RESILIENCE and innovation is the tagline for Singapore’s chairmanship of Asean this year. And both are very much needed if Asean is to achieve true integration in the form of a single market.
However, the bottom line is the seamless flow of corporate/trade payments and investments remains frustratingly elusive.
Singapore’s vision is to build on Asean’s resilience, harness opportunities from disruptive technologies to innovate and make the region more competitive.
The plan is to create an environment that is conducive to freer trade and regional interdependence and establish a network of smart cities. This will power the region’s economy, improve trade facilitation and encourage the ease of investment.
Underpinning all these dynamics – Asean’s rapidly growing digital consumption market and the demands that come with it.
Southeast Asia is the world’s fastest growing Internet region. Nearly four million new users will come online every month for the next five years. According to a Google/Temasek study, this translates into a user base of 480 million by 2020.
Yet these consumers only spend US$30 billion online. There are predictions that spending could rise six and a half times or 500 per cent to $200 billion by 2025, fuelled by consumption of electronics, clothing, household goods and groceries and by increased travel within the region. Clearly Asean economies stand to benefit from the potential of this flourishing digital economy. But for that potential to become a reality, changes must be made.
The integrated e-payments system becomes more critical for a single digital market. A single interoperable payment system presents a huge opportunity to enhance intra-regional trade and business activity.
Removing cost and logistical barriers to international payments is a major step towards unlocking Asean’s growth potential.
Additionally, more needs to be done to digitise the supply chain process and reduce non-tariff barriers. Regional schemes like the Asean Single Window for customs facilitation and clearance and the Asean-wide self-certification scheme, are a start.
The same applies to Asean’s trade finance systems which are still heavily paper-based. The OECD estimates that the ‘hidden costs’ of trade – the manual processes underlying most transactions – can be as much as 15 per cent the value of goods traded.
Last but not least, in line with the digital economy, Singapore is proposing the development of an ASEAN smart cities network. The rapid pace of urbanisation across Asia means cities have no choice but to become more organised and efficient.
The strain on transport, housing and telecoms and IT networks is evident. Infrastructure development is at the heart of all of this. Roads, ports, airports and telecommunications grids need to be built or retrofitted to handle increased loads.
HSBC estimates that $2.1 trillion of infrastructure investment is required across Asean. Current budgets will cover only US$910 million.
Asean governments don’t seem to be deterred. Plans have been announced to increase infrastructure spending on large-scale projects, including high-speed railways and mass transit systems. Singapore alone has committed $1.7 billion of investment in Smart Nation and fintech initiatives. Thailand, itself after delays, began the first phase construction of a high-speed rail line valued US$5.5 billion connecting Bangkok to its northeast province, Nakhon Ratchasima.
Establishing smart cities, digitising trade processes, building integrated systems … that’s a lot of priorities for Singapore to push forward on the Asean agenda. Ideally, Asean would lay down a framework for all these initiatives to build on.
Without investing in the region’s soft infrastructure and harmonizing systems, Asean will lose its competitive edge in the global economy. And smart cities can’t be fully realized without embracing the technologies used to build the digital economy.
The growth of Asean’s digital economy is not an initiative. The transformation of our citizens into digital natives is happening, right now. And it’s far better to be in the driver’s seat rather than watching from the sidelines.
Contributed by TONY CRIPPS, Chief Executive Officer, HSBC Singapore