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ASEAN-Japan Business Week: Toward Innovative and Sustainable Growth

24 May 2021

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Tokyo, 24 May 2021: Southeast Asia has always been at the heart of the international business for many Japanese companies, and it has become even more important for them to respond flexibly and rapidly to the massive transformations caused by transformations such as digitalisation and green growth in the region.

The 'ASEAN-Japan Business Week', a brand-new online event hosted by multiple organisations from ASEAN and Japan, provided an opportunity to better understand the latest trends around the business in ASEAN and the potentials in the future. The five-day event was officially started on Monday, 24 May 2021 and streamed by more than 200 participants. Mr Koji Hachiyama, the Chief Operating Officer (COO) of ERIA and Dr Han Phoumin, Senior Economist of ERIA attended the event as the speakers.

The opening session was divided into two sessions with different topics: first, Establishing New Partnerships between Japan and Southeast Asia, with the following speakers giving their remarks:

  1. H. E. Kajiyama Hiroshi (Minister of Economy, Trade and Industry Japan)
  2. H.E. Dato Lim Jock Hoi (Secretary-General of ASEAN)
  3. Sasaki Nobuhiko (Chief Executive Officer of JETRO)
  4. Mimura Akio (Chairman, the Japan Chamber of Commerce and Industry (JCCI))
  5. Hara Noriyuki (Chair, Committee on Asia and Oceania, Keidanren Representative Director, Chairman of the Board, Mitsui Sumitomo Insurance Co., Ltd)
  6. Tamura Akihiko (Director-General for Trade Policy of Minister of Economy, Trade and Industry Japan)

The speakers highlighted the importance of digitalisation, especially in the time of the pandemic. The digital transformation is rapidly accelerating in the ASEAN region. Therefore, taking advantage of this, Japan-ASEAN partnership can be strengthened to promote green growth.

Digitalisation and sustainability are critical to the recovery efforts in the next phase of economic integration. ASEAN has set a digital agenda through the ASEAN Digital Integration Framework Action Plan 2025. On sustainability and green growth, ASEAN has been continuously promoting financing of the ASEAN Green/Sustainability Bond Standards, as well as developing a roadmap for a sustainable capital market. These actions need support from all stakeholders in the region including the business community, as well as Japanese community.

ASEAN has also launched the Comprehensive Recovery Framework to promote programs and policies that will support a strong and resilient post-pandemic economy.  JETRO JICA actively supports members companies of small-medium enterprises (SMEs) in a number of ways, including by providing the consultation desk. Promoting economic recovery and society 5.0 for sustainable development goals are also on the agenda.

There are three important elements to the ASEAN-Japan relationship: 1) strengthening ASEAN connectivity; 2) promoting the social development of digital technology; and 3) supporting sustainable growth (global agenda of climate change, environment, and decarbonisation).

The third session addressed Transforming Southeast Asia, Transforming Japanese Business.

During this session, the speakers emphasised the impact of COVID-19 across the region and the multiple challenges and opportunities that can develop as part of recovery including the circular economy and green growth. Digitalisation is developing very quickly, triggering the supply chain revolution. Most of the offline businesses are taking the advantages to expand their businesses to online platforms in order to survive (e-payment, telemedicine, fintech, agriculture, and fisheries). SMEs need support to adopt digital technology, otherwise, they are going to collapse. Digitalisation can also bring Japan to the Southeast Asia market.

Mr Koji Hachiyama, COO of ERIA, spoke on this panel.  He opened his presentation by giving an overview of the ASEAN economic situation. According to Mr Hachiyama, ASEAN has contained the impact from COVID-19 and is expected to continue to have high growth after COVID-19. Businesses in ASEAN will also continue to grow dynamically while responding to the situation caused by COVID-19.

On digitalisation, he explained that ASEAN has a high potential for digitalisation as it is progressing rapidly. ASEAN will become a huge digital single market and will be a major player in the world economy in the future. On the other hand, there are still many problems, such as the security measures which are not catching up with rapid digitalisation. However, this situation will give many business opportunities as well. In ASEAN, digitalisation is in the rapid transition stage from ‘Line activities’ (electronic commerce, etc.) to ‘Area activities’ (data free flow and common data platform, digital transformation). Japanese technology could contribute positively to the digitalisation in ASEAN.

He also addressed the issue of the circular economy, which prioritises material recovery at the end of a product lifecycle to bring resources back into the production process and eliminate waste, such as in smart cities and recycling. Mr Hachiyama highlighted six principles for advancing the circular economy in ASEAN:

  1. Creating a concept under the international production network
  2. Contributing to the promotion of ASEAN economic integration
  3. Sufficiently assessing the impact on production costs and market prices, especially in SMEs
  4. Raising awareness and recognizing that the circular economy will contribute to long-term growth
  5. Promoting efforts that respect the ASEAN Way, such as coordination for the entire ASEAN
  6. Ensuring financial sustainability and feasibility before proceeding with business

He said that with their advanced technologies, Japanese companies can become more involved and grow significantly together with ASEAN.

On the third day, ERIA Senior Energy Economist, Dr Han Phoumin, provided a keynote speech entitled ‘Decarbonisation Scenarios for ASEAN: Methodology and Expected Results’ during the session on ‘Promoting Green Business for Sustainable Development in Southeast Asia’. Dr Han started off with the key message that the ASEAN faces tremendous challenges in the race to carbon neutrality ‘net zero emissions’ by the middle of the 21st century regarding the future energy landscape and how the energy transition will embrace a new architecture – including sound policies and technologies to ensure energy access together with affordability, energy security, and energy sustainability. Given the high share of fossil fuels in ASEAN’s current energy mix (oil, coal, and natural gas comprise almost 80%), the clean use of fossil fuels through the deployment of clean technologies is indispensable for decarbonising ASEAN’s emissions.

He also highlighted the fact that ASEAN is rich in solar resources, however only a few countries have offshore wind resources such as Viet Nam, Indonesia, and the Philippines. Mainland Southeast Asia - ‘the Mekong subregion’-  countries are rich of hydropower. Increasing the penetration of solar and wind could be facilitated by future power connectivity and trade within ASEAN. If the ASEAN electricity market gradually moves up to a multilateral/integrated electricity market, the hydropower resource from the Mekong subregion could play a significant role as the baseload power which can complement the high penetration of solar and wind energy. In the absence of a thermal power plant, a large capacity of electrical battery storage is necessary as power backup during days of less sunshine and wind.  

The high penetration of variable renewable energy (solar and wind); the clean energy of hydrogen fuel; and carbon sink technology such as carbon capture sequestration utilisation and storage (CCUS) will become the future energy mix in massive scale, but only when the carbon price can be regulated. In the carbonisation scenarios of his presentation for ASEAN’s case, the marginal abatement cost of decarbonisation could reach $700 US/tCO2 if the target of net zero emission is set at 2070. However, if the net zero emission target is set by 2050, the marginal abatement cost could skyrocket to $955US/tCO2.

Dr Phoumin also shared his view that such  high-cost scenarios of decarbonisation may present challenges for the energy transition in ASEAN. However, CCUS is a promising technology in cost competitiveness for the foreseeable future. Managing the energy transition in ASEAN towards clean energy systems and carbon neutrality will need to consider the presence of fossil fuels (coal, oil, and natural gas) in the short- and medium-term energy system. It will be crucial to explore ways to use fossil fuels in an environmentally sustainable manner to act as a bridge to a carbon-free energy future. For successful implementation of the energy transition and climate change policy objectives, policymakers will need to balance other equally important policy objectives of energy security, energy access, and affordability.

Further, ASEAN will need to set clear targets and actions in all sectors and programmes to facilitate the penetration of renewables, clean technologies, and clean energy to decarbonise ASEAN’s emission. Appropriate financing instrument will need to be designed to support such up-take of clean technologies, clean fuels, and renewables. This presentation provided a roadmap of ASEAN’s decarbonisation scenarios and gave attention to ASEAN’s leaders, policy makers and stakeholders on how ASEAN will need to tackle emissions.

The race to carbon neutrality and net zero emissions of ASEAN will rely on today’s actions, policies, and investments to change the fossil fuel-based energy system towards a cleaner energy system, but any decisions and energy policy measures to be rolled out during the energy transition need to be weighed against potentially higher energy costs, affordability issues, and energy security risks.

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