Southeast Asia (SEA) is poised to enter a new era of economic expansion. The annual economic growth rate in the region is expected to be 4 to 5 per cent over the next decade, with Vietnam growing the fastest at 5 to 7 per cent per year. The countries’ rapid expansion is fuelled by a number of factors, including a rapidly expanding population and a global shift towards a more diverse supply chain. Significant steps have been taken to encourage the long-term growth of ASEAN economies. Diverse industries have made breakthrough advances, including cybersecurity, finance, and digital banking integration, as well as recycling, renewable energy, waste management, and autonomous vehicles. Investments continues to flood in, specifically in high-tech value chains, e-commerce, digital banking, infrastructure, and transit growth. A series of high-profile initial public offerings (IPOs) by regional unicorns will pave the way for more blockbuster IPOs in 2023.

Advancing together

ASEAN countries have made steady progress in a number of areas such as such as improving ease of doing business, enabling healthy competition, facilitating investment, bolstering the government and reducing corruption, ramping up education levels and promoting reskilling, enhancing infrastructure, and boosting macroeconomic and social stability via strengthening connectivity and developing sustainable infrastructure. The Master Plan on ASEAN Connectivity 2025 emphasises the significance of coordinating resources to provide support across the whole lifespan of infrastructure projects in ASEAN, which includes project planning and enhancement of infrastructure productivity and capability building. The Covid-19 pandemic has heightened the need for capacity building in key infrastructure sectors, particularly in enhancing the human resources capacity to drive sustainable infrastructure in the region.

Western alliances

The conferment of the ASEAN Dialogue Partnership to the UK is expected to complement ongoing efforts to deepen relationships between ASEAN and the UK. In addition to regional economic integration, trade and investment, and finance, the ASEAN-UK collaboration has explored partnership in a few other key areas like political and security cooperation, maritime cooperation, micro, small, and medium enterprises (MSMEs), and information and communications technology (ICT) and digital integration. Some of the prospective financing sources include £300 million of official development assistance (ODA) to help economic and social development in SEA, in line with the UK’s interests in the region.

Other sources of funding include the SEA Prosperity Fund, the UK’s Newton Fund, the Fleming Fund, and the International Partnership Programme, in addition to ASEAN-specific initiatives such as the ASEAN Economic Reform Programme (£19.7 million) and the ASEAN Low Carbon Energy Programme (£15 million). Recently, ASEAN-UK launched the infrastructure capacity building project, ASEAN Sustainable Leadership in Infrastructure Programme (ASLIP). The initiative is a module-based course for ASEAN authorities that emphasises pre-acquisition and upstream infrastructure planning. Additionally, ASLIP aims to enhance government-private sector collaboration in sustainable infrastructure, as well as address crucial concerns on methods in developing sustainability towards net zero, urbanisation, and inclusivity and social impacts. With this plan of action, ASEAN and the UK aim to increase the flow of high quality, sustainable financing, including private sector investment, to support green, clean, inclusive growth and resilient infrastructure, and enhance cooperation on upstream infrastructure planning and pre-acquisition, including the regulatory and business environment. As part of the deal, the UK will strengthen development and security ties in SEA by establishing a regional British International Investment (BII) office in Singapore by the end of 2022, investing up to £500 million in the Indo-Pacific.

The US has steadily strengthened its relationship with SEA over many years. The budget for 2022-23 included more than $800 million in bilateral assistance for ASEAN partners and more than $25 million to deepen relations with ASEAN and enhance ASEAN’s capacity to address pressing regional challenges. The US intends to invest $40 million through the Southeast Asia Smart Power Program to leverage $2 billion in blended financing for clean energy infrastructure in SEA, decarbonising and strengthening the region’s power sector, increasing regional energy trade, and boosting the roll-out of clean energy technologies. Additionally, the US Trade and Development Agency is launching new initiatives to leverage over $1 billion in public and private funding for investments in digital infrastructure and smart cities in the region.

Other strategic engagements

Singapore has been the top hub for greenfield foreign direct investment (FDI) in the first half of 2022 within the ASEAN trading bloc, as capital-intensive growth plans continued to favour the city-state. During this period, foreign investors in Singapore announced 142 projects worth $8.2 billion, following two consecutive half-year periods in which FDI exceeded $9 billion. The ASEAN Catalytic Green Finance Facility, managed by the Asian Development Bank, will increase access to finance for critical infrastructure for ASEAN countries and support the development of sustainable infrastructure projects such as renewable energy, clean transportation, and urban infrastructure in developing countries across the region. The £110 million financial support announced by the UK will mobilise further public and private money and is part of a larger commitment by ASEAN governments and partners to invest over $5 billion in green projects around the region.

The Green Climate Fund, the Foreign and Commonwealth Development Office of the UK, the European Union, and the Italian state lender Cassa Depositi e Prestiti have collectively donated $665 million to the platform. A consortium led by Macquarie Asset Management (MAM), through Macquarie Asia-Pacific Infrastructure Fund 3, has acquired a minority stake in Indonesia-based Bersama Digital Infrastructure Asia Private Limited. The MAM consortium will invest alongside Provident and Saratoga to enable Bersama Digital Infrastructure to explore investment opportunities in the digital infrastructure sector, with special focus on telecommunication towers, fibre, and data centres in this high-growth region.This acquisition values Tower Bersama at over $6.5 billion and represents one of the largest FDIs in the Indonesian digital infrastructure industry.

In sum

The collaboration among multiple countries and ASEAN has generated possibilities for tackling the challenge of climate action, financing for sustainable development, addressing emerging regional and global concerns of common interest and the establishment of cooperation policies. All in all, the mutual reinforcement of these goals has contributed to the region becoming more competitive, accessible, and habitable. „