ASEAN Finance Officials Eye Greater Integration, Push for Infrastructure Investment
Finance ministers and central bank governors from the Association of Southeast Asian Nations (ASEAN) stressed the importance of building on strong economic growth figures during their annual meeting last week, while highlighting the value of trade, investment, financial integration, and infrastructure towards meeting that objective.
The meeting was held on 6 April in Singapore. The city-state currently holds the position of chair of the bloc, and has outlined an agenda highlighting growth, resilience, and innovation. (See Bridges Weekly, 18 January 2018)
The ASEAN group, which is comprised of Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam with Papua New Guinea as an observer, was founded in 1967 and aims to promote growth, collaboration, and peace between the member countries.
In addition to ASEAN member states, representatives from the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB), the ASEAN+3 Macroeconomic Research Office (AMRO), the International Monetary Fund, and the World Bank Group were also in attendance at the finance meet.
Infrastructure and sustainable growth
In his opening remarks, Singapore Finance Minister Heng Swee Keat delineated Singapore’s chairmanship objectives. In terms of growth, he cited an estimate from the International Monetary Fund (IMF) issued last October that found that ASEAN’s collective economic growth improved by 5.1 percent in 2017, while noting that more work remained to ensure sustained economic improvements.
The finance head presented data on infrastructure investment needs, insisting on the value of public-private partnerships to raise the necessary funds.
“The ADB estimates that, for the 15-year period from 2016 to 2030, ASEAN’s infrastructure investment needs will total US$2.8 trillion (or US$184 billion per annum). We will need to work to better mobilise private capital. In fact, neither government alone or private sector alone can meet all the needs. But I think working together, we can make some progress,” Heng said.
These statements came a day after the Asian Infrastructure Investment Bank (AIIB) adopted its Strategy on Private Capital Mobilisation on 5 April. Through its plan, AIIB sets out the sequence of activities it will use to develop and incentivise private partnerships and execute high quality transactions. ASEAN expects to collaborate with AIIB to pursue infrastructure funding, according to the joint statement from ASEAN finance ministers last week.
The AIIB, founded in 2016, works to link people, services, and markets both in the region and more broadly, specifically through investment in infrastructure needs across Asia, including sustainable infrastructure and energy. It will hold its next annual meeting from 25-26 June in Mumbai, India.
Another area of growth that the Singaporean finance chief highlighted was in ASEAN Green Bond Standards (GBS). The ASEAN Capital Markets Forum launched these standards last year. The programme works to generate increased “green” investment to support sustainable growth in the region, especially in funding infrastructure. Using “internationally accepted” practices, the standards seek to guide this sector to enhance transparency, consistency, and uniformity.
“We will build on the ASEAN Green Bond Standards launched last year by the ASEAN Capital Markets Forum (ACMF) to encourage more green bond issuances, as well as other modes of sustainable finance, within ASEAN,” Heng said in his opening address.
ASEAN continues to work on internal integration, with working groups making progress across various items, including the Master Plan on ASEAN Connectivity in 2025 and negotiations under the ASEAN Banking Integration Framework (ABIF). In addition, the finance leaders stated that the ASEAN member states are close to concluding a trade in services agreement for financial services.
Ministers underscored the importance of the implementation of the ASEAN Economic Community Blueprint 2025, which was adopted in 2015. The plan, which calls for eliminating tariffs, liberalising investment, and narrowing the development gap among other goals, aims to deepen the region’s integration across multiple levels.
“We reaffirm our commitment to the ASEAN Economic Community (AEC) Blueprint 2025, including its strategic objectives of financial integration, financial stability, and financial inclusion,” the ministers’ joint statement said.
Natural disaster responses remained key in the April meeting. In its role as chair, Singaporean officials say that they hope to address the widening protection gap. ASEAN countries are increasingly vulnerable to natural disasters, but insurance coverage and pre-disaster risk management remain limited.
“We need to support initiatives that enhance ASEAN’s ability to cope with and recover from such shocks,” Heng said, noting the importance of data availability and capacity building for less developed countries in creating disaster resilience.
The ASEAN grouping currently has free trade agreements (FTA) with Australia, New Zealand, China, India, Japan, and Korea, which together make up the 16 countries of the proposed Regional Comprehensive Economic Partnership (RCEP). A ministerial-level meeting was held between the RCEP nations in March, and negotiations are due to resume this month towards crafting an accord across these 16 economies. (See Bridges Weekly, 29 March 2018)
Despite continued negotiations for RCEP and other trade initiatives, concerns about trade “protectionism” were raised during the finance ministers’ meeting. They said that they remain vigilant of risks that might undermine international trade and investment, given their value in generating growth and fostering development.
“We must continue to have very strong commitments to trade and to openness to the globalisation process,” said the Singaporean finance minister. ASEAN finance ministers and central bank governors will meet again under Thailand’s leadership in 2019.
ICTSD reporting; “ASEAN finance ministers, central bankers reaffirm commitment to international trade, investment,” CHANNEL NEWS ASIA, 6 April 2018.