Forge new connections today to meet the demands of tomorrow
Creating new cooperative bridges between ASEAN and the Middle East can help to collectively address the world’s most pressing challenges, and in turn forge a clearer path to prosperity.
That was the distinct message emerging from a recent international panel, seeking to identify a clear role for venture capital in bridging the business and innovation gaps within Southeast Asia. The panel further identified the levers with which these stronger partnerships can help to tackle the pressing challenges of climate change.
As part of the Global Business Forum ASEAN at Expo 2020 Dubai, thought leaders from across the two regions spoke at a session entitled Attracting Investors of the Future. The panel discussed the promise of further integration between the Association of Southeast Asian Nations (ASEAN) and the United Arab Emirates (UAE).
ASEAN has arrived
According to Rino Donosepoetro, Vice Chairman, ASEAN & President Commissioner Indonesia at Standard Chartered, ASEAN’s 661 million residents spread across 11 countries – Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam, Myanmar, Cambodia, Laos, Brunei and Timor-Leste – are quickly reaching economic maturity and flexing their newfound spending power.
Currently the third most populous economic bloc in the world, ASEAN is set to become the fourth largest economy by 20301. “Underpinning this growth is a fast-rising middle class and a maturing industrial base,” Donosepoetro outlined. “The middle class will account for more than two-thirds of the population by 2030, while the number of high-end upper-middle income households in ASEAN are also expected to double to almost 60 million people.”
These push factors will help trigger strong demand for high-quality products, as ASEAN’s industrial base expands, spurred by a growing opportunity for multinationals to diversify their production footprint.
Six ASEAN economies, in Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam, would continue to be the growth engine for the region. “The manufacturing GVA or gross value added in these six ASEAN countries is expected to reach USD950 billion by 2025, a compound annual growth rate of 9 per cent,” noted Donosepoetro. “So this is really exciting.”
“From a corridor perspective between the Middle East and ASEAN, foreign direct investment inflows from Middle East companies into ASEAN have increased sharply. In 2020, Middle East companies invested about USD1 billion into ASEAN. This was a five-fold surge from 2017.”
In September 2021, Indonesia and the UAE announced the start of negotiations for a new free trade and investment agreement – with areas of focus including biotechnology, the digital economy, energy transition and space development2.
Among recent exciting developments, Dubai-headquartered DP World signed a USD7.5 billion agreement with the Indonesian Investment Authority, the nation’s sovereign wealth fund, to develop infrastructure across the archipelago, in terms of ports and key strategic assets3.
“What we are doing with Indonesia is really a very good case that needs to be replicated across other ASEAN nations,” said Dr. Saeed Aldhaheri, member of the Global Future Council for the World Economic Forum.
Uniting around challenges
Beau Seil, Partner at Patamar Capital, said given that UAE-ASEAN collaboration is increasingly more apparent at a business to business level, now is a crucial time to add a deeper focus on areas within the Environmental, Social, and Governance (ESG) space – particularly the issue of inclusive economic growth.
“If we don’t provide economic opportunities, we’re not going to have a big enough economic base of buyers and consumers who can adopt the next waves of technologies – because they won’t be able to afford them,” warned Seil.
Donosepoetro said that for industry as a whole, now is a perfect time to unite around ESG – given that climate change represents a clear and present danger for us all. This in turn presents a huge opportunity for ASEAN, which requires large-scale investment to meet its sustainability goals by 2030, and opens the way for numerous economic partnerships between UAE and ASEAN.
As ASEAN banking institutions extend a host of new financing options to businesses pursuing low-carbon and climate-resilient projects, the issuance of ESG-related bonds and loans reached a new record of USD12 billion in 2020.
Another key mechanism to help address the financing gap is around carbon credits. “We see this emerging as a great intermediary instrument – the market has been buzzing,” said Donosepoetro. “And ASEAN countries have significant nature-based solutions potential.”
As a perfect example of uniting around a shared opportunity, Standard Chartered, together with DBS, SGX and Temasek, helped create the first Asia-based carbon trading platform, Climate Impact X.
Montri Rawanchaikul, Chief Executive Officer of PTT Exploration and Production Public Company Limited (PTTEP), said oil and gas companies are among those that will need to evolve their business models most in response to climate change.
“This will open up new types of investments,” he said. “For instance, investing in technologies that allow us to capture carbon dioxide and store it. This would create a whole new way of doing business – and it’s something that we are very excited about.”
Patamar Capital’s Seil believes that ultimately, the pressure to find solutions can be a major spur to innovative investment, as industry seeks to create a different climate-based economy. The growth of Web 3.0 promised more decentralisation, he noted – ultimately putting everybody in charge of their own information and economic opportunities.
“Let’s take the risk to see how we create more distributed economic gains, which will create more resilient economies and higher adoptions of clean energy – because people will have more money.”
2 https://asia.nikkei.com/Economy/Trade/Indonesia-and-UAE-begin-talks-on-trade-and-investment-pact