Speech by Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat at the 26th International Conference on the Future of Asia — "Shaping the Post-COVID Era: Asia's Role in the Global Recovery" on 20 May 2021.
Mr Okada Naotoshi,
Nikkei Chairman and Group CEO,
Ladies and gentlemen,
Thank you for inviting me to speak at this Conference.
We are into the second year of COVID-19, and it remains the primary preoccupation for most, if not all governments of the world.
The pandemic is still raging in many parts of the world. More than 160 million people have been infected, and more than 3 million have died.
The world is now at another crossroad in this fight.
The rapid development of effective vaccines provided a glimmer of hope.
New cases and deaths have come down in places with mass vaccination.
But vaccines are in short supply globally, and vaccine nationalism is a fact that we cannot wish away.
With the emergence of new, more virulent strains, we are also seeing a resurgence in cases.
Globally, we are experiencing the largest wave of infection since the pandemic started.
This is a reminder that none of us can truly be safe unless everyone is safe.
If we do not step up global cooperation to contain the virus, we may be caught in a vicious cycle of never-ending waves of infection.
Each wave resulting in new, potentially more virulent, and lethal strains, undermining existing measures and vaccines, leading to fresh lock-downs and disruptions.
Given the unprecedented scale and severity of the pandemic, there is an urgent need to scale up vaccine production and distribution.
Despite the shortcomings, there were bright spots in global efforts.
We saw an unprecedented level of information sharing and cooperation in some areas of science and technology.
One example is the sharing of genome sequences of COVID-19 through GISAID, a global science initiative to monitor the emergence of new strains of the virus.
GISAID has since received 1.6 million genome sequences, from over 180 countries.
Another example is the COVAX Facility, which has also brought together multiple stakeholders to ensure fair and equitable access to vaccines.
More than 67 million doses have been shipped to over 120 countries. This is encouraging progress, though still a long way from the target of 2 billion doses by end of this year.
COVAX and GISAID are bright spots of global cooperation. But these are not sufficient.
All countries, including all of us in Asia, have a role to play in containing the pandemic. We can strengthen global cooperation by building on the momentum of COVAX to address funding and access shortfalls, supporting the production and distribution of vaccines, and working with multilateral development banks to extend support to countries that have been hardest hit.
GLOBAL COOPERATION AMIDST CHANGING GLOBAL ORDER
History tells us that global cooperation is possible if there is a unity of purpose.
After the Second World War, the desire to avoid another global war led to the formation of the United Nations
Through GATT, the precursor to the WTO, a set of global trading rules was established.
Global trade flourished, which provided the foundations of growth, especially for many of us in Asia.
But strong global cooperation is possible only if we have a stable global order.
The current global order is increasingly under pressure, not least due to the increasing strategic competition between the US and China.
US-China competition is here to stay for the foreseeable future.
Both sides have publicly doubled down on their positions.
For both US and China, domestic considerations remain paramount.
Neither can afford to appear weak nor be seen to be conceding ground to the other.
This year, China marks the politically significant 100th anniversary of the founding of the Communist Party of China.
The lead up to the 20th Party Congress next year – when China’s top leadership will be chosen – will also be a delicate period.
In the US, there is strong bipartisan consensus and public support for a tougher approach towards China.
It is not unusual for major powers to have disagreements or to compete for influence.
What is important is that competition be conducted within a stable framework so as to defuse tensions, and to avoid a situation where differing interests prevent them from cooperating even on common interests, or worse still, escalate into armed conflicts.
But as I said at this Conference in 2019, while I believe that competition may be inevitable, it need not be zero sum.
It is possible for both sides to find a new mode of constructive competition.
The key is for both sides to work towards a modus vivendi, of building confidence and trust, and competing within a rules-based multilateral system where there are established rules and norms of engagement.
Healthy competition can spur innovation to create better solutions to the world’s challenges. And by finding common ground to working together even as we compete, we can build on one another’s strengths, and achieve more than the sum of our parts.
There have been some encouraging steps.
The first high-level meeting between the US and China in Alaska might have been marked by tough rhetoric, but the meeting also showed recognition from both sides on the need for dialogue.
The Biden Administration has said that there is room for cooperation, even as there will be competitive elements in the relationship.
Chinese leaders have called for both sides to seek mutually beneficial cooperation, while managing differences.
China and the US have a long history of working together in areas of common interest, such as to combat global health crises.
For example, they worked together to tackle the Ebola outbreak in West Africa.
I look forward to closer cooperation and greater global leadership from the US and China on combatting COVID-19 and for working towards the post-pandemic recovery.
I am also heartened to see some early signs of cooperation on climate change.
In April, the US and China Special Envoys for Climate Change – John Kerry and Xie Zhenhua – met in Shanghai, to discuss how both powers can work together to fulfil the Paris Agreement and address the climate crisis.
Later that month, President Xi also attended the Leaders’ Summit on Climate hosted by President Biden.
By building on areas of common interest, I hope both the US and China can eventually arrive at a framework for stable competition.
But we must be realistic that the US-China strategic competition could intensify, and it will not be straightforward to achieve a new equilibrium.
Both countries will continue to jostle for strategic influence particularly in Asia.
China has invested substantially in the region through the Belt and Road Initiative or BRI.
Despite COVID-19, China’s investment in Asia through the BRI was almost US$25 billion last year.
China is also the largest trading partner of ASEAN and several countries in the region, including Australia, Japan and South Korea.
The Biden Administration has committed to engaging the region and ASEAN constructively, restoring key alliances and partnerships in Asia, such as through the Quad.
Biden’s first multilateral summit was the Quad Summit on 12 March 2021, with Australia, India and Japan.
It is also notable that PM Suga is the first foreign leader to visit the White House; and the first outgoing US Cabinet-level visit was to Japan and South Korea.
I speak on behalf of many, if not most, countries in the region that we welcome and want to strengthen relations with both the US and China.
We hope to engage both constructively.
Within Southeast Asia, we welcome their continued cooperation and support for ASEAN centrality and unity.
But with the ongoing strategic competition, we will need to navigate greater uncertainty and possibly turbulence.
ASIA: EMERGING STRONGER FROM THIS CRISIS
What can Asia do, amidst this geopolitical turbulence?
The starting point is that Asia is a region brimming with promise, with strong fundamentals.
Asia has some of the most advanced economies in the world.
China is a remarkable story. Japan, South Korea, and Taiwan are also home to some of the most advanced manufacturing capabilities including the most cutting-edge semi-conductor foundries and fully automated “dark factories”.
The digital economy is rapidly growing in Asia.
In Southeast Asia, the digital economy is projected to grow three times by 2025 while some parts of Asia are rapidly ageing, there are significant untapped demographic dividends, in places with young populations like India and Indonesia.
Shanghai, Tokyo, Hong Kong, and Singapore are leading financial centres.
By 2040, with these strong foundations, Asia is projected to form 50% of the global GDP1 up from 43% today, and 29% in the year 2000.
While Asia’s growth potential is remarkable, the realisation of this potential is far from predetermined. The region must work together to address critical issues and pursue a common agenda to realise a better future.
The immediate priority is to bring the pandemic under control.
We must also focus on emerging stronger from this global crisis, by working towards a green recovery, and by investing in new growth areas such as digital and infrastructure.
The road ahead will also be full of uncertainty and complexity, especially if the US-China strategic competition intensifies, and we must collectively contribute to a more stable global order.
Let me offer 3 suggestions.
First, Asia can further strengthen regional architecture and partnerships, to emerge stronger from this crisis.
In 2018, eleven countries came together to conclude the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or CPTPP.
I commend Japan for providing leadership to rally the remaining countries after the US pulled out.
I know that the current political conditions make it difficult for the US to rejoin, but things are never static, and the US should not rule it out.
Last year, ASEAN and five of our FTA partners signed the Regional Comprehensive Economic Partnership or RCEP.
This is the largest agreement of its kind in history.
The next important step is to expedite ratification. A number of countries, including Singapore, have already done so.
Japan’s Diet had also recently approved the agreement.
The RCEP remains open to India when it is ready.
The CPTPP and RCEP are important building blocks for the region and for the world.
The door remains open for other like-minded partners to join us.
Both agreements also serve as pathfinders for a possible FTA of the Asia Pacific, one which should include the US, China, and India.
Such an FTA will shape economic relationships and the region’s geostrategic landscape for years to come.
Beyond physical trade, the region must also collaborate to realise the potential of the digital economy.
We must work to harmonise standards, allow the trusted flow of data, and facilitate cross border transactions.
And as the digital economy grows, we must also strengthen collaboration in cybersecurity.
I am heartened that ASEAN and Japan developed an action plan last year to explore opportunities in digital trade and e-commerce.
Japan is also helping to strengthen cyber capacity building efforts in ASEAN.
On the global stage, Japan, Australia, and Singapore are co-conveners of the WTO Joint Statement Initiative on E-Commerce.
With 86 WTO members on board, representing over 90% of global trade, this initiative aims to create global baseline rules on trade-related aspects of e-commerce.
Beyond e-commerce, there is also an urgent need to develop new approaches and governance frameworks for the emerging cross-border digital economy.
To this end, Singapore has established Digital Economy Agreements with several countries.
Such agreements can provide a common framework for progress in this rapidly evolving field.
As the digital economy grows, we must look at how we can further deepen economic integration across our economies.
There is also another area of cooperation that is critical as we recover from COVID-19.
When the time is right, we should work towards resuming the safe movement of people across borders.
This will be critical for economic recovery and growth.
Vaccinations will be an important enabler to resuming safe travel.
We can also work with like-minded countries, including Japan, and with international organisations to pursue common health and travel arrangements.
My second suggestion is that Asia can emerge stronger by continuing to maintain constructive dialogue on difficult issues.
While much has been said about Asia’s promise, like most other regions globally, there are hotspots of concern here. For example: The Korean Peninsula remains technically at war.
Taiwan Strait continues to be a flashpoint.
South and East China Seas remain contested.
And the difficult situation in Myanmar remains of grave concern.
Many of these are long-standing issues, with entrenched positions by the stakeholders.
There are no easy solutions to bridge the divergent interests, but major conflict could have catastrophic consequences.
So the region must do what we can to reduce the risk of miscalculations, and prevent situations from boiling over.
For example, ASEAN Member States and China are in negotiations on a Code of Conduct in the South China Sea.
A second reading of the Single Draft Negotiating Text has commenced.
Unfortunately, due to COVID-19, we have been unable to hold physical negotiations.
And there are a number of outstanding crucial issues, including the legal nature of the Code of Conduct.
Despite these limitations, we must soldier on and work towards an effective and substantive Code of Conduct, that is in accordance with universally recognised principles of international law, including the 1982 United Nations Convention on the Law of the Sea.
Another important aspect is building trust through dialogue and confidence-building measures.
The ASEAN Leaders’ Meeting in Jakarta last month showed the importance of constructive dialogue between ASEAN member states and the relevant stakeholders in Myanmar.
The Meeting secured agreement on a Five-Point Consensus.
Most notably, Myanmar agreed with the importance of exercising maximum restraint and the need for meaningful dialogue with all parties concerned.
This is an important initial step to de-escalate the crisis in Myanmar.
However, the path back to normalcy in Myanmar will be long and difficult.
ASEAN member states have consistently stressed that engagement, rather than isolation, will go further in resolving the current crisis.
And I urge the international community to continue supporting ASEAN’s and the UN’s engagement of Myanmar.
Third, to emerge stronger from this crisis, we must invest in emerging opportunities across borders so that we can raise living standards in the region and share in one another’s growth.
Unlocking Asia’s potential requires a tremendous amount of capital. But if we work together and collectively make the right investments, investing our capital and crowding in capital from afar, our efforts can make a big difference.
One area is the huge infrastructure needs in this region.
The funding gap in developing Asia is estimated at US$1.7 trillion per year prior to COVID-19. This would have increased since then.
No Government would be able to fund these projects on its own.
Greater collaboration between countries, multilateral development banks and the private sector will enhance our collective capacity to access new opportunities.
Japan, where households are holding on to almost US$10 trillion in cash and deposits, can consider investing some of these monies to earn returns while improving lives.
Recognising this immense need, Singapore set up Infrastructure Asia to better match supply and demand for Asia’s growing infrastructure needs, and to better structure, finance and implement quality infrastructure projects.
We welcome more of such efforts in unlocking the region’s infrastructure potential.
Another area is in environmental sustainability.
COVID-19 is a wake-up call for the world, and a reminder that we must better respond to global and complex challenges like climate change and resource conservation.
As economic recovery picks up, there are more opportunities to pursue a green recovery and invest in green solutions.
One area is in carbon credit projects from nature-based solutions, which have the potential to provide one-third of the global mitigation necessary to stabilise warming to below 2 degrees Celsius.
Southeast Asia is home to the largest blue carbon stock in the world, with the largest areas of mangrove swamps and seagrass meadows in Indonesia and the Philippines.
Together with 200 million hectares of forests, the potential to absorb excess CO2 from the environment is significant. And the carbon credits generated from such solutions can complement de-carbonisation efforts by companies and countries.
Realising this potential will require investment by the region. Not just in terms of natural capital, but also in ensuring high standards of quality and verifiability of carbon credits that may be generated from these projects, and the development of vibrant exchanges for these credits to be traded.
Investing across borders has an additional benefit apart from improving lives and getting returns on capital. It enables us to benefit from one another’s success, and pulls the region closer as we pursue a common objective of growing a more vibrant economy and improving the lives of our people.
This Conference was first held in 1995.
Asia has come a long way since then.
We had our fair share of ups and downs, including the Asian Financial Crisis, SARS and the Global Financial Crisis.
But we have been able to overcome each crisis and emerge stronger.
Asia is once again at a crossroad.
The shadows of COVID-19 continue to loom large.
We are still grappling with the worst global recession in almost a century, at a time when the global order is under significant pressure.
But I am hopeful that Asia can once again navigate through this difficult period.
By strengthening regional architecture and partnerships, by taking a constructive approach to handling hotspots in the region and by investing in one another to unlock our growth potential, so that we can grow together as a region.
In this way, Asia and the world can emerge stronger together from COVID-19, and contribute to a better global order.
 Based on GDP measured in purchasing power parity terms. The projection of Asia’s economy in 2040 is based on Oliver Tonby et al. (2019), “The Future of Asia,” McKinsey Global Institute, September. Figures for Asia’s share of world GDP for 2020 and 2021 are based on IMF WEO April 2021 database. The IMF’s own forecast of Asia’s share of global GDP of 46% in 2026 (IMF’s forecasts are five years ahead) corroborates with the longer-term projections from McKinsey. Between 2021 and 2026, the weighted average growth rate in Asia is projected by the IMF to come in at 4.6% p.a., ahead of the world average of 4.0%.
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