South-east Asian green bond demand will soon grow

Subject Prospects for the South-east Asian green bond market. Significance South-east Asia has been slow to capitalise on the global boom in 'green' financing, but is likely to become a prominent issuance source within a few years. Drivers will include demand for infrastructure funds and commitments to climate change policies. Impacts Regulators will need to keep pace with the industry's evolution, or risk undermining investor confidence. Immature bond markets will hamper issuance growth in emerging ASEAN economies. As they embrace more sustainable lending policies, banks will be important in developing green bonds. Green bonds face competition from other, cheaper financial instruments.

Significance The Mekong flows through China and the five mainland South-east Asian states -- Myanmar, Thailand, Cambodia, Laos and Vietnam. Earlier this month, China belatedly informed the downstream Mekong countries of reduced water flow because of power-line maintenance at one of its dams on the river. Impacts US partners India and Japan will look to strengthen economic ties with the South-east Asian Mekong states. Climate change and low rainfall will exacerbate droughts in mainland South-east Asia. The China-led Lancang-Mekong Cooperation initiative will dominate management of the Mekong, overshadowing the Mekong River Commission.


Significance It is the only country in South-east Asia with a large-scale nuclear plant, although this was never loaded with fuel. Other countries in the region have tentative plans to develop nuclear power programmes. Impacts The current absence of nuclear power programmes will help avert the diversion of capital from renewable energy development in the region. South-east Asian countries with small, non-power reactors, built for research, will try to maintain these facilities. Across the region, the need for electricity grid investment will increase as more decentralised generation sources are deployed.


Subject The outlook for Indian naval engagement with South-east Asian countries and ASEAN. Significance At the ASEAN summit in mid-November, India's Prime Minister Narendra Modi underlined India's 'Look East' policy, pledging to cultivate diplomatic, economic and security relationships with South-east Asia. One manifestation of Delhi's willingness to undertake a more strategic regional role is the Indian navy's growing portfolio of partnerships with South-east Asian navies. Amid concerns over China's maritime assertiveness, India's navy has been welcomed in the region as a security partner. Impacts India will avoid South-east Asian undertakings that may provoke China. Delhi will need to define 'Look East' policies concretely to convince South-east Asia fully of Indian strategic utility. Modi will expand bilateral naval exercises, humanitarian aid and counter-piracy/smuggling efforts in South-east Asia.


Subject Crowdfunding in South-east Asia. Significance Regulatory reforms have made possible a range of alternative financing initiatives that raised almost 84 million dollars for small businesses in the past three years from South-east Asian platforms alone. Crowdfunding is the fastest-growing segment, though amounts are still small. Impacts Further industry-specific regulatory reforms will be required to support South-east Asian crowdfunding. Facing competition, more banks will be forced to offer online crowdfunding-related products. However, low product returns could be a disincentive to large investor interest in crowdfunding.


Subject South-east Asian tax bases. Significance Indonesia's tax amnesty programme enters its third phase in 2017. The amnesty will generate short-term revenue, but it is not a solution to a wider problem of limited tax bases found across the ASEAN core economies of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Impacts Bilateral tax treaties may change following OECD reforms, even if South-east Asian states are not party to the initiatives. Compliance costs for country-by-country reporting for multinational companies under the OECD initiatives could be substantial. More efficient tax collection and wider tax bases could benefit ASEAN states' development such as infrastructure.


Subject Online radicalisation. Significance On May 25, the Indonesian parliament unanimously passed stringent anti-terrorism laws allowing the military to be directly involved in counterterrorism operations. The vote followed a string of suicide bombings attributed to local jihadist networks that have pledged allegiance to Islamic State (IS). Jakarta joins other South-east Asian governments -- notably those of Malaysia, the Philippines and Singapore -- in attempting to counter a new push in the region by IS, as it loses territory in Iraq and Syria. Impacts Rising anti-Shia sentiment in the region, a by-product of increased Saudi influence, will likely give IS new issues to exploit. The Rohingya crisis gives IS a regional boost, especially in terms of operations in Myanmar and more likely in Yangon than Rakhine State. Non-ideological, low-wage overseas workers, particularly from the Philippines and Indonesia, are most susceptible to IS.


Significance Inbound and outbound Asian tourism has exploded over the last 20 years, especially in East and South East Asia. However, the sector faces challenges. Impacts Supporting tourism, Asia hosts three Olympics in a row -- South Korea 2018 (winter games), Tokyo 2020 (summer) and Beijing 2022 (winter). Tourism is a key source of exports and dollars; if Cambodia is hit by sanctions after its disputed election, tourism could cushion GDP. In ten years the UN sees India's population overtaking China's, making Indian travellers key to East and South-east Asian tourism.


Subject South-east Asian defence budgets. Significance The pressure of responding to the COVID-19 pandemic is prompting many South-east Asian governments to cut defence spending and postpone or cancel new arms acquisitions. Meanwhile, China and the United States continue to vie for influence in the region. Impacts Piracy attacks will increase across the region as socio-economic distress rises and budgets for navies and coast guards fall. ASEAN unity will fracture as tensions among member states increase. Economic problems will cause political instability across South-east Asia, possibly even leading to military coups in certain countries.


Subject Private philanthropy. Significance In South-east Asia, as elsewhere, there is growing pressure on civil society, from non-profit organisations to corporations, to help address the economic distress and social dislocation caused by the COVID-19 pandemic. Impacts Despite government and philanthropic efforts, South-east Asia is expected to experience a severe recession. A rise in philanthropy by religious organisations will fuel religious polarisation and the risk of violence post-crisis. Indonesia’s non-profit sector will likely experience a particularly sharp funding dip as foreign donations fall.


Significance The ADMM-Plus is primarily a confidence-building forum, but Esper will need to navigate various issues that will affect US security relations in South-east Asia for the remainder of President Donald Trump’s current term. Impacts The forthcoming US election could further diminish Trump’s attention towards multilateral meetings. US defence ties with Singapore and Vietnam will grow more easily than with Thailand and the Philippines. US counterterrorism cooperation with South-east Asian states will likely grow.


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