Digitalisation and innovation are key to a prosperous and sustainable ASEAN

29 Sep 2023

Home > News > Digitalisation and innovation are key to a prosperous and sustainable ASEAN

As the Association of Southeast Asian Nations (ASEAN) eyes its long-heralded growth prospects, experts believe that countries must fully leverage sustainable infrastructure, digitalisation, and innovative financing solutions to realise its immense potential.

In terms of its sheer growth, size, and trading power, the 10-member union is increasingly turning heads. Combined, the trading bloc’s GDP sits at around USD3.65 trillion in 2022, a figure expected to surge to almost USD5.65 trillion by 2028¹. If materialised, this will represent growth of over 55 per cent in just five years. By this date, ASEAN’s burgeoning population will have reached 705 million², collectively making it the third-most populous market globally, behind fellow Asian neighbours India and China³.

Equally as striking are the trading bloc’s favourable demographics. Currently, 60 per cent of ASEAN’s population are under the age of 35⁴, or over 400 million people today. By 2030⁵, more than half the total population will have become middle-class, a powerful and productive population of more than 350 million residents.

Of course, sheer size and buying power only tell part of the story. Against this promising backdrop, ASEAN is actively prioritising the creation of a greener and more socially equitable trading bloc for all its citizens and businesses. To truly realise this bold ambition, ingenious solutions are essential for some of Southeast Asia’s most pressing socioeconomic and environmental issues⁶. In addition, careful navigation of evolving geopolitical shifts will be required.

The ASEAN-Indo-Pacific Forum is a perfect platform for seeding such solutions⁷. At the plenary session from this year’s event staged in Jakarta, esteemed panellists shared many problem-solving views and ideas, and explored how the best solutions can be truly realised. The focus of the session were three key themes: sustainable and innovative finance; green infrastructure; and digital transformation.

Transparency through data and technology

Data and technology are critical to advancing the world’s sustainability agenda. High quality and timely data can help us better understand fragile ecosystems, notes Marisa Drew, Chief Sustainability Officer at Standard Chartered. Two decades ago, the world’s rush to switch from gasoline to ethanol, resulted in corn replacing other crops for example, a move which in turn proved disastrous for biodiversity⁸.

Data is also being deployed to track the progress of environmental projects. Climate Impact X (CIX), a Singapore-based global exchange and marketplace that was co-founded by Standard Chartered, leverages timely data through satellite monitoring, machine learning and blockchain technology to enhance the transparency, integrity and quality of carbon credits offered to market participants⁹. The platform focuses on natural climate solutions including forests, wetlands, and mangroves, ecosystems that are prevalent across Southeast Asia.

Role of banks

There are numerous important roles that banks like Standard Chartered can play in creating a greener and more socially equitable ASEAN. Drew notes how the bank understands and translates the unique needs and net zero goals of each market. In doing so, it can translate these into a value proposition to attract private capital to projects. Another role is to share best practices, expertise and key lessons regionally, which help countries decarbonise in a holistic and systematic manner.

The bank partners with governmental and multilateral financing bodies to provide blended finance solutions that leverage the capabilities of both types of organisations. As such, Standard Chartered offers vast experience in structuring transactions that will appeal to the market and are designed to be financially robust.

“Standard Chartered has 160 years in the region, and we’re the only international bank with a presence in all 10 ASEAN states,” enthuses Drew. “We deeply understand the cultures of each country and can articulate the vision and mission of each member nation to global capital allocators at scale.” As a bank that places sustainability, innovation, and digitalisation at the forefront of its operations across Southeast Asia and beyond, Standard Chartered is simultaneously contributing to the economic prosperity of the region — while actively building a greener and more socially-equitable ASEAN.

Connecting communities

For ASEAN to fulfil its socioeconomic and environmental goals, it will require world-class modern infrastructure. To this end, upgrading the region’s capabilities across telecoms, energy and transportation will require more than governmental support alone – private sector funding and expertise will be essential to help facilitate these plans. For example, the Asian Development Bank (ADB) estimates that without private capital, Southeast Asia’s green infrastructure needs will experience an annual financing shortfall of USD100 billion¹⁰.

For Patrice Caine, CEO of French electrical systems conglomerate Thales Group, internet connectivity has the potential to fast-track socioeconomic progress, especially in connecting far-flung rural areas that are without access to information via the worldwide web. Since 2007, Thales Group has launched telecommunications satellites in partnership with Indonesia’s Ministry of Communications and Informatics and other private sector participants¹¹. The Group’s SATRIA satellite, Asia’s largest, will be launched in late 2023, reaching an estimated 145,000 areas across Indonesia’s 17,000-plus islands. By connecting schools, hospitals, and regional government buildings and facilities¹², the project will enable easy access to global knowledge, skills, and best practices.

Novel energy solutions

Powering Indonesia’s burgeoning economy will require electricity, and lots of it. Energy demand could increase by up to 80 per cent from 2014 to 2030¹³. Yet observers warn that this increase might come at the expense of the environment: over 60 per cent of Indonesia’s electricity needs currently come from coal-fired power plants¹⁴. While there is ample enthusiasm for renewable energy solutions, especially in the form of solar power, Indonesia lacks the free land it would need to build sufficient clean energy plants to meet its electricity needs.

According to Abdulaziz Alobaidli, COO of UAE-headquartered renewables developer Masdar, innovation is essential. One such project is the Cirata Floating Photovoltaic Power Plant, the largest of its kind in Southeast Asia. The project is a joint venture between Masdar and state power utility Perusahaan Listrik Negara¹⁵, with Standard Chartered co-financing the plant. To Alobaidli, the project epitomises the innovative spirit required to overcome land constraints: it is located on a 250-hectare plot on the 6,200-hectare Cirata reservoir in West Java; and once completed, it is expected to provide electricity to around 50,000 homes, creating more than 800 jobs, and offsetting 214,000 tons of carbon dioxide emissions¹⁶.

Digitalisation and inclusivity

Access to clean energy will dramatically improve the livelihoods of residents in emerging markets like Indonesia. However, to create a truly equitable ASEAN, communities must also be able to access financial services, asserts Sunarso, CEO of Bank Rakyat Indonesia (BRI). Currently over 290 million people in ASEAN are categorised as unbanked: of those that have access to financial services, under a third receive their monthly wages in their bank accounts, with the rest paid in cash¹⁷. The challenge is just as problematic for Southeast Asia’s businesses, especially Micro, Small and Medium Enterprises (MSMEs). Indonesia for example has 64.2 million MSMEs¹⁸, representing 99 per cent¹⁹of all businesses nationally, and employing almost 120 million people²⁰, or 97 per cent of Indonesia’s total workforce.

For many banks, servicing underbanked individuals and MSMEs is currently unprofitable due to high servicing costs. The solution, attests Sunarso, is for banks to fully digitalise their product offerings and back-end systems. By streamlining business processes and finding new cost-efficiencies, while offering novel digital bank products to new customers.

ASEAN’s potential unleashed

Emerging technologies like artificial intelligence (AI) are also playing a role in the advancement of ASEAN. Ahmed Mazhari, President of Microsoft Asia believes that timely and high-quality data combined with AI can help solve many of the challenges hindering communities across Southeast Asia and beyond. Potential breakthroughs could include the discovery of novel disease treatments, Mazhari notes, or enabling children from rural areas to learn remotely using a device equipped with AI-powered interactive software.

To realise its digital potential, ASEAN must also house a truly digital-fluent workforce. Currently, digital literacy varies considerably across the region – as similar skill shortages hinder workforces globally. According to Thales Group’s Caine, Europe and North America are currently experiencing a severe engineer shortage, whereas in India there is a surplus of such skilled workers. While a short-term solution to this challenge is talent transfer, Caine asserts that the longer-term answer is to ensure today’s education systems reflect the needs of tomorrow’s workforces.

Indeed, people are critical to creating a more sustainable and equitable ASEAN. Whether structuring a green finance transaction, designing, and building green infrastructure, or implementing a digital transformation programme, collaboration between organisations and people will ultimately unleash the trading bloc’s true potential.

¹https://www.statista.com/statistics/796245/gdp-of-the-asean-countries/

²https://www.statista.com/statistics/796222/total-population-of-the-asean-countries/

³https://www.worlddata.info/the-largest-countries.php

⁴https://asean.org/wp-content/uploads/2023/07/AEIB_No.13_July2023_final.pdf

⁵https://asean.org/wp-content/uploads/2023/07/AEIB_No.13_July2023_final.pdf

⁶https://asean.org/asean2020/wp-content/uploads/2021/01/ASEAN-Outlook-on-the-Indo-Pacific_FINAL_22062019.pdf

⁷https://events.kemlu.go.id/aipf

⁸https://www.epa.gov/sites/default/files/2014-12/documents/environmental_challenges_associated_with_corn_ethanol_production.pdf

⁹ https://www.climateimpactx.com/

¹⁰ https://www.adb.org/what-we-do/funds/asean-catalytic-green-finance-facility/overview

¹¹ https://www.thefastmode.com/technology-solutions/32465-asias-largest-internet-satellite-indonesias-satria-1-launched-into-orbit

¹² https://www.thalesgroup.com/en/countries/asia-pacific/thales-indonesia