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Seven trends shaping Southeast Asia

Sensemaking / Seven trends shaping Southeast Asia

Ivana Gazibara, Forum for the Future's Head of Southeast Asia, outlines seven trends that could make or break a sustainable future for the region.

By Ivana Gazibara / 04 Nov 2013

No one could deny the pace of change in Southeast Asia: it’s one of the fastest growing economic regions in the world. But rapid growth and the rising aspirations of a growing middle class is increasing pressure on natural resources. Southeast Asia has lost 13% of its forests since 1992 – an area equivalent to the size of Vietnam, the United Nations Environmental Programme reports. The impacts of global deforestation on the climate will be felt close to home: the region is one of the world’s most vulnerable to climate change impacts, such as droughts, floods, typhoons, sea level rise and heat waves, notes Dr Raman Letchumanan, Head of Environment at the Association of Southeast Asian Nations.

So what’s the likelihood of a sustainable future for the region, and what will drive it? This is one of the questions that a new Futures Centre in Singapore, run by Forum for the Future, seeks to answer. The global sustainability non-profit is working actively in the region with business, civil society and government. This emerging conversation has prompted me to try to summarise some of the key things that we are hearing and observing in the region. This is not left-field stuff you’ve never heard of. Rather, these are the big picture trends that are going to be influencing policy, business practice and societal developments over the coming years. For Forum, they are particularly interesting not just as drivers of change, but also as systemic issues which interact with each other in complex ways.

As Stephanie Draper, Forum’s Deputy Chief Executive, explains, “Our work at Forum is often focused on creating change at a systemic level rather than working on isolated issues. We analyse trends and explore various scenarios to help our corporate and public sector partners plan better for change and work proactively towards a sustainable future.” The trends below need to be understood and addressed – not just as separate issues, but in tandem – if Southeast Asia is to fulfil the promise of the ‘Asian Century’ of growth and prosperity, and prove resilient in the long term.

1. Beyond the haze

The haze in Singapore has been the subject of much media attention and debate, with widespread public anger against the failure to enforce forest protection laws in the region. News coverage has contributed to rising environmental awareness: page views of the National Environment Agency website in Singapore went up by 610% during the haze. Perhaps the most interesting thing about this situation in the long-term will be the potential shift in public attitudes that it could signal, with more people looking to business and government for real leadership on natural resource management.

“The Singapore haze has highlighted to people that this is a really big issue, and not just something affecting orangutans in the bush”, says Scott Poynton, Executive Director of The Forest Trust. “In Sumatra and Kalimantan it’s affecting day-to-day health, catalysing people to take a serious look at what’s happening out there with natural resources and say, ‘Hold on a minute, this is not sustainable’.”

This is certainly not the first time Singapore has experienced the dreaded haze. In fact, it is becoming a regular fixture above the city, which is exactly what is provoking the strong public response. The proliferation of digital air pollution monitoring platforms is another factor, allowing members of the public to identify correlations between a company’s operations and their own quality of life. As Anna Lyons, Programme Manager of Fauna & Flora International (FFI)’s Agricultural Landscapes team, says, “The use of real-time monitoring is a very powerful tool. At the height of the haze this year, a number of RSPO members were implicated in the Sumatran forest fires. The RSPO was able to check the allegations and then seek appropriate remedial action by the members by comparing real-time forest fire hotspots with digital maps of concession areas. One of FFI’s company partners in the forestry sector was also implicated; the monitoring allowed the public to respond critically, but also for the company to take appropriate timely action.”

One sector bearing the brunt of criticism from consumers is ‘dirty’ palm oil. As Lim Biow Chan, President of the Consumers Association of Singapore puts it: “If we can signal strongly to the companies that buy palm oil [to manufacture their] products that we are extremely unhappy, and [that] they are risking the wrath of consumers, then they can signal [this] to the palm oil companies.”

This is particularly relevant in the context of Singapore. There, much of the root cause of the haze can be traced right back ‘home’. Many plantations in Sumatra are actually owned by Singaporean companies – something which was pointed out by Indonesia, when Singapore sought to lay the blame at its door. The Minister for Environment and Water Resources, Vivian Balakrishnan, has called (via his Facebook page) for the companies responsible for the fires to be named and shamed, in the hope of provoking a consumer boycott. The haze could also begin to put off investors, which will no doubt ratchet up the pressure on business to act.

2. The eco-car catalyst

Like many rapidly growing regions, Southeast Asia has to contend with the issue of growing traffic congestion levels, air pollution and other downsides of the current transport paradigm. Singapore realised that the traffic congestion was reducing the country’s potential prosperity by slowing productivity and inhibiting meetings, and so introduced the Vehicle Quota System, so that even those with the means (car ownership is now prohibitively expensive) must apply for the right. This move could prove a catalyst for leadership in new forms of transport in the region, such as driverless electric shuttle buses. Michael Khor, Director of Research at Nanyang Technological University in Singapore, sees e-mobility as “central to the development of megacities today”. While many Singaporeans still see the car as a status symbol and strive to make the purchase, the city’s roads remain pleasantly unclogged thanks to stringent policies around car ownership. The Development Minister of Brunei, which has the world’s ninth largest number of cars per capita, has floated the idea of adopting a similar policy.

Elsewhere in the region, countries are competing to become automotive production hubs – but with a twist. Thailand manufactured more than 2 million vehicles in 2012, a record figure for its automotive industry. Part of this increase has been prompted by the adoption of the eco-car scheme in 2009, which aims to promote the manufacture of low-carbon vehicles through tax incentives and other measures. The scheme also sets production parameters aimed at reducing energy consumption, both to reduce emissions and to lessen the country’s dependence on imported oil. Phase II of the scheme started this year, with all new phase II eco-cars set to meet the Euro 5 environmental standard of releasing less than 100g of CO2 per 100km.

Indonesia is now following in Thailand’s footsteps by offering incentives for the production of small, fuel-efficient cars. According to IHS Automotive, these cars could account for 35% of the 1.8 million passenger vehicles expected to be sold in the country by 2020. And Laos has declared itself the ‘battery of Asia’ because of its high levels of clean electricity production from hydropower; it is now aiming to convert 40% of its local four-wheelers, tricycles and motorcycles to electric vehicles (EVs). Last but not least, Malaysia’s National Automotive Policy is promoting hybrids and EVs, and the development of related infrastructure. Could a combination of policy to reduce congestion and investment in low-emissions vehicles make Southeast Asia a global leader in the next generation of urban transport?

3. Smarter cities

Many of the cities in the region are now well aware of the precariousness of their economic position – due to their climate change vulnerability and the threat of rising resource security – hence the push to maximise resource efficiency and become ‘smart cities’.

According to a recently published report by the Building Services Research and Information Association (BSRIA), the Asian smart building market alone will grow from the current size of US $427 billion to US $1,036 billion in 2020, creating vast opportunities for advanced building technologies and services.

Mark Wong, Head of Sustainability Reporting and Carbon, Sime Darby, says that the company has started to look into green buildings – “to see if this could be a big driver for consumer demand in future. We have developed a test bed: what does sustainable design look like given the tropical climate we live in? At what point will technologies become commercially feasible?”

In fact, Singapore is already billing itself as an ‘iconic smart city’, despite some criticism about how much progress has really been made towards this goal. It has teamed up with energy company EDF on an urban modelling project that will allow it to develop, trial and commercialise innovative solutions in the city – particularly in terms of growing the clean technology and urban sustainability sectors. Its four year old University of Technology and Design aims to attract a new global elite to study architecture, sustainable design and systems engineering. Just across the border, Malaysia is engaging in a bit of friendly competition by developing Iskandar, a sort of ‘eco megacity’.

4. Climate vulnerability

The region of Southeast Asia “is likely to suffer more from climate change than the rest of the world if no action is taken”, warned the Asian Development Bank back in 2009. Factors include the sheer concentration of people and economic activities in coastal areas, its resource-based economies, and the scale of the poverty challenge in the region – despite fantastic growth rates over the past decade.

Densely populated cities run particularly risks. In its Climate Change Vulnerability Index 2013, Maplecroft identified Manila, Bangkok, Yangon, Jakarta and Ho Chi Minh City at the top of its list. This takes into account concerns such as exposure to climate related natural hazards, resource constraints, agricultural dependency, government effectiveness and education levels.

Key industries are also under threat. Global warming is likely to cause the rice yield potential to decline by up to 50% on average by 2100 compared with 1990, and jeopardise critical export industries in the region. In Malaysia alone, for every one degree increase in temperature, palm oil revenue decreases by an average of 42.6 Malaysian ringgits [US $13.2] per hectare in key producing regions. And in countries like Myanmar (Burma), which are economically underdeveloped, climate change could hinder government efforts to alleviate poverty.

A massive part of the challenge here is that most of the region is unprepared to cope with the impacts heading its way, which calls into question its optimistic projections for growth and development. Will it be able to both adapt and mitigate impacts effectively going forward?

5. The consumption wildcard

Hyperconsumption has hit the high street and myriad shopping centres of Southeast Asia, prompting rapid growth in sales – particularly at the luxury end. Luxury is not necessarily contrary to sustainability; in many cases, its selling point is the compelling story behind a product or an experience, recognising the value of the materials, design, production skills and labour. Many luxury brands also promote the idea of preserving cultural heritage for future generations – from heirloom watches to historic hotels. But the scale and rate of growth in consumption in the region is a worrying trend, in the context of strained resources.

There is some indication that consumers are beginning to look for more sustainable options, however. Some of this is a response to health and safety concerns. High consumer demand for ‘chemically clean’ cosmetics, for example, is leading many Asian companies to jump on the natural and organic bandwagon.

According to German cosmetics giant Beiersdorf, natural ingredients are very well perceived in countries like Vietnam. There has also been a developing trend for ‘authentic’ products in places like Thailand, drawing on ancient Thai cosmetics that consisted mainly of extracts from various tropical flowers. In Thailand more broadly, the number of green consumers has been increasing over the past two decades, with a focus on things like energy saving, environmental goods purchasing, cycling, green labelling, and organic agriculture. And Filipinos report concerns about issues such as carbon emissions, environmentally friendly packaging, waste disposal and energy consumption.

Demand for organic rice is also on the rise, especially in the Philippines, Malaysia and Singapore. “People are aware of the environment”, says Yang Saing Koma, the President of the Cambodian Centre for Study and Development in Agriculture. And, at the end of 2011, the Hongkong and Shanghai Hotels Group announced a global ban across the company on serving shark fin – another sign of changing attitudes. “This was well received by guests. People wrote to say they are fully supportive of this act”, says Natalie Chan, Senior Manager of Corporate Responsibility & Sustainability for the Group.

Policy is helping shift behaviour too. In Thailand, the Government has had a green procurement policy since 2008. More recently, the local government in a suburb of Manila banned plastic bags in shops, forcing people to switch to brown paper bags. According to a member of Forum for the Future’s network in Manila, within a few weeks everyone had become used to it.

6. Resource challenges

As countries in the Southeast region seek to achieve and maintain rapid growth, securing resources to make everything run smoothly today and tomorrow becomes the priority, with less of a focus on longterm sustainability. Take energy: countries are still overwhelmingly prioritising capacity that will help cope with a breakneck increase in demand, and making sure there are no blackouts. Feed-in tariffs for renewables are still at too small a scale in most of the region to play a meaningful role in the energy picture. In many ways, the ‘noise’ around renewable energy is there, as a lot of people are talking about it. But from a commercial perspective, high carbon energy sources predominate.

There is still some way to go in terms of the culture and behaviour around energy use as well. Commercial buildings are, on the whole, wasteful, and only beginning to develop recognised frameworks for energy efficient design in the built environment. A general lack of awareness about the potential and value of energy efficiency predominates. “People don’t like ceiling fans. It is associated with being poor whereas aircon is associated with being rich”, explains Hein Oomen, a futurist and clean energy professional based in the Philippines.

Water is also a significant concern. In order to reduce its dependence on Malaysia, Singapore has invested significantly in rainwater harvesting. Its recycled water tariff is also lower than its freshwater tariff in order to encourage water recycling, and recycled water now makes up some 15% of all water use in the city. Other countries are finding their core industries challenged by water constraints. Agriculture sucks up a grand total of 70% of Thailand’s total water supply (it is the world’s largest rice exporter), making for significant risk exposure in a country already grappling with drought issues. There is huge potential for improving the efficiency of resource use across the region. For example, the smart water meter market in Asia Pacific should grow substantially over the next five years, driven by the nexus between growing demand and dwindling supply.

Food security is also a growing problem. Southeast Asia is known for its food exports, with countries like Indonesia and Thailand regularly featuring among the world’s top food exporting nations. However, in 2008, the region experienced a sharp turnaround in rice production, with countries like Indonesia, Thailand and Vietnam calling a halt to their rice exports, and the Philippines frantically seeking to secure supply from those still selling.

As with many other resources, Singapore is almost entirely reliant on imports for its food supply. It is therefore no wonder that it’s been exploring opportunities like vertical farming, and encouraging key players such as Syngenta and Bayer CropScience to develop ‘elite’ crop varieties for the region. As climate change hits harder and resources like water become scarcer, the region will have to think about the security of food supply much more actively.

7. Sharing the benefits

Despite the promise of the ‘Asian Century’, there are worrying signals that the benefits of economic growth have not been as widespread as one would hope. Increasing income inequality suggests that for the average person in the street, purchasing power has not risen as much as headline GDP growth would suggest. Millions of poor people in the region continue to exist in a parallel economy, one characterised by a population marginalised from the mainstream economic landscape and the familiar media headlines about record levels of growth. The gap between rich and poor is most pronounced in the Philippines, where the richest 20% outspend the poorest 20% by more than eight times, but inequality is also high in other countries in the region.

The opportunities to correct the situation are tremendous. As Johannes Loh, Research Associate at the Asian Trends Monitoring Bulletin, points out, in Indonesia, 75% of the population is still ‘unbanked’ and could benefit hugely from an expansion in financial service provision, particularly in microfinance and mobile finance. Low quality of schooling, as well as vocational training for young people in rapidly overpopulating urban centres, exacerbates the problem. And those who fall can fall pretty far, because many of the countries in the region lack comprehensive social protection nets. As The World Economic Forum on East Asia pointed out, issues such as inequality – unless addressed – will hold back the region’s potential in the future.

Seven trends, one response

Whether or not we see that Asian Century of growth that the ASEAN has been banking on – and, crucially, whether this growth is sustainable – will depend on how all seven trends play out. None of these trends, and the challenges I have highlighted, can be isolated from the rest. The ability of this region to address resource challenges and offer opportunities to its growing population such that everyone is able thrive, will depend on a combination of smart approaches to urban development, government leadership, rising public awareness of the challenges, and the active participation of both citizens and business. The Futures Centre in Singapore is Forum’s first contribution to this effort, with the aim of building a shared understanding of the challenges, and bringing people together to search for solutions.

Ivana Gazibara is Head of Southeast Asia at Forum for the Future.

Photo credit: iStockphoto/Thinkstock, iStockphoto/Thinkstock, CEDAC

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