Chairman’s Note

Private and Confidential
For SIIA Corporate Members and Advisors
August 2024

ASEAN Integration

The SIIA recently held our ASEAN and Asia Forum, one of our flagship events. We featured several key policymakers including Singapore’s Minister Chee Hong Tat, Johor’s Menteri Besar Dato Onn Hafiz and AIIB’s President Jin. Many leading companies from the region such as UOB, PSA, Huawei and Visa also contributed to the robust discussions. The event was covered by the media including the Business Times, the Straits Times and CNA. Highlights of the forum will follow shortly.

More immediately, I thought to share with you, as our corporate member and friend, some key takeaways that I noted.

1. Geopolitical Tensions and ASEAN Upside: There is broad concurrence that geopolitical tensions will continue between the USA and China, irrespective of who leads the USA. But the good news is that most see that ASEAN can benefit, relatively, by being of value and attracting investment and supply chains – from both the USA and China, as well as European, Japanese, Korean and other investors.

2. Upscaling Benefits: Increasing interest and investment activity is already evident in a number of ASEAN countries, with specific locations and also sectors experiencing notable growth. For example, there is a growing cluster focused on chips and electronics around Penang, Malaysia, and Indonesia is making significant strides in “downstreaming” its mineral resources into manufacturing. But these benefits can be further upscaled if ASEAN countries cooperate and integrate. By working together, two or more countries can better attract and anchor global supply chains by seamlessly linking their comparative advantages (e.g. price advantages, resources, and talent pools).

3. Rebooting ASEAN Integration: ASEAN economic integration has primarily focused on trade in goods and made progress to reduce tariffs, with some advancements in trade facilitation. More, however, needs to be done in terms of implementation to make everyday transactions seamless. These include: (1) investing in cutting-edge infrastructure and systems that can be interoperable across borders; (2) digitalisation of platforms and procedures, especially in trade documentation, payments and platforms; (3) facilitating movement of talent across borders for specific purposes and periods with visas, green lane arrangements etc.

4. Energy Grid, Resilience and Sustainability: There is both a need and opportunity for ASEAN integration to include cross-border energy grids. This could increase supply and resilience, lower carbon emissions, and improve pricing. Multilateral bank financing from the AIIB and other institutions can assist together with private investment. Initial bilateral steps can pave the way towards a region-wide grid.

5. Johor-Singapore Special Economic Zone (JSSEZ): There is a much attention on the SEZ with Johor, with good economically rationale to support it. Negotiations are ongoing with prospects of an agreement in the coming months. However, there are also requests that stem from political and social considerations. These include the inclusion of Forest City in the SEZ and hopes for wage levels to be above those currently paid in other parts of Malaysia, demonstrating the creation of “quality” jobs with a multiplier effect. The SEZ has a prospect of encouraging similar efforts in other parts of ASEAN.

6. Changing Mindsets: One deeper challenge is to change mindsets so that ASEAN governments do not compete negatively and instead look for win-win cooperation. This is beyond a question of technicalities and formal agreements and will take time and leadership as well as nurturing a greater understanding and affinity among the peoples of our region.

Yours sincerely,

Simon Tay
Chairman