SOUTH-EAST Asia’s growth in 2024 will be driven by the increasing cohesiveness of trade relations within the region, said Patrick Lee, Standard Chartered’s top executive in Singapore.

“People are realising the benefits of seeing Asean as one economic bloc,” said Lee, the cluster chief executive officer of Singapore and Asean markets.

“They realise that although the member states are different in terms of economic growth and political issues, there are many areas that we share in common.”

Lee – a banking veteran of over 25 years who is currently responsible for steering and executing business development and strategy in Singapore, Malaysia, Vietnam and Thailand. – told The Business Times in a recent interview that he is bullish about the region’s prospects this year.

He noted that Asean continues to be a significant contributor to Standard Chartered’s financial performance. In the nine months to Sep 30, 2023, total Asean inbound and outbound client income saw double-digit growth compared to the previous year.

Lee, who became Standard Chartered’s Singapore CEO in 2018, sees Singapore as an exceptionally attractive market, with the bank positioning the country as a “hotbed and super-connector” and not merely a destination market.

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In the first nine months of 2023, Singapore accounted for the majority of the group’s total inbound cross-border income from clients – both within Asean and the global market.

Lee said the strategic emphasis on Singapore aligns with the bank’s approach of establishing an “Asean hub” in the city-state to take advantage of regional opportunities, especially in Malaysia, Vietnam and Thailand.

China’s potential

Lee said he sees South-east Asia’s economies to be highly complementary with China. The world’s second-largest economy is the centre of global manufacturing, while Asean is an emerging manufacturing base and a global industrial transfer ground, he said.

He cited Asean’s relatively complete infrastructure and an abundance of labour resources as reasons why the region has naturally become the first choice for China’s traditional manufacturing industry to shift their global supply chains and be closer to overseas terminal markets.

Another big plus in Asean’s favour is the bloc’s involvement in the Regional Comprehensive Economic Partnership (RCEP) – a mega free trade agreement between all 10 Asean member states and China, South Korea, Japan, Australia and New Zealand.

With the RCEP in force, Lee expressed confidence that the trade and investment flows between China and Asean will continue to grow.

At the same time, he noted that China is experiencing a slowdown as its economy undergoes restructuring to address its property crisis, and there are expectations of ongoing trade tensions with the US. As such, some investments are likely to be redirected to different parts of South-east Asia, he said.

He described the Asean region as attractive, with significant markets like Indonesia and Vietnam having growing populations, a young demographic, a rising middle class and increasing affluence.

He expects Asean to see economic growth of 4 per cent in 2024 – a pace that is faster than the world’s other regions.

While much of 2023 saw Asean’s local currencies grapple with weakening exchange rates against a robust US dollar, which led to cost-push inflation driven by the high cost of importing energy and other factors of production, Lee said he was not concerned about the greenback staying overvalued for an extended period.

“Contrasting our experience in 2023 with the last Asian financial crisis in the late-1990s, where we observed much sharper devaluation of local currencies and significantly more pressure on the banking systems and governments, the region is currently in a good state.”

Another challenge facing Asean in 2024 is fiscal risk, which stems from subsidy policies aimed at addressing high food and fuel prices and mitigating inflationary pressures, Lee said.

Even so, he said he was not worried about fiscal issues impacting South-east Asia in 2024.

“There are still very high levels of savings in many of the markets, coupled with a healthier growth rate and a higher employment rate,” he said. “The fiscal position is a lot better than it was in the 1990s.”

ESG priorities There are more conversations within Asean about the importance of environmental, social and governance (ESG) issues, said Lee.

He cited the last United Nations Climate Change Conference in December, which showcased Asean’s efforts to spearhead a regional carbon market.

“Dialogues about how Asean members can help one another are strengthening because all of them see the risk of climate change and the necessity of taking actions,” said Lee.

The central banks of Indonesia and Malaysia, for example, are progressive and more advanced in taxonomy and climate-related disclosures, he said.

“Learning from one another will bring a lot more exchange on the implementation of ESG strategies. This shared challenge will bring the region together.”

On its part, Standard Chartered is a founding member of Climate Impact X, a global marketplace for carbon credits headquartered in Singapore, in collaboration with the Singapore Exchange, Temasek and DBS Bank.

The bank is also part of the Monetary Authority of Singapore’s Transition Credits Coalition, which was launched in December 2023. The coalition aims to create a new category of carbon credits to expedite the phasing out of coal-fired power plants.

Standard Chartered’s global sustainable finance income nearly doubled in the last 12 months and continues to grow rapidly, said Lee.

The group has a global target of delivering over US$1 billion in sustainable finance income by 2025 and mobilising US$300 billion in green and transition financing by 2030.

“Sustainability can become a key competitive advantage for Asean,” said Lee. “The success will be determined by the region’s ability to share capital, expertise and technology across different member states.”

Digitalisation fuels sustainable trade

Lee also said that digitalisation can serve as an enabler of sustainability solutions, which will, in turn, enhance the cohesiveness of the South-east Asian region.

A sustainable trade ecosystem will bring benefits in the form of increased exports, facilitated by the wider adoption of digital supply chain finance (SCF) solutions. SCF platforms provide the visibility and transparency that’s needed to track ESG compliance across the entire supply chain, and improve access to finance for companies.

“Emerging technologies in cross-border commerce make global trade more inclusive, benefiting smaller businesses within Asean,” said Lee.

According to a model developed by the Boston Consulting Group, it is estimated that Asean’s digital economy has the potential to grow to as much as US$2 trillion by 2030. In December 2023, negotiations began for a Digital Economy Framework Agreement aimed at facilitating more seamless cross-border digital trade in the region.