Asean bloc at a 'tipping point of significant reset': Standard Chartered

Oct 15, 2021

EVEN as the second quarter and the third quarter have been "challenging" for Asean as a whole, the year as a whole should show a good technical rebound of high single digits, said Benjamin Hung, chief executive officer, Asia, Standard Chartered.

"Going forward, I think the Asean bloc should be capable of achieving the level of 6, 6.5, if not 7 per cent growth. Going forward, for the foreseeable medium term, that will be more than twice the global trend growth of 3 per cent," he said.

Noting that Asean is at a "tipping point of significant reset", Hung, who was speaking at a virtual media roundtable on capitalising Asean opportunities on Friday (Oct 15), pointed to factors including the young and growing population in the region, the fact that the region is resource rich, and the rising middle class,

He also cited emerging trends, including geopolitics, supply chain, intra-Asean trade, middle-class consumption, the rise of digitisation and sustainability, as emerging trends that will, over the next 3 to 5 years, redefine Asean's prospects.

"A number of Asean markets - and I would name Indonesia, Malaysia, the Philippines, Thailand and Vietnam - have, from a GDP (gross domestic product) composition perspective, have more than 50 per cent of its GDP, driven by household consumption," he noted.

"That's why I think whilst there's room for all these markets to move towards manufacturing, supply chain... the core engine of consumption is still there. There will be geopolitics dynamics etcetera, but I think that the world is all of a sudden, seeing that Asean has very bright prospects."

Kingshuk Ghoshal, head, global subsidiaries, Singapore and Asean, corporate, commercial and institutional banking, Standard Chartered, added that foreign direct investment (FDI) is flowing into the region.

The shifting FDI is being driven by investment deltas, which we definitely see in some of the emerging new sectors," he said.

Notably, FDI inflows into Asean reached its highest level in 2019 at US$182 billion, making Asean the largest recipient of FDI in the developing world according to the Asean Secretariat's Asean Investment Report 2020-2021. Due to Covid-19, FDI declined to US$137 billion in 2020.

But as a proportion of global FDI figures, Asean bucked the trend, with its share of global FDI rising from 11.9 per cent in 2019 to 13.7 per cent in 2020.

Singapore specifically will likely see investments come in in the form of higher value-added research and development, artificial intelligence and robotics technology, said Ghoshal. In addition to speciality chemicals, food agri technology is another area that is seeing interest, he said.

"Not to mention the massive investments we have already seen and continue to do so in the technology, media and telecom sector, particularly in the digital infrastructure space," he said.

Separately, Indonesia is one of the most attractive and interesting markets when it comes to net zero and transition plans, he said, in response to a question.

"If you look at the development of the automotive market leading to the electric vehicle (EV) market development, a lot of the sourcing for that supply chain is going to come from the mines of Indonesia," he said, noting that there has been increased interest from South Korean carmakers and Chinese and Korean players who want a piece of the EV battery manufacturing pie.

He also cited the example of the Cirata Floating Photovoltaic Power Plant - a 145 MWac floating solar project in West Java, Indonesia, which Standard Chartered is financing.

Once completed, Cirata will be one of the largest floating solar project in South-east Asia, generating enough electricity to power 50,000 homes and offset 214,000 tonnes of carbon dioxide emissions.

"Indonesia will play a big part not just in the transition but also in the supply of carbon credits... to support the rest of the markets to achieve net zero," said Hung.