US firms can help Asia-Pacific tackle challenges of Covid-19, geopolitics, debt: Heng

FIRMS from the US can play a constructive role in helping the Asia-Pacific region face challenges such as Covid-19, US-China relations, rising global debt levels, said Deputy Prime Minister Heng Swee Keat in his keynote speech at the AmChams of Asia Pacific Business Summit on Tuesday.

At the hybrid event, bringing together 28 AmChams (American Chambers of Commerce) from the region, Mr Heng noted that while global economic recovery from the pandemic is likely to be long-drawn and uneven, he shares the International Monetary Fund's (IMF) view that over the next two years, the Asia-Pacific is expected to rebound faster than the rest of the world.

And in the longer term, the region's economic outlook is promising, with strong fundamentals such as a young population, a rapidly-expanding middle class, and great growth potential for the digital economy.

Yet the region also faces challenges - which American corporates can play a constructive role in navigating, said Mr Heng.

First, the biggest challenge is uncertainty over the trajectory of Covid-19. Though many parts of the Asia-Pacific have contained the pandemic relatively well so far, recovery will be limited as long as borders stay shut and safe distancing measures remain.

Vaccination may not be a panacea, but it puts countries on much stronger footing for recovery, said Mr Heng. "The pandemic cannot be fully controlled anywhere, until it is stopped everywhere. Securing vaccines for all countries is therefore critical to ending this pandemic."

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He highlighted the role of the international COVAX (Covid-19 Vaccines Global Access) facility, which helps supply vaccines to low and middle-income economies.

"We are heartened that the Biden administration has recently pledged US$4 billion to COVAX," he said, adding that corporates too can play a part.

A second challenge for the Asia-Pacific region is heightening strategic competition between the US and China, with domestic considerations meaning that neither power wishes to appear weak.

"We hope that the Biden administration will bring greater predictability and nuance to the world's most important bilateral relationship," said Mr Heng. He hoped both sides would be able to cooperate on issues of common interest, such as Covid-19, global economic recovery and climate change.

It is also important that the US engages the rest of Asia beyond China, he said. A strong US presence in the region is a "vital stabiliser" and will allow the US to continue reaping the rewards of the region's long-term growth.

US corporates have a critical role to play in championing globalisation, and being a partner in stronger US economic engagement of the region, he added.

In the ensuing fireside chat with former US ambassador Ted Osius, who is now vice-president of government affairs and public policy at Google, Mr Heng said he hoped that free trade agreements (FTAs) would allow countries to continue the momentum of globalisation and gain more confidence that it benefits their citizens. FTAs can be pathfinders for broader agreement: not blocs, but building blocs, he added.

Third is the challenge of rising global debt levels, with the IMF expecting government debt in developing Asia to rise to around 70 per cent of gross domestic product by end-2021, up from 57 per cent in 2019.

While very low interest rates have helped governments to service debt for now, they cannot remain low indefinitely. "If we are not careful, the debt burden and resulting inflation could crimp the ability of economies to make sustained investments in emerging opportunities," said Mr Heng.

Corporates can play a key part in "realising Asia's growth story" by taking a long view and continuing to invest in emerging opportunities.

"Your signal of confidence will have a strong multiplier effect, not just commercially, but geopolitically," he added.

Mr Heng also highlighted three growth areas which are important for the region's development and present opportunities for investment: infrastructure, including clean energy, transport and smart infrastructure; the digital economy; and sustainability.

Singapore can be a partner in this, he added. The country has set up Infrastructure Asia to facilitate infrastructure investment; is investing in technology-intensive, innovation-driven growth; and aims to be a green node for South-east Asia. More broadly, Singapore can be a base for US firms to explore the region.

AmChams of Asia Pacific was founded in 1968, when Asia was in turmoil and the shadow of communism loomed large, noted Mr Heng.

"The world is once again in turmoil, with Covid-19 sweeping across borders. I encourage American firms to continue to invest and grow your presence in the region," he said. "You can make a difference to the recovery and growth of the region, and to improve the lives of our people."