Asia must build capabilities to adapt to structural changes: DPM Heng

ASIA'S prospects are promising, but the region will need to navigate structural changes brought about by the Covid-19 pandemic in order to achieve its full potential, said Deputy Prime Minister Heng Swee Keat in his keynote address at the Credit Suisse Asian Investment Conference on Monday.

He stressed that South-east Asia must build capabilities to tackle "a greater premium on resilience", "a big shift to digital" and the global order "going through choppier seas".

Sound fundamentals like favourable demographics and pervasive digital revolution are promising for Asia's prospects, Mr Heng said at the virtual event. Two-thirds of the global middle class is expected to be in Asia by 2030; South-east Asia alone has 400 million Internet users.

"But Asia's growth is not fore-ordained," the minister added.

Noting that the "strategic competition" between the US and China has been accentuated by Covid-19, Mr Heng warned that Asia would need to "navigate the shifting geopolitical tides". He called on South-east Asia to advance its collective interests and work with any countries interested in partnership.

Asean puts the US's regional engagement efforts into concrete action, and China is a major trading partner for almost all of Asean, Mr Heng said. "The constructive involvement of both the US and China in the region will be key to Asia's continued peace, stability and growth.

"It is not a question of choosing sides, but of retaining our ability to make choices for ourselves. This is what Asean centrality is about."

Mr Heng said that free trade agreements between South-east Asia and other countries, such as the Regional Comprehensive Economic Partnership (RCEP) - "the largest agreement of its kind in history" - have helped to further deepen regional integration and cooperation, but more needs to be done.

Countries that have committed to the RCEP must next expedite ratification, to send a strong signal and attract other countries to cooperate with South-east Asia, he said.

Deepened regional integration and cooperation can also grow the cross-border digital economy, Mr Heng added. He raised the example of plans by Singapore and Thailand to pioneer linked national e-payment systems, which will allow users to use mobile phone numbers to send money directly and securely to each other.

The region must also redouble transformation efforts, helping smaller enterprises and their workers along, he said. With its growing number of smart factories, fully automated dark factories, and robots employed in manufacturing, support is necessary to ensure that economic growth creates growth and benefits for the majority in Asia.

Finally, Asia must continue to be an open and inclusive global investment destination to diversify its investment sources and draw the investment capital and expertise it needs, Mr Heng said.

He noted that the infrastructure needs of developing Asia alone are estimated at US$1.7 trillion per year, and South-east Asia is also expected to become one of the fastest-growing regions in the coming decade.

Mr Heng said Singapore in particular, with its international connectivity, vibrant startup scene and potential to be a carbon solution provider, can serve as a gateway for investments, a launchpad for innovation and a green node for sustainability for partners exploring opportunities in the region.

"Covid-19 will eventually pass, but its lasting legacy is in accelerating many structural changes," Mr Heng said. "We must plan ahead, invest in new capabilities and innovate, to better meet these disruptions, so that we can emerge stronger."