By Nirukt Sapru, CEO, Vietnam and ASEAN & South Asia Cluster Markets, Standard Chartered
Despite global economic uncertainties, the prospects for ASEAN are bright with the region’s GDP expected to surpass US$4 trillion by 2023 and potentially become the world’s fourth largest economy by 20301.
Key to ASEAN’s future prosperity is greater connectivity – both physical and digital – to pave the way to better integration and increased trade among the bloc’s economies. ASEAN’s continued success also relies on sustainable development. From green bonds to syndicated loans, innovative financial solutions are needed to promote sustainable business, employment and growth.
Taking steps towards a single trading bloc
One way for ASEAN to improve trade and connectivity is by working towards fostering the free-trade area that provides equal access to goods and services to all members of the bloc. The European Union – which is the world’s largest trading bloc and the top trading partner for 80 countries2 - shows how lower trade barriers, reducing paperwork, and harmonising standards can create benefits for its member countries. A good starting point could be to harmonise foreign direct investment rules across ASEAN nations. By working towards more synchronised frameworks and regulations around investments, the region becomes more attractive for both ASEAN and foreign-based investors.
Free movement of goods and services will of course require effective physical connectivity. ASEAN governments have identified transport infrastructure as paramount for economic development and increasing trade competitiveness. When last-mile deliveries can efficiently reach every corner of the region, there exists potential for exponential growth in trade and commerce.
What is more, ASEAN also needs effective digital connectivity. According to the World Economic Forum, ASEAN is the world’s fastest-growing internet market, with the bloc’s digital economy projected to add an estimated US$1 trillion to regional GDP over the next 10 years.3 To facilitate this, ASEAN governments should look to create pan-regional guidelines for the telecom sector so the region can better capture the opportunities of the digital economy.
Notably, these ideas must be underpinned by sustainable development among ASEAN economies and businesses. To achieve this, companies should leverage innovative financial solutions to support their growth and expansion ambitions. Take the example of Vietnam Electrical Equipment Joint Stock Corporation (Gelex). In January, Standard Chartered placed a VND1.15 trillion (US$50 million) fixed rate 10-year bond for the renewable energy pioneer to help fund its solar energy project.
As well as funding sustainable development, the bond was also an example of how ASEAN collaboration is helping companies in the region realise their aspirations. The issue was guaranteed by CGIF, a fund set up by ASEAN and China, Japan and Korea (ASEAN +3), and the Asian Development Bank to support local currency bond issuance.
Vietnam leads the way
Strategically situated at the heart of ASEAN, Vietnam is championing trade and sustainable development through its chairmanship. With the theme of ‘Cohesive and Responsive’, the emphasis is placed on promoting economic integration and connectivity, among others. Importantly, Vietnam is providing leadership in many of these areas.
For instance, according to the Standard Chartered Trade20 Index, Vietnam shows the strongest progress in trade growth potential driven by enhancements to infrastructure and greater ease in doing business.4 Meanwhile, government initiatives to support trade and infrastructure include signing a free-trade agreement with the European Union and introducing a new law to encourage public-private partnerships.5 Vietnam has also set out a plan to transform the country into a leading digital economy in the region by 2030.6
Importantly, Vietnam is promoting sustainable growth. For example, the State Bank of Vietnam now requires commercial banks to promote green finance for projects with clear objectives on protecting the environment and encourage environmentally-friendly business activities.7
Realising ASEAN’s potential
For ASEAN to truly reach its potential, member states need to continue efforts to enact regional policies that advance the bloc’s vision. It is equally important for governments and business to collaborate closely to leverage the region’s opportunities.
As the only bank operating in all 10 ASEAN markets and with a history of over a century in Vietnam, Standard Chartered understands the role it can play in helping the government reach its chairmanship goals, and businesses to reach their growth potential. The Bank continues to focus on innovative financial solutions to support the vision and goals of ASEAN and the region’s businesses.
By improving integration through harmonised regulations on trade and infrastructure, and driving a sustainable approach to development, ASEAN will create an environment in which people and businesses can thrive.
1 ASEAN – A region facing disruption: Positioning mid-corporates for growth in Southeast Asia
7 opens in a new windowhttps://www.ifc.org/wps/wcm/connect/758c9ed5-cf12-4f15-b0a5-952dcae9b0c4/Directive+on+Green+Credit+and+E%26S+Risk+management.pdf?MOD=AJPERES&CVID=kOkF7YL