DPM Heng Swee Keat at the EU-ASEAN Business Council 10th Anniversary Gala Dinner

Mr Jens Ruebbert, Chairman of the EU-ASEAN Business Council

Excellencies, 

Ladies and gentlemen,

Good evening, I’m delighted to join you to celebrate the 10th anniversary of the EU-ASEAN Business Council. 

Since we last met at your 5th AGM meeting in 2018, the world has changed in significant ways.
 
Back then, we were beginning to see signs of fragmentation: 

Commitment to trade and other international agreements was wavering, and even rescinded. 

Strategic competition was becoming more apparent, and the US-China trade war had just kicked off. 

We then collectively faced the shock of the COVID-19 pandemic, where border closures caused significant disruption to trade linkages and connectivity. 

And today, the geopolitical situation is volatile – there is war in Ukraine, and conflict in the Middle East. 

The world today is more fragmented and fractious. This is apparent from looking at trade data. 

Global trade shrank by 5%, or US$1.5 trillion, in 2023 after a COVID bounce back. 

Trade patterns have shifted, increasingly influenced by geopolitics. 

The trend of “friend-shoring” can be observed by the decrease in the diversification of trade partners. 

Supply chain patterns have also shifted, reflecting companies’ preoccupation with building greater resilience to manage these risks. 

Overall, this growing pull back on collaboration is worrying, as it comes at a time when countries across the world are facing shared urgent challenges like climate change and ageing. 

ASEAN and EU: Shared Beliefs

In this context, I am heartened to see ASEAN and the EU leaning strongly against these trends, and deepening our longstanding ties. 

Whereas global partnerships have frayed or become more exclusivist, ASEAN and the EU upgraded our relationship to a Strategic Partnership in 2020. 

We continue to be each other’s important trading partners. 

The EU is ASEAN’s 3rd largest trading partner and investor. 

ASEAN is likewise the EU’s 3rd largest trading partner outside of Europe. 

We have deepened connectivity between our regions, which have a combined population of around 1.1 billion people. 

In 2022, ASEAN and the EU signed a Comprehensive Air Transport Agreement, the world’s first bloc-to-bloc aviation agreement which will open up new markets and facilitate people-to-people flows between our two regions. 

I am glad to see European businesses sharing a commitment to deepen connectivity with ASEAN. 

In the Business Council’s 2023 Business Sentiment Survey, 99% of your respondents felt that the EU should accelerate negotiations on trade deals with ASEAN countries. 

While recognising the challenges of negotiating a region-to-region Free Trade Agreement at the moment, your respondents were practical minded, with 80% keen to pursue an investment protection agreement with ASEAN.  

What underpins this steadfast partnership between ASEAN and the EU? 

In my view, there are three important beliefs that we share. 

One: we believe that connectivity and integration are enablers of growth and development. 

The EU, as a supranational organisation, represents the highest of ambition in political and economic integration. 

Its foundations were laid in the post-World War Two era, where politicians sought to build a lasting peace through closer cooperation within Europe. 

Over the decades, this has evolved towards the ideal of a single market with the free movement of goods, services, capital and people. This has increased efficiency and opportunities, and uplifted peoples and economies across Europe. 

Likewise, ASEAN was formed as a response to Cold War geopolitics, but it was the imperative of economic growth that drove closer integration over the decades. 

Like the EU, ASEAN member states recognise the value of having a larger common voice, and collective heft to draw investments into the region. 

From creating the ASEAN Free Trade Area to signing a suite of Free Trade Agreements with our dialogue partners, the drive is both for greater connectivity within ASEAN and beyond. 

More than two decades ago, I was in the trenches negotiating the ASEAN Free Trade Area and the ASEAN Economic Community. 

I remember vividly how economic officials in ASEAN were deeply committed and had strong support from the ASEAN Secretariat. 

I am very happy to see the progress that we have made, and the benefits these have brought to peoples across ASEAN member states.

I believe EU member states have similarly benefitted from greater economic integration. It is therefore natural that ASEAN and the EU are drawn towards greater connectivity between our two regions. 

There is wide-ranging cooperation across the political-security, economic, and socio-cultural pillars.  

The EU has supported ASEAN’s economic integration efforts over the years, under the Enhanced ASEAN Regional Integration Support by the EU, or ARISE Plus, programme. 

With our similarity of experience regarding the benefits of integration and connectivity, the second key belief that ASEAN and the EU share is the importance of maintaining an open and outward-looking orientation. 

This is especially valuable in today’s global environment, where zero-sum, anti-trade rhetoric from certain quarters have placed a dampener on international collaboration and connectivity. 

New patterns of specialisation and competitive advantage have emerged as a result of trade liberalisation and closer integration in a post-Cold War era. These have created stresses on economies and workforces. 

While countries have by and large been able to keep pace by transforming their industries and supporting their companies and workers, the accelerated pace of change over the past decade has generated greater unease and dislocation, leading to a decline in support for global collaboration. 

In this regard, the EU’s more balanced narrative of “de-risking” has helped to temper the rhetoric on “de-coupling”. 

“De-risking” acknowledges that new considerations of political economy need to be balanced alongside the reality of significant interdependence between countries and economies. 

With many EU countries continuing to actively engage different partners, it sends a strong signal of the EU’s commitment to global trade and connectivity, amid geopolitical uncertainty. 

Likewise, ASEAN and its member states push ahead with expanding engagement, and welcoming partners to our region. 

We signed the Regional Comprehensive Economic Partnership (RCEP), which covers ASEAN and Asia-Pacific nations, in 2020 during the height of the pandemic. 

In 2022, when global FDI flows declined 12% to US$1.3 trillion, FDI flows into ASEAN was at an all-time high of US$224 billion. Countries were eager to tap on opportunities in the region, and ASEAN was happy to serve as a destination for EU companies looking to diversify their markets and supply chains.

In so doing, ASEAN and the EU can play an important role in upholding the open and rules-based multilateral trading system. 

This leads me to my final observation, which is that ASEAN and the EU have a bias towards practical and concrete actions. 

While it’s important to set clear ambitions, any regional grouping with a diversity of circumstances and preoccupations will also inevitably face divergences.  

ASEAN is known to be consensus-driven in general, but we have adopted a practical approach to economic cooperation over time, to provide some flexibility while continuing to uphold ASEAN centrality. 

The ASEAN Charter allows for an “ASEAN minus X” participation principle to be applied in the implementation of economic commitments. 

As such, the implementation of economic commitments can proceed with two or more ready member states, with other members participating at a later stage. 
 
ASEAN and the EU are taking a similarly practical approach to the development of an ASEAN-EU Free Trade Agreement. 

Whilst it has been difficult to land on the parameters for a region-to-region FTA due to differences in ambition and readiness, the discussion has now shifted towards more specific areas of cooperation, such as digitalisation, sustainability, and supply chain resilience. 

Concurrently, the EU is pursuing bilateral FTAs with ASEAN member states. The EU-Singapore FTA entered into force in November 2019, while the EU-Vietnam FTA entered into force in August 2020. 

As we heard from Jens earlier, there are ongoing negotiations with other ASEAN member states. 

This approach means that we can make steady progress and put building blocks in place towards an eventual region-to-region Free Trade Agreement. 

Three Suggestions

With these three shared beliefs in mind, let me offer three suggestions on how ASEAN and the EU can build on our longstanding partnership to create new value that will benefit our businesses and peoples. 
One, we can focus on areas of mutual interest and benefit, and make progress in specific domains to build momentum for broader cooperation. 

I earlier mentioned that the ASEAN-EU Joint Working Group on Trade and Investment is discussing ways to deepen cooperation in digitalisation, sustainability, and supply chain resilience. 

These are areas of shared challenges, so I hope that our officials can work through them, and form the building blocks for an eventual ASEAN-EU Free Trade Agreement. 

As countries and companies seek to build more resilient supply chains, ASEAN and the EU can build on the existing work under ARISE Plus to improve the transparency of Non-Tariff Measures in the region. 

ASEAN is now negotiating a Digital Economy Framework Agreement, and could benefit from the EU’s expertise in digitalisation and sustainability. 

As ASEAN seeks to develop a collective response and approach towards sustainability issues, we can learn much from the EU’s work on carbon neutrality and the circular economy. 

Another promising area for collaboration is cross-border energy trade. 

The EU has significant experience and expertise on this, whereas ASEAN is still early in our journey towards the establishment of an ASEAN Power Grid, which will be critical for driving green and sustainable development in our region.  

ASEAN can learn from the EU on strengthening regional interconnectivity and enhancing grid infrastructure, to facilitate multilateral electricity trading. 

My second suggestion is more of an invitation – we welcome the EU to tap on Singapore as a testbed and pathfinder to achieve new breakthroughs in the region. 

Many European companies, including many of you here today, choose to use Singapore as a base to access opportunities in ASEAN and the broader Asia region. 

Singapore and the EU have also pushed the boundaries on various economic and financial agreements. 

Besides the EU-Singapore FTA, we have also signed the EU-Singapore Investment Protection Agreement (EUSIPA) which would provide enhanced investment protection for our bilateral investments through modern provisions, and give legal certainty to our investors. I look forward to its entry into force once all EU member states have ratified it. 

The EU-Singapore Investment Protection Agreement will be a useful reference point, given that some 80% of respondents in your Business Sentiment Survey last year felt that the EU should pursue an investment protection agreement with ASEAN. 

On the digital economy front, Singapore and the EU are pursuing several initiatives to enhance digital connectivity between our markets. 

The EU-Singapore Digital Partnership, which we signed in February 2023, provides an overarching framework for all forms of bilateral digital cooperation.

The first deliverable of this Partnership is a set of Digital Trade Principles.  

We have since built on them to launch negotiations on a legally-binding EU-Singapore Digital Trade Agreement, or DTA, in July 2023. 

We aim for this to be a high-standard and ambitious DTA between digitally progressive and like-minded economic partners. 

Such a DTA would give our citizens and businesses legal certainty and clarity to transact confidently in the digital economy, and further enhance digital connectivity between Singapore and the EU.  

More importantly, the DTA could allow us to exercise thought leadership in shaping global rules and standards on digital trade, and serve as a pathfinder for a legally binding arrangement between the EU and ASEAN in future. 

My third and final suggestion is to encourage greater financial flows between our two regions to support the real economy, by promoting innovation and sustainable development.  

We heard earlier from David Harrity on the financial support that HSBC is providing to their clients in this region across a wide range of areas. Indeed, there are significant investment opportunities in ASEAN and the broader Asia region, including in infrastructure and sustainable development.  

In turn, many European companies, including innovative startups and SMEs, have capabilities that can meet these needs. 

We have therefore developed the ASEAN Taxonomy on Sustainable Finance to facilitate this. 

Today, it may be expensive to fund these new and innovative activities because of information asymmetries. 

Hence, European financial institutions, especially banks and fund managers, can act as intermediaries to bridge the information gap for European investors, providing good risk-adjusted returns while mobilising finance to support good projects in ASEAN and the region. 

I am therefore glad that European financial institutions are expanding their operations in Singapore to serve the region. 

For example, 10 European asset managers have designated Singapore as their ESG Asian hub.  

Six of the top global insurers and reinsurers, which are from the EU, have also been developing their sustainability solutions for Asia out of Singapore. 

Their teams in Singapore are supporting insurance solutions for disaster risk financing, carbon credits, and renewable energy infrastructure. 

These are valuable areas for supporting market-based solutions.  

Conclusion

In conclusion, let me reiterate my optimism and belief that ASEAN and the EU can forge an even brighter path ahead together. 

Our regions have leaned against anti-globalisation sentiments, to deepen collaboration and connectivity with each other, and others around the world. 

We set out clear ambitions, yet are also willing to move in practical ways and specific areas, to learn by doing and achieve steady progress. 

So I hope that we can continue to push along at different levels – officials, businesses and citizens – to deepen mutual understanding and forge new collaborations. 

This is how we can continue to bring benefits to our businesses and peoples, keep the global trading system open, inclusive and rules-based, and promote the efficient allocation of capital to pursue longer term development objectives. 

Thank you and I wish you an enjoyable evening.