Singapore and the UK this week kicked off negotiations to open up a digital economy, building on the free trade agreement signed late last year. If an agreement is signed, all sizes of businesses from both countries look set to benefit from increased clarity and reduced costs associated with seamless digital transactions.
This is a significant and ambitious chapter in developing “the new economy”, the first of its kind between an Asian and European country — and one which will undoubtedly mark progress for inter-country trade. Yet it also has the potential to have much widerreaching implications: the two FinTech hubs could form a framework that 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 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 ($5.4 trillion). Along with that, the new economy will be a major theme.
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Already, we are 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 levels. A Kearny EDBI study found that US$1 trillion in additional GDP could flow into Southeast Asia if the region can fully embrace AI.
However, that potential is being eroded as Asean 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, while 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, and upholding the principles of net neutrality.
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The Singapore-UK digital agreement will set a precedent for other Asean economies to follow. This will not only benefit UK companies seeking out the bright opportunities in Southeast Asia, but also businesses within the bloc, by enabling cross-border digital trade.
Regina Lee is HSBC Singapore’s country head of commercial banking
Photo of Singapore's skyline: Bloomberg
