5 July 2021

UK-SG digital deal could unlock Southeast Asia’s new economy

Singapore and the UK this week kicked off negotiations to open up a digital economy, building on the Free Trade Agreement (FTA) signed late last year.1 If signed, all sizes of businesses from both countries look set to benefit from increased clarity and reduced costs associated with seamless digital transactions.

Regina Lee, Head of Commercial Banking, HSBC Singapore

This is a significant and ambitious chapter in developing ‘the new economy’, the first of its kind between an Asian and European country2 – and one which will undoubtedly progress inter-country trade. Yet it also has the potential to have much wider reaching implications; the two Fintech hubs could form a framework which could be replicated across Southeast Asia.

In working to ink the deal, the UK and Singapore must keep in mind the wider Southeast Asia opportunity; the benefit to both countries is too big to miss.

The challenge

According to the World Economic Forum’s (WEF) forecast, ASEAN will become the world’s fourth largest economy in the coming decade, with 70% of its population joining the middle class and a consumer market worth US$4 trillion.3 Among that, the new economy will be a major theme.

Already, we’re seeing sweeping digital adoption across most industries on account of physical lockdowns. For example, online streaming in Malaysia, Singapore and Vietnam during the ”stay home” period surged by 60% compared to the pre-COVID level.4 A Kearny EDBI study found that USD1 trillion in additional GDP could flow into Southeast Asia if the region can fully embrace Artificial Intelligence.5

However, that potential is being eroded as ASEAN member countries remain splintered in their approach to regulating data flows across borders due to concerns about national security, data privacy, or to protect local businesses.

The opportunity

Singapore is an innovation hub for Southeast Asia whilst the UK is a global leader in Financial Services and Fintech with wide and deep capital markets. Not only can the UK be a source of this investment, it can also be a crucial strategic ally and adviser in support of ASEAN’s reform agenda across the digital and tech sectors.

Drawing on Singapore and the UK’s capabilities and tech ecosystems, it makes sense that the region’s growing digital demand can be led by the two countries.

What’s next

Governments, business leaders and industry bodies must now come together to support the formulation of a digital trade deal, but keep Southeast Asia in their sights by aligning with the ASEAN Framework. That means:

  • Enabling the free flow of data
  • Maintaining high standards of protection for personal data
  • Upholding the principles of net neutrality

The Singapore-UK digital agreement will set a precedent for other ASEAN economies to follow, not only benefiting UK companies seeking out the bright light opportunities in Southeast Asia, but for businesses within the bloc by enabling cross border digital trade.

A contribution piece by Regina Lee, Head of Commercial Banking, HSBC Singapore was first published in The Edge on 3rd July 2021.