The Risk Management of Asian Opportunities — Heng Swee Keat

Context

  • Asia’s strong economic fundamentals present significant opportunities.
  • However, global uncertainties require careful risk management from policymakers, investors, and companies.
  • Singapore’s Deputy Prime Minister Heng Swee Keat spoke about these themes at the 2023 Nomfins Investor Forum Asia.

Medium-Term Challenges for Asia

  1. Disrupted and bifurcated supply chains — Need to rethink supply chain strategies for resilience.
  2. US-China trade war evolving into a tech war — Escalating geopolitical tensions affecting technology flows.
  3. Fragmentation of globalization — Increasing regionalization and selective global integration.

Applying Abenomics’ Three Arrows to Asia

Heng referenced Abenomics (Japan’s 2012 economic policy framework) comprising three policy tools:

  1. Monetary Policy
    • Central banks manage money supply and interest rates.
    • Recent interest rate hikes have helped curb inflation.
    • Financial stability is crucial to avoid banking failures.
    • Both monetary and financial stability are foundational to global economic health.
  2. Fiscal Policy
    • Government spending and taxation influence the economy.
    • Taxation has limits due to global mobility of businesses and individuals.
    • Responsible fiscal policy is vital for economic stability.
    • Singapore used fiscal reserves (S$40 billion) during COVID-19 to support businesses and jobs, aiding recovery.
  3. Structural Policy (Most challenging)
    Heng highlighted four major structural forces Asia must confront:
    • Globalization: Countries need to identify competitive advantages as value chains evolve.
    • Science, Technology, and Innovation: Digitalization affects all sectors; fintech promotion is key in Singapore.
    • Climate Change & Green Transition: Particularly important for vulnerable island states facing rising sea levels.
    • Demographic Changes: Aging populations in developed Asia vs. youthful populations in South Asia and Africa require different policy responses.

The Asian Opportunity

  • Asia, especially ASEAN, is expected to continue growing strongly and offers vast economic opportunities.
  • Historical analogy: Japan once led industrialization, with smaller economies benefiting (“flying geese” model).
  • Heng envisions a new regional formation including ASEAN, India, Japan, China, the US, and Europe collaborating by leveraging their respective strengths.
  • Collective efforts could help the region travel further together economically.

Balancing Opportunity with Risk

  • Opportunities come with risks; managing both is essential.
  • Taking risk management seriously, while adopting a forward-looking perspective, will enhance capital allocation decisions.
  • This approach may allow stakeholders to better navigate uncertainties and seize Asian growth prospects.