASEAN exports originated from the EU. The share of EU value added within exports is particularly high in Malaysia, Singapore, and Brunei.
The concern with Britain’s exit from the European Union is therefore not directly related to Brexit, but with the effect Brexit will have on the EU economy. An analysis by the S. Rajaratnam School of International Studies at Nanyang Technological University, Singapore lays out a worst-case scenario: an economic slump spreading from Britain and causing significant damage to the rest of the EU. A slowdown in the EU would negatively affect the demand for ASEAN’s exports much more than a consequent economic downturn limited to only the UK.
While it is too early to say whether Brexit will cause a significant impact on the economy, it’s clear that the UK will be keen to secure favourable trade deals outside the EU. The UK may also seek to leverage its Commonwealth ties in Malaysia, Singapore, and Brunei. High Commissioner Hay sees Brexit as “a great opportunity to build on already strong and healthy bilateral trade links,” and increased British investments in Malaysia in the future. For now, business is as usual – Brexit or otherwise.