SINGAPORE: Singapore has not seen a “major impact” from simmering trade tensions between the world’s two largest economies but it is closely monitoring the “warning signs”, Finance Minister Heng Swee Keat said at a media briefing on Thursday (Mar 29).
After all, an escalation into a full-blown trade war “will benefit nobody”, he said.
Fears of a trade war between the United States and China flared after US President Donald Trump unveiled plans last week to slap tariffs on potentially up to US$60 billion in Chinese goods. China’s Commerce Ministry has urged the United States to “pull back from the brink”, saying that it was not afraid to engage in a trade war.
When asked about how this could impact Singapore and the region, Mr Heng said free trade has its advantages and disadvantages, and it is important for countries to implement measures to mitigate the latter. But he stressed the need to “continue to build the consensus for free trade” as an escalation in trade tensions would not be “in anyone’s interest”.
“At this stage, we are monitoring all these developments,” he said.
Closer to home, there remains “very strong support for free trade and integration” among the Association of Southeast Asian Nations (ASEAN). The member states will “continue to sustain this momentum” with the move towards the ASEAN Economic Community (AEC) – a blueprint to integrate Southeast Asia’s diverse economies into a single market – and better integration of trade, services and flow of capital, said Mr Heng.
Negotiations for the 16-member Regional Comprehensive Economic Partnership (RCEP), which involves the 10 ASEAN member states and other economies like Australia, China, Japan, New Zealand and India, are also underway.
With that, “the discussion on sustaining momentum for trade liberalisation remains strong”, he said.
SINGAPORE’S FINANCIAL PRIORITIES FOR ASEAN CHAIRMANSHIP
Mr Heng also touched on Singapore’s financial priorities during the media briefing held before the ASEAN Finance Ministers and Central Bank Governors’ Meetings next week. The meetings will convene in Singapore from Apr 4 to 6 as Singapore takes over the rotating ASEAN chairmanship this year.
Mr Heng outlined three themes, with the first aimed at bridging ASEAN’s “substantial” infrastructure financing gap.
Citing figures from the Asian Development Bank (ADB), the total infrastructure bill for Southeast Asia is estimated at US$2.8 trillion between 2016 and 2030, or about US$184 billion annually. Climate-adjusted forecasts are even higher at US$3.1 trillion, or US$210 billion per year.
Given that it would not be possible for Governments to fund these needs alone, better mobilisation of private capital will be needed, said Mr Heng. This can be done through better ways of matching infrastructure demand with supply of funds, creating better awareness of ASEAN’s infrastructure projects and a better understanding of investor needs.
As such, Singapore will host the 8th World Bank-Singapore Infrastructure Finance Summit on Apr 5 where ASEAN finance ministers will participate in roundtable discussions with potential investors.
The annual Asia-Singapore Infrastructure roundtable will also take place later this year to facilitate discussions between project owners and investors.
With global investors increasingly looking at sustainability considerations in their investments, ASEAN will also build on its green bond standards to encourage green bond issuances and other sustainable finance instruments, said Mr Heng.
Secondly, the meetings will focus on enhancing the region’s resilience against risks.
For one, many ASEAN states remain “highly exposed to natural disasters yet disaster financing has not kept pace with economic growth, resulting in (a) widening protection gap”, said Mr Heng.
To enhance disaster resilience, ASEAN is exploring ways to improve data availability when it comes to the region’s economic exposure to natural catastrophes “so as to facilitate risk management and strengthen capacity building”.
Another emerging risk is cybersecurity. Mr Heng noted that there is room for deeper collaboration among ASEAN regulators to foster cyber resilience in the financial sector. This can be done by strengthening existing institutions and initiatives, like the multilateral currency swap agreement known as the Chiang Mai Initiative, he added.
Lastly, ASEAN is looking to support digital innovations, like financial technology, that can promote financial inclusion for the underserved and unbanked segments of society, said Mr Heng. It is also looking at capacity building in new emerging areas, such as big data analytics, to equip people with the know-how to ride the wave of technological disruptions.
Citing the example of a proposed tie-up between Singapore and Thailand’s electronic payment systems, Mr Heng added that ASEAN is also seeing “strong potential” in pioneering regional linkages for cross-border payments. Announced at the end of last year, such a tie-up will see Singapore’s PayNow System being linked to its equivalent in Thailand called PromptPay.
Noting that discussions are seeing “good progress”, Mr Heng hopes that this will pave the way for a network of payment linkages within and across ASEAN.
Apart from these topics, ASEAN’s finance ministers will also be having discussions next week with several international organisations, such as the World Bank, the regional banking association, as well as the US and European Union business councils.
“This will provide additional opportunities for us to enrich our discussion, and tap on (a) wider range of views on how ASEAN can sustain growth, boost resilience and foster innovation,” said Mr Heng.