Digital and sustainable solutions are touted as key drivers of growth as the world tries to recover from the COVID-19 pandemic. Given this, the Singapore International Chamber of Commerce (SICC), in collaboration with the Singapore Institute of International Affairs (SIIA), hosted a webinar titled “ASEAN & COVID-19: Uncertainties amidst sustainable and digital opportunities” on 16 March 2022.
The session opened with Mr Manu Bhaskaran, Founding Director and CEO of Centennial Asia Advisors as well as Council Member of the SIIA, speaking on the uncertainties and opportunities that face our region. Ms Jessica Wau, Deputy Director (ASEAN) of the SIIA then zoomed in on the region’s digital future and Ms Meixi Gan, Deputy Director (Sustainability) of the SIIA spoke on ASEAN’s path towards a green recovery.
Optimism amid Uncertainty
As the region moves towards endemic COVID-19, we must be prepared for both new challenges and opportunities. Mr Bhaskaran provided insights on how the global landscape as well as emerging trends can shape the region’s post-pandemic economy and how businesses must be resilient to survive in a volatile world as well as flexible to tackle structural challenges and tap on opportunities.
A notable headline with ripple effects across the world is the Russo-Ukrainian war. Mr Bhaskaran shared that despite the war, economic recovery is still expected for the region as COVID-19 restrictions ease. While impacts of the war will be felt most in financial markets and commodity prices, growth will be expected in terms of tourism, foreign investments, and sectors that rely heavily on foreign labour. Still, oil prices are expected to settle once Russia gains clarity on the extent of sanctions and this will in turn stabilise the financial markets. Mr Bhaskaran said this is expected to come about sometime in April 2022 and bodes well for the stabilisation of Asian currencies.
With superpower rivalry as a pervasive theme impacting the world and region over the past years, Mr Bhaskaran also noted the impacts of “slowbalisation” – an overall slow-down of the pace of global integration. He pointed out that increased bifurcation, protectionism, and sanctions will adversely affect export potential. Still, this can be balanced by the potential benefits to ASEAN from China+1 strategies being undertaken by companies, with firms relocating supply chains away from China. However, ASEAN member states must ensure that it is able to meet the increase in manufacturing demand by tapping on digital and sustainable solutions.
ASEAN’s Digital Economy: Context and Trends
Transformation and innovation are key for businesses and the region to remain competitive. The digitalisation trend in ASEAN bears watching and tapping into the digital market will bring a myriad of benefits to our region. Due to the pandemic, there has been an increase of 60 million digital consumers in ASEAN’s internet economy. ASEAN’s e-commerce value has also expanded by almost six times in four years, from US$9.5 billion in 2016 to US$54.3 billion in 2020.
Despite this, Ms Wau shared that digital infrastructure is still lagging in Southeast Asia’s less developed and rural areas, and this prevents the region from fully reaping potential benefits. The lag in digital infrastructure causes issues such as low internet and mobile penetration, limiting the potential of digital technology adoption and usage. This must improve.
Another area for improvement is the need for more effective, deeper, and broader government regulations to accompany digitalisation. The implementation of legal frameworks will help prevent cyberattacks and boost consumer confidence in digital solutions. This can be harmonised across borders, as evidenced with more Digital Economy Agreements being forged and the progress towards the 2025 ASEAN Digital Economy Framework. This will welcome more coherent and streamlined standards for consumer protection, payments and invoicing and cross-border data flows. Notably, Singapore is Chair of the Working Group on Digital Data governance which aims to produce an ASEAN Data Management Framework and ASEAN Model Contractual Clauses for Cross Border Data Flow (MCCs).
Ms Wau also surfaced challenges that accompany an uptake in digital solutions. One of which is the resulting structural unemployment, where cost-effective technology can potentially replace traditional jobs. At the same time, there is a heightened demand for tech talents, with predictions that by 2030, there would be a shortage of 47 million tech talent in the APAC, and 50 per cent of CEOs in APAC would have difficulties finding digital talent with the right skills. Going forward, it will be imperative for the region is to address a mismatch in skills by reskilling and upskilling its workforce.
Environmental Sustainability Trends
Apart from digital solutions, sustainable solutions are also key for our region to emerge stronger and more resilient. In her presentation, Ms Gan covered emerging trends in environmental sustainability, accompanying challenges and opportunities.
It is clear from Singapore’s Budget 2020 that environmental policies such as Singapore’s net zero target, planned increases in carbon tax rate, the allowing of carbon offsets to up to 5 per cent of a company’s taxable emissions, and efforts to promote green finance, are getting increased attention from the Singapore government. This is not unique to Singapore, as in recent years many other ASEAN member states have also implemented green finance initiatives as well as other sector specific initiatives targeting areas air pollution and the transition to renewable energy sources. The reason for these is clear: climate action and sustainable development have emerged as growth drivers and cross-cutting strategies.
Still, challenges exist. One key challenge facing the region is the lack of harmonised methodologies and standards to determine what constitutes sustainable conduct of business, resulting in sustainable solutions having minimal impact. For example, Ms Gan shared that as countries currently have different carbon pricing and different methods of calculating carbon emissions, some businesses may be inclined to relocate to a different country instead of being incentivised to reduce their carbon emissions, going against the intended purpose of carbon tax policies. In view of this, there is a need for greater regionwide collaboration to set standards in terms of monitoring, reporting, and verification systems for emissions reduction and carbon credit certification schemes to increase efficiency and reduce green washing.
Ms Gan also noted that while carbon markets could financially incentivise companies to curb emissions and increase their climate ambitions, it could also disincentivise them from developing concrete decarbonisation plans due to high start-up costs, long verification processes, and project volatility. She said that this is also a challenge that must be addressed and suggested that businesses can instead implement internal carbon price monitoring and develop creative ways to internalise carbon costs into their decision-making. One way to do this is to invest in sustainability expertise so that businesses can measure and report their carbon footprints and work towards the greening of their supply chains.
Conclusion
Both the public and private sectors are key players as the region taps on digital and sustainable solutions to recover, grow, and stay competitive. Policy makers must work to implement appropriate strategies just as much as corporations should be adaptable. ASEAN as a region must be resilient and flexible in a volatile post-pandemic world if it hopes to revitalise and maximise the potential of the future economy.
