The hot topic around government, finance, and investment circles is sustainability, and no where is this more important than in Southeast Asia where ASEAN is trying to walk the fine line of development which is environmentally and economically sustainable..
Southeast Asia is a region that is fast growing and is increasingly urbanising as governments seek to connect citizens into the modern economy. Participation in the modern economy requires electrification of rural areas and connectivity into telecommunication networks, all lucrative investment opportunities for foreign and regional investors. However, any efforts of development, especially so in emerging economies, are tested against a criteria of sustainability—how does it address environmental degradation, how does it ensure conservation of the natural environment, how does it fit into climate mitigation and adaptation strategies.
According to a 2017 report, there is the potential of US$3 trillion of investment in green infrastructure in ASEAN between 2016 and 2030. This huge number is primarily the sum of potential investment in energy transmission and distribution ($700m), climate change mitigation ($400m), and water ($380m). There is a lot to do, especially when we combine the challenges of addressing a growing population and developing primarily agrarian and non-industrialised economies, and balancing that development with conserving the environment and promoting climate change mitigation.
In the pursuit of attracting greater investment into the region and promoting the sustainability credentials of the organisation, ASEAN, Association of Southeast Asian Nations, established the Asean Catalytic Green Finance Facility earlier this year. Equipped with the ability to offer loans and provide technical advice to countries for sustainable projects, the facility will begin to mobilise US$1 billion for countries to invest in environmentally-friendly and climate-minded infrastructure projects. The total pool of funds is the culmination of contributions from many actors, $75m from the ASEAN Infrastructure Fun, $300m from the Asian Development Bank, $336m from the KfW, the German state-owned development bank, $170m from the European Investment Bank and $170m from the Agence Française de Développement. The funding, according the ADB, can be used for “transport, energy, water and sanitation, environment and rural development, and social infrastructure”.
The strength of the scheme tied to the facility is the requirement for “clear environmental goals and targets” which ensures that projects are able to address sustainability through a meaningful and measurable approach. Committing projects to climate targets and environmental goals helps the region to better achieve its international Paris commitments but also attracts greater foreign investment with the certainty that sustainability criteria is being integrated within project development, moreover, funding will be released to reduce the risk of investing in the upcoming suite of infrastructure projects.
The challenges facing ASEAN as the centre of multilateralism within eastern Asia are plenty, beyond development and sustainability it has to grapple with the fact that it is in the middle of a power struggle between India, China, and the United States. It has already clashed with China regarding its incursions into the South China Sea and the illegal reclamation projects, but it also successfully managed to maintain a united front and a cohesive series of actions in response to Chinese actions. ASEAN member-states were also parties to the now-defunct Trans-Pacific Partnership which sought to open up greater movement of trade between Pacific countries, including Australia, New Zealand, Japan, North American and South American countries and foster greater commerce ties across the great Pacific Ocean. With the withdrawal of the United States, though, the question remained about the future of free trade in the region, even with the spiritual successor, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, only two of four ASEAN parties have ratified the agreement.
Like many emerging economies past and present though, ASEAN nations have to ensure that they continue to attract and sustain investment to guarantee development all while maintaining sovereignty over their economy and their security. The approach by ASEAN to establish the facility paves a path with greater certainty and a clearer outlook on the future of the region, a future where the region is able to meet the challenges of lifting their populations up all while acting in the interest of conserving the environment and pursuing climate action.
