Asean

Russia’s interests in ASEAN countries

Russia is paying more and more attention to South-East Asia, intensifying cooperation with ASEAN countries in diverse fields.

Russia and ASEAN countries have conducted their first naval exercise from the 2nd to the 4th of December 2021, in Indonesian waters, along the Strait of Malacca, one of the most important maritime routes in the world. For the exercise, Indonesia, Thailand, Singapore, Vietnam, Malaysia, Myanmar and Brunei deployed their warships and military aircrafts, while the Philippines participated as a virtual observer. This is the first joint exercise between ASEAN countries and Russia. On the other hand, individual states such as Indonesia in 2020 and Laos in 2019 have already completed military exercises with Moscow. Indeed, Russia and some ASEAN countries seem to have a strong link in the field of defence and security. Based on data for the period 1999 to 2019, Moscow is the first arms exporter to Southeast Asian countries. According to a report by the Stockholm International Peace Research Institute, 26% of all arms imported in ASEAN countries are supplied by Russia, while 20% by the United States.

In general, it should be highlighted that it is convenient for ASEAN countries to have a broad portfolio of suppliers in order to both strengthen their policy of non-alignment and avoid having a bad relationship with other supplier states. Connie Rahakundini Bakrie, an Indonesian military analyst from the Institute of Defence and Security Studies, described the joint exercise between Moscow and the countries of the Association of Southeast Asian Nations as a further sign of non-alignment of the ASEAN bloc. Indeed, over the years these states have sought to build a policy that would let them avoid taking sides between China, to which they are linked by close economic ties, and the United States, that are definitely a guarantee against any possible dispute given by the growing power of Beijing. With the exception of Laos, Cambodia and Myanmar, which are much more linked to China, the other ASEAN countries are building strong ties with Western countries.

The foreign policy of the ASEAN countries seems to be convenient also to Russia, which is paying more and more attention to South-East Asia. This bond is also proved by the upgrade of the relationship between Moscow and the ASEAN countries to a "strategic partnership" in 2018. In addition, the fourth ASEAN-Russia Summit was held in video conference on October 28th to celebrate the 30th anniversary of the relations between Moscow and ASEAN countries. This summit has also produced a Comprehensive Plan of Action to implement their strategic partnership. As stated by Richard Heydarian, Professor of History and Political Science at the Polytechnic University of the Philippines, Russia most likely sees South-East Asia as a strategic territory to promote a multipolar order and not a uni or bi-polar global order. Moscow certainly wants to undermine the global status enjoyed by the United States, but this does not imply that Russia wants to permit China to expand its control to regions that declare themselves as non-aligned, such as South-East Asia.

Vietnam is definitely the ASEAN state to which the Russian Federation is most closely linked. The friendship between the two countries has been also demonstrated by the visit of Vietnam President Nguyễn Xuân Phúc to Russia from November 29th to the 2nd of December 2021. The leaders of the two countries during this visit have produced a joint statement on their global strategic partnership and have also expressed their desire to both increase their cooperation on security and defence and to strengthen their trade and investment ties. The link between Hanoi and Moscow derives mainly from the similar political views of the two countries during the period of the Cold War. Vietnam is of strategic importance to Russia as it serves as a bridge between Moscow and the ASEAN bloc. On the other hand, Vietnam probably hopes that Russia will stem China’s claims in the South China Sea. However, it is unlikely that Moscow would sacrifice its relations with China for Vietnam.

Richard Heydarian also makes a very interesting point about the connection between Russia and ASEAN countries. Moscow, in fact, has another source of attraction for these countries: ideology. The politics that Putin represents is actually very attractive to some South-East Asian leaders who do not fully recognize themselves in the democratic systems of the United States and the European Union. Putin’s authoritarian, nationalist and populist policy seems to exert a particular soft power over some members of ASEAN. Finally, Russia has also applied the so-called vaccine diplomacy in many countries belonging to ASEAN. ASEAN countries, in fact, have greatly appreciated the intervention of Russia in response to the COVID-19 pandemic, also through the distribution of the vaccine "Sputnik V" in the area and the training of health experts.  

RCEP, the agreement that promises Asian integration is underway

On January 1, 2022, the Regional Comprehensive Economic Partnership (RCEP) will officially enter into force, an agreement that comes with great expectations about the Asian integration process. An overview

The Regional Comprehensive Economic Partnership (RCEP) will enter into force by January 1st, 2022. It is the largest trade agreement in history outside the World Trade Organization (WTO), involving 16 countries of the Asian region. At the time of the official launch, however, 10 nations will be involved in the new measures, while 5 have yet to ratify the agreement within their own legislative mechanisms. From January 6 ASEAN nations will be included in the RCEP: Singapore, Brunei, Thailand, Laos, Cambodia, and Vietnam. Together with them enter China, Japan, New Zealand, and Australia. Finally, for South Korea, it will be necessary to wait for the plenary session of the National Assembly to formalize the entry into the agreement.

Many words have already been spent on the potential of the RCEP, as much as the expectations are high. A treaty of this magnitude will only accelerate the economic integration of the region, bringing together very different economic, political, and social realities. The RCEP will cover a market of 2.3 billion people, with a value of production that exceeds 26 trillion dollars: this is about 30% of the world population and over a quarter of the exports existing on global markets.

The main points

The RCEP aims to break down tariff barriers by up to 90% between member countries over 20 years. For China and ASEAN countries it will mean a strengthening of the Free Trade Agreement (FTA) already in force, reducing 70% tariffs on goods imported from Southeast Asia, while Brunei, Singapore, Thailand and Vietnam will eliminate around 75% of tariffs on products imported from China. All correlated with an effort to simplify and accelerate administrative practices related to commercial exchanges between RCEP countries. This step will focus on the growth of digital skills in the countries involved, but also on the harmonization of data, documents and communications.

The second most important aspect of the regional agreement concerns the abatement of the so-called non-tariff measures (NTM), or all those restrictions on imports linked - for example - to the quality and safety standards of a particular industry. This is an important point, which together with the transparency constraint facilitates international transactions along the supply chain. One example is Vietnam, which imports a significant portion of high-tech components from China and South Korea: these types of deals are continually subject to compliance procedures that drive up the prices of both materials and final output, while the absence of uniform standards hinders the introduction of the product on international markets. Costs that are anything but negligible, as they require a very in-depth and updated analysis of the regulatory requirements of the business partner, and the adoption of new certified tools and skills. With the arrival of the RCEP, this process is adopted in a single solution at the national level, with the competent authorities who have worked to apply the measures necessary to standardize national regulations with those provided for in the agreement.

Digital integration is one of the most innovative steps of the agreement in the FTA panorama. The acceding countries promise to create more opportunities for small and medium-sized enterprises in the e-commerce sector, as well as providing them with more digital skills to facilitate trade on the international market. According to a 2021 survey by the World Economic Forum, 87% of ASEAN SME executives count on digitization as an important tool to overcome the economic crisis. In the plans of the RCEP, this evolution will have to pass through new channels, where monetary transactions and the exchange of documents and administrative deeds will have to take place. Hence the opportunity to exchange technologies and useful expertise more easily: companies in Singapore, a country that excels in the global digital skills index (DSGI) (with a score of 7.8), can contribute to the technological development of partners far from the soft and hard technological upgrade (like Cambodia, which has only 2.8 of DSGI).

What to expect 

The RCEP was launched in a difficult historical moment, where economic development must deal with the waves of Covid infections. Any large-scale economic integration process takes several years before showing the first concrete results. The agreement offers the most advanced countries the opportunity to reduce costs along the supply chain, while it allows developing countries to more easily import some sophisticated technologies and know-how. Both Asian investors and foreign companies entering the RCEP market could see the range of growth opportunities widened, both in terms of purchases and sales of goods and services.

The promises of the agreement are commercial integration, tariff rationalization, economic liberalization, revitalization of SMEs, market accessibility and mutual benefit between equals. This does not completely eliminate the risk that some countries may take advantage of the agreement to enter the gray areas of national regulations, especially where protection for SMEs is lacking. The time for disquisitions has come to an end for (almost) all countries: it will be the actions of the next few years that will demonstrate the potential of the RCEP both for private individuals and for international cooperation.

What will be the future of the ASEAN economy in 2022?

In the years preceding the Covid-19 pandemic, ASEAN countries competed to become the fourth world economy power within 2030, but several lockdowns, waves and millions of infections have put on stand-by this major goal..

For millennia, Asia has amazed and surprised the West with new discoveries and great steps forward in technologies and economic fields. In this precise historical moment, expectations that the whole world, but first and foremost the various ASEAN countries, place on the Asian rebirth are delaying being actualized but this doesn’t mean that they will not materialize. According to data processed by Oxford Economic, the prolong of the pandemic is only delaying the restart of ASEAN countries. In the first trimester of 2021, Indonesia, Thailand and the Philippines, the three majors Southeast Asian economies, have found themselves obliged to actualize several measures of containment to cope with new waves of infections, respectively registering a contraction of 0.7%, 2.6% and 4.2% of GDP compared to the same period of 2020. Therefore, if analysts have revised downward the block’s growth previsions for the current year, from 5.5% to 4.9%, positive signals that arrive from global trade and the gradual return of investments suggest an even stronger recovery in 2020 (+6.5%).

For the most part of ASEAN countries, the second semester of 2020 was the first period in which the influence of the pandemic has made itself felt. For this reason, it will be easier for regional economies to register an annual growth in the ongoing trimester. However, the future is still wrapped in uncertainty due to the recent worsening of the virus throughout the region. Restrictions have slowed private consumption expenditure, which fell 0.5% year-over-year in the first quarter, outpacing the 0.9% growth registered in the fourth quarter of 2020.

The progress of vaccination programs in every country will have an impact on people’s expenditure. On May 5th of this year, the Bank of Thailand made economic projections based on certain scenarios: whether 100 million doses of vaccination will be distributed by the end of 2021 to achieve herd immunity by the first quarter of 2022, the economy will grow 2.0% in 2021 and 4.7% in 2022. A delay in achieving herd immunity until the third quarter of 2022 would reduce economic growth in the region to 1.5% in 2021 and 2.8% in 2022. If it takes until the last quarter of 2022, the economy will only grow 1.0% and 1.1%, according to the bank’s projections.

During the first trimester, Thailand was hit by the second and the third wave of the virus. The second one, that developed in half December and lasted until the beginning of February, brought to shorter opening times, and the closure of activities such as coffee shops, pubs with karaoke and massage parlors in the metropolitan area of Bangkok. After protests of the catering sector, the government began to allow the access to food services also in the most hit provinces. Nevertheless, entrances of restaurants remained low, as seating capacity was limited to 25%. Restrictions slowed private consumption expenditure, which fell 0.5% year-over-year in the first quarter, outpacing the 0.9% growth registered in the fourth quarter of 2020. The lack of tourists has not helped the economy. Although the Thai government is keen to open the country given its dependence on tourism, waves of viruses have disrupted visitor flows. Exports of services, which include spending by non-residents such as tourists, declined 63.5% in the three months ended March. Merchandise exports grew for the first time in four quarters, posting a 3.2% increase.

Malaysia was on track to satisfy official previsions of growth of 6% to 7.5% until the coronavirus pandemic struck in March 2020. Nevertheless, the country has continued to work to achieve the predicted growth in Gross Domestic Product (GDP) between 6.0% and 7.5% in 2021. The Malaysian government’s future strategy includes a greater focus on the economic sectors most affected by the coronavirus pandemic such as tourism and retail. Kuala Lumpur will wait for the recovery to take hold before considering any new taxes. Since the objective is to relaunch the economy, this will only be possible through a balance between short-term fiscal injection and the fiscal consolidation of medium and long-term.

In the Philippines, the government spoke of the country’s potential to return to a rapid growth rate, aided by government spending and an eventual end to blockades. GDP fell 4.2% in the March quarter compared to a year earlier. The Philippine economy shrank more than expected in the first quarter, although sequential momentum showed that a recovery was underway and suggested that the central bank will keep rates at historic lows. The economy also improved on a sequential basis, with production up 0.3% from the previous three months on seasonally adjustment terms to mark its third consecutive quarter-over-quarter growth. Manila is battling one of Asia's worst coronavirus outbreaks with over one million recorded cases and over 18.000 deaths. A new wave of infections since March has prompted the re-imposition of stricter mobility limits, but the new daily cases are down from the peak.

An example of a successful Covid-19 containment and economic recovery strategy is certainly that of Vietnam. With one of the lowest case rates and deaths in the world, Vietnam’s journey against COVID-19 has stood out in Southeast Asia and around the world. The government has been widely credited with the country’s success in keeping transmission rates of COVID-19 under control due to its rapid decision-making process, effective public health messages and aggressive contact tracing, although not without criticism. But, as in other countries, movement restrictions and social distancing measures to reduce the spread of COVID-19 have affected people’s livelihoods. Some families relied on aid for their basic needs. Others, such as informal workers who were unable to submit documentation to access government aid, relied on charity for assistance. Several Vietnamese social organizations working with disadvantaged rural communities, have provided food parcels and loans to families in Central Vietnam, where livelihoods are secured through agricultural labor. The government allocated IPA 63 trillion, about USD 2.6 billion, for social assistance, but the aid was largely inaccessible to those who lacked legal documentation or worked in the informal sector. There are many communities that have not yet received aid from the government program. The executive narrative does not discriminate, but some of its regulations and conditions inevitably pose obstacles for some members of the population. Therefore, Hanoi will have to work to ensure better social inclusion if it wants to maintain the title of “successful economy” among ASEAN countries.

World Bank estimates

Asia-Pacific’s economic recovery is at risk of a setback due to the spread of the Delta variant of the coronavirus and the protracted stress on businesses and households, which will likely result in a slowdown in economic growth and further increase in inequality. This is the analysis made by the World Bank in its latest update on the regional economy. The Bank noted a slowdown in economic activity beginning in the second quarter of 2021, and consequently revised its growth previsions downward for most economies in the region. While China’s GDP growth prevision is being raised over the April revisions from 8.1 to 8.5%, the rest of the region will grow on average this year by 2.5%, almost two percentage points less than the organization’s previous projection.

Among economies with the most marked reduction in growth previsions are those of Southeast Asia mentioned above: for Thailand, the World Bank now foresees growth of just one percent in 2021, compared to the 3.4% projected in April. Vietnam, where the pandemic has hit the main economic and productive centers hard, sees its GDP growth estimate for the current year fall from 6.6% to 4.8%, and Malaysia is also expecting a similar reduction: from 6 to 3.3%. The adjustment made by the World Bank to previsions for Indonesia is more limited, which could grow by 3.7% this year (in April the estimate was 4.4%).

In conclusion, it can be said that the global economic recovery continues, but with a widening gap between advanced economies and many of the emerging and developing markets. Growth prospects for advanced economies this year improved by half a percentage point, but this is balanced by a downward revision for emerging markets and developing economies, led by a significant downgrade of growth for emerging Asian countries.

Eni and the Energy Transition in the Asia Pacific

Abating carbon footprint in an energy hungry region 

Article by Davide Tramballi

Institutional Support for Business Development MENA & APAC, Public Affairs, Eni

In the wake of the COP-26, net zero targets are spreading all over Asia. As China, India and Indonesia have released their own pledges, more than 4 billion people, roughly 60% of the world’s population, now live in countries that declared ambitious zero-net goals. This is having crucial implications on energy markets and their future development. Firstly, ‘net zero’ is becoming a priority for developing nations; this is not an exclusive feature of OECD countries anymore. Secondly, larger Asian nations are increasing pressure on relatively ‘smaller’ nations in the region to do significantly more and better. Thirdly, net zero targets are becoming an economic necessity for APAC countries, as they carry the biggest energy deficit of all World’s regions, compounded by the need for immediate pollution relief shared by virtually all major Asian cities. Finally, Asian countries (especially in the continent’s South-East) are increasingly using next zero pledges as a formidable tool to attract investments, which are and will be more and more pivotal in allowing Asian nations to increase their renewables’ generation capacity. 

Overall, especially in Asia-Pacific, net zero targets are balanced by the serious energy needs of its fast-growing economies and populations, that have turned the region into the World’s largest emitter of CO2 (with roughly half of all global climate changing gases) and are expected to drive 60% of the total global energy demand growth between now and 2040. The top three contributing factors to CO2 emissions are electricity and heat production, manufacturing, and transportation, largely as a result of increasing urbanization in Asia. Especially China and South-east Asia display the World’s fastest growing energy demand, which since the early 2000s has been covered for more than 90% by fossil fuels. To allow Asian countries to achieve the required level of growth, fossil fuels are set to remain a mainstay of supply over the next decades. According to the 6th Asean Energy Outlook’s target scenario, released in Nov. 2020 and to be reviewed in light of 2021 developments (including the results of COP26), the coal-fired power generation capacity is set to increase from 103 gigawatts (GW) in 2020 to 207 GW in 20401.

Looking at these trends, the technologies and know-how Eni has developed on its innovation itinerary are clearly emerging as an effective answer to the Asia Pacific energy transition needs. Firstly, as regional countries start to gradually phase out coal in their energy mix, in line with one of the main COP26 priorities, LNG-to-power projects have mushroomed across the region, fostering gas demand from the power sector. Eni aims to increase local production of natural gas in this area and to market growing volumes of liquefied natural gas (LNG) replacing coal. This will be crucial to reduce APAC’s countries’ emissions while allowing them to also meet their burgeoning energy demand2. Parallelly, Eni intends to leverage on its expertise in renewable energy sources such as solar and wind, at the center of the company’s strategy with a planned increase of 60GW in its global installed capacity by 2050, to support APAC countries ambitious electrification’s targets. Electrification is also crucial to make mobility increasingly sustainable, but not sufficient or fast enough to decarbonize the transport sector. In this regard, Eni’s leadership in the production and marketing of advanced biofuels represent an immediate and complementary solution, also promoting circular economy projects based on the reuse of food and agricultural wastes through environmentally sustainable supply chains. Eni Biojet fuel, which contains 100% biogenic components and could be combined with conventional fuel up to a 50% mix, will especially play a great role in tapping the demand of sustainable aviation fuels (SAF) from the fast-growing regional aviation markets. Carbon dioxide Capture, Utilization and Storage (better known by the acronym CCUS) could be another key tool for the decarbonization of regional energy systems and a first enabler of the hydrogen economy by unlocking the production of low-carbon hydrogen at affordable costs in the near term.

Most relevant Countries of Eni presence in the Asia Pacific

Eni is present in thirteen Asian countries with activities covering the whole energy value chain. In line with the company’s strategy, operations are progressively combining traditional oil&gas projects with energy transition initiatives also in Asia – in view of the total decarbonization of Eni’s products and processes by 2050. This is shown by the efforts Eni is carrying out in some of the most important regional countries.  

Indonesia is one of APAC’s ‘giants’, and its recent net zero 2060 target has been a breakthrough in the region. However, this clashes with Indonesia’s major coal production and exports (especially to China), and with the planned addition of 33,000 MW to the country’s electricity production, whose probable cancellation opens up a significant window of opportunity for natural gas developments, coupled with CCUS decarbonization’s technologies. Eni is well positioned to effectively contribute to these targets, as it already owns a total of 12 exploratory and producing natural gas blocks. The company produces gas from the Jangkrik field since 2017 and from the Merakes field since April 2021, supplying the Indonesian domestic market and Eni’s own LNG portfolio: the majority of the gas is liquefied at the Botang plant and sold to Pertamina with long-term contracts, decisively supporting Indonesia’s development and ambitious coal phase out objectives. In recent years, Eni and Pertamina have also explored new opportunities for cooperation in biorefinery, circular economy, low-carbon products, waste management, biomasses and R&D.

Vietnam is another key country in Eni’s Asian strategy. The company made a significant gas and condensate discovery in the country’s offshore in 2019, untapping resources that will potentially play a crucial role in reducing the country’s coal dependency, increasingly at odds with its net zero 2050 pledge, while ensuring its growing power demand. In addition, the company has discussed new potential developments in the fields of renewables, biofuels supply chain, and other environmental projects.

Australia represents another example of the integration of gas production with decarbonization processes and renewables. Eni has operated in the country’s North-west offshore since the early 2000s, with activities centered on the exploration and production of natural gas. In 2019-2020 Eni acquired three photovoltaic plants with a total capacity of almost 60 MW in the Northern Territory, which represent its entry into the Australian market for renewables. In addition, in May 2021, the company signed a MoU with Santos to improve cooperation in the development of a CO2 capture and storage/utilization facilities (CCUS) in the Darwin area, serving not only assets owned by the two companies but open to any interested third-party project, with the long term objective of facilitating the creation of a CO₂ management hub in Australia’s Northern Territory.

As the World single largest greenhouse gas emitter, China’s energy plans and net zero targets remain pivotal for the success of the global decarbonization and energy transition processes. The pledges made by President Xi and enshrined in the 14th Five Year Plan (2021-2025) are ambitious3, and shall be reconciled with the huge energy needs of its dynamic economy, and with the country’s over-reliance on coal - especially in the industrial sector, where giant state owned enterprises (such as China Energy Investment Corporation, the world’s largest coal producer and coal-fired power generator) account for roughly 65% of China’s total carbon emissions. The need to drastically cut its coal-powered generation and thus increase reliance on renewables and natural gas opens up several opportunities in China’s rapidly evolving energy sector. Eni has been strengthening its position there since 1984 and today has an integrated presence in oil&gas exploration and production, supply of LNG, refining technologies and trading of crude oil and chemicals. In December 2020, the company signed with the International Cooperation Center of the National Development and Reform Commission (ICC-NDRC) an agreement to promote the collaboration in energy transition, focusing on low-carbon energy sources, advanced technologies and circular economy initiatives.

The 21st Century has been marked by many experts as the “Asian Century”, and the way APAC’s countries will address their energy challenges will be decisive for the global energy transition. With this in mind, over the last years Eni has been building up its integrated presence at the heart of this key energy region, with a strong commitment to diversify energy sources and support economic growth. Looking ahead, the company is seeking to further strengthen its presence, capitalizing on proprietary technologies and decarbonizing solutions to help Asia-Pacific countries on their path towards a safer and sustainable energy for all.

 

Note

1 The 6th Outlook, published in November 2020, was supplemented in 2021 by the ASEAN Plan of Action for Energy Cooperation, Phase II 2021-2025, stating that: "Taking into account the COVID-19 pandemic, ACE projections indicate that total regional primary energy supply (TPES) could decline slightly by 3% in 2040 in the same reference scenario" (p.1)

2 Develoments in Asia Downstream LNG, Wood Mackenzie, Dec.2021

3 Peak CO2 emissions before 2030; carbon neutrality before 2060; https://racetozero.unfccc.int/chinas-net-zero-future/ 

Digital currencies development in ASEAN

From the Cambodian e-riel to the latest Indonesian declarations of MUI: Southeast Asian countries are wondering about how to regulate the cryptocurrencies market and think about official digital currency.

Article written by Fabrizia Candido

“Cryptocurrency and Regulation of Official Digital Currency Bill” is the name of the proposed legislation that India, on November 23rd, announced it is working on. The goal would appear to be to forbid private cryptocurrencies (although it refers to some, vague, exceptions) and, at the same time, to pave the way to an official digital currency emitted by the Reserve Bank of India. This is not an entirely completely unexpected news, considering that during 2021, the Indian government had even taken into consideration the possibility to criminalize possession, emission, extraction, trade and transfer of cryptocurrencies assets. The fear, as expressed by Prime Minister Narendra Modi a few weeks ago, is that cryptocurrencies could “end up in the wrong hands, ruining the youth”. But India is not the only Asiatic country where cryptocurrencies, private and/or state-owned, are the object of discussion.

Questioning how to regulate the market, deregulated and inherently volatile, of cryptocurrencies and to imagine an official digital currency, there are also some of the ASEAN countries. 

In Indonesia, the Central Bank of the country since January 1st, 2018, has forbidden the use of cryptocurrencies, including Bitcoin, as means of payment: the rupiah is the only legal currency in the country. Nevertheless, it is allowed cryptocurrencies trading as investment option together with commodity futures, that is, future contracts in which there is an obligation to exchange a fixed quantity of goods and a fixed data, and to a certain prize set on the trade data. Last November 11th, however, the Majelis Ulama Indonesia (MUI) declared that the cryptocurrency trading is haram and not Shariah-compliant, except for those cases where it involves “clear benefits”. Although MUI’s decision does not mean that all cryptocurrency trading will be interrupted in Indonesia, it is expected that the decree will dissuade some Muslims from investing in cryptocurrencies. According to the Indonesian Ministry of Commerce, by the end of 2020 the number of traders had reached 6.5 million.

Less rigid is Malaysia, that through a statement on the Bank Negara website, since 2014, has been warning its citizens that Bitcoin is not recognized as legal currency in the country, that the Central Bank does not regulate operations and therefore it recommends caution when using this cryptocurrency. In July 2021, however, the popular platform of cryptocurrency exchange Binance was banned from the country.

Not opting for a ban, but for a strict and selective regulation that allows it at the same time to still be an active hub, there is finally Singapore. About 170 companies have asked for a license from the Monetary Authority of Singapore (MAS), bringing the total number of enterprises that try to operate in accordance with its Payment Services Act to about 400, after the entry in force of the law in January 2020. Since then, only three cryptocurrency companies have received these coveted licenses. “We do not need 160 of them to open a business here. Half of them can do it, but with very high standards, which I think is a better result” commented Ravi Menon, Director of the Monetary Authority of Singapore, during an interview with Bloomberg.

Looking instead at a digital state currency are Cambodia and Laos. Cambodia, specifically, has undertaken an ambitious project to grow its Central Bank Digital Currency (CBDC). Bakong, this is the name chosen for the Cambodian digital currency, thanks to a massive pilot project, today already counts 5,9 million users. According to Nikkei Asia, during the first semester of 2021, Bakong users made about 1.4 million transactions worth USD 500 million. The project was presented for the first time by the National Bank of Cambodia (NBC) in October, last year, based on blockchain technology developed together with Japanese fintech company Soramitsu. The main goal is the exploration of digital payments, the encouragement in the use of local currency and the reduction of the dependence on dollars, and the financial inclusion of citizens left out of the traditional banking system.

Last October, Japanese fintech Soramitsu was also hired by the Central Bank of People’s Democratic Republic of Laos, to explore the issuance of a Laotian CBDC. A digital version of kip would support authorities in the gathering of data necessary to measure the economy’s pulse, such as the amount of money in circulation. Moreover, the initiative marks an attempt by Laos to extend the reach of its currency while the digital e-yuan looms as a potentially invasive presence in the Southeast Asian Nation for which China is the second largest economic partner.

Vietnam has also decided to explore the creation of its own digital currency, with Decision 942 by the Prime Minister that aligns with the strategy to digitalize the government within 2030. The policy exhorts the State Bank of Vietnam to research, “develop and experiment the use of digital currency based on blockchain technology”. In Vietnam, the use of cryptocurrencies to make purchases is illegal, but these are still actively purchased as investment instruments: the country is among the top three globally for percentage of people that affirms to hold some form of cryptocurrency, according to a survey by Statista.

Green mobility, ASEAN bets on electric cars

ASEAN focuses on electric vehicle production to reconcile sustainability commitments and growth in its emerging economies.

In the wake of the Glasgow 2021 climate conference (COP26), Southeast Asian countries have pledged to accelerate the deployment of electric vehicles to limit emissions and meet the standards set by the Paris Agreement. According to Our World in Data, road transport is responsible for about 15% of total carbon dioxide emissions, as demand for cars is increasing worldwide, in accordance with the development of emerging economies and population growth. For these reasons, ASEAN policy makers have bet on new technologies to reconcile economic growth and sustainability imperatives. COP26 President Alok Sharma said that further acceleration in the adoption of electric vehicles (EVs) is needed if we are to make a difference for the planet: the provision that they will account for about half of new car sales by 2040, while already optimistic, is no longer a sufficient target.

In ASEAN, Thailand and Indonesia lead the turnaround for green mobility, while the Philippines and Malaysia are lagging behind. Vietnam, a fast-moving economy in Asia's emerging market landscape, also has very ambitious national plans in this regard. But the approaches of ASEAN member states are still fragmented, according to experts. As an example, the Socio-Cultural Community Blueprint 2025 on regional cooperation does not mention the need for new transportation technologies in its agenda for strengthening the Association as a regional and global player. In an interview with Nikkei Asia, Vivek Vaidya, associate partner at the consulting firm Frost & Sullivan, said that "every country has its own approach, every country has its own considerations, and therefore has its own strategies." Thus, there would be no single, consistent answer for EV promotion in the 10-nation Southeast Asian bloc.

Thailand has been identified as the "Detroit of Asia" for years, due to its undisputed leadership in global automotive value chains. In this regard, the national strategy "Thailand 4.0" is the vector of the electric turnaround undertaken by the country, which seeks to maintain its competitive advantages by aligning with environmentalist demands and international agreements. The ultimate goal for Bangkok is to allow only the sale of electric vehicles from 2035. The plan includes tax incentives to attract foreign investment to support its economic growth. As Pietro Borsano of the Turin World Affairs Institute suggests, this is a comprehensive strategy aimed at "increasing the competitiveness of the Thailand system." The Thai government's logic revolves around the role of exports as an engine of growth, so, according to experts, "any kind of investment in production that will increase exports" is welcome. This leaves room for competition among major international investors in the Southeast Asian automotive sector, including Japan, China, Korea.

New transport technologies have paved the way for another key player in the global automotive value chain: Indonesia. Already in contention to overtake Bangkok thanks to a growth in the sector that focuses more on domestic demand than on international trade, Jakarta hides an ace up its sleeve that could definitively mark the fate of its rival. It possesses, in fact, one of the largest deposits of raw nickel in the world. This is one of the key materials for the creation of lithium-ion batteries that power electric cars. The Thai government has recently banned its export to encourage foreign companies to invest in the local production of finished products, and is considering creating its own lithium battery industry through Indonesia Battery Holding.

Although policymakers often express great enthusiasm for this new electric revolution, some activists believe it is not the solution to focus on. Although the use of electric vehicles can lower the CO2 emissions attributed to road transport, there are a number of other factors to consider: the circumstances of lithium mining are often controversial, the freedom to make sustainable choices requires economic autonomy that condemns marginalized people and poorer countries to systematic exclusion from the electric mobility dream, and finally the political will is needed to coordinate efforts to respond to the labor demands of those sectors that would be replaced by the electrification of road transport.

This year the first conference on energy and environment was held, promoted by the ASEAN Center for Energy. On this occasion, expert Muhammad Rizki Kresnawan summarized the main issues of the electricity turnaround in Southeast Asia. First, the large capital requirements for infrastructure creation could further expose regional economies to the dependence on foreign investment. In addition, fossil fuels dominate regional electricity production, which could result in a reliance on imported fuel that threatens the area's energy security. Although it is widely believed that new technologies can accelerate the transition to a greener economy, intersecting political, social, and environmental challenges could make the deployment of electric vehicles less linear than ASEAN economies would have hoped.

Asian diasporas: stories of places and generations in Europe

The Asian diasporas in Europe are a phenomenon related to the events of the twentieth century, from colonialism to the Cold War passing through the First Indochina War and the Vietnam War. Asian communities have settled inside and in the outskirts of London, Milan, Berlin and Paris and continue to grow.

London is home to southeast Asian's largest diaspora on the European continent. On the banks of the Thames is where Filipino emigration is most concentrated, about 200,000 people initially fled the dictatorship of Ferdinand Marcos Sr. in the Seventies and Eighties and then arrived in the United Kingdom for economic and academic reasons. There are also about 50,000 Thais and 50,000 Vietnamese, the latter mainly as asylum seekers following the fall of Saigon in 1975.

The second Filipino community in Europe has settled in Milan and counts for the largest Southeast Asian community in Italy. The community has experienced an extraordinary growth: from the 16 Filipinos who arrived in the Lombard capital in 1970 it has reached almost 50,000 today. A relevant factor that has led many of them to choose Italy is the religious one. Affiliation to the Roman Catholic Church is vital for their community life for it represents a bridge between the two countries and an element of cohesion between the first and subsequent generations. In the shadow of the Madonnina, over 200 Filipino associations collaborate with the municipality and the new generations are shaping a solid entrepreneurial environment mostly in traditional catering and travel agencies.

Since the days of divided Germany, Berlin has been home to the country's main migration from Southeast Asia. The main ethnic group is the Hoa, Sino-Vietnamese, concentrated in Little Hanoi in the District of Lichtenberg, East Berlin. The heart of the community is the Dong Xuan Center where most of the entrepreneurial activities are located and where Vietnamese festivities are celebrated. There are also Vietnamese communities in West Berlin that, unlike most compatriots who lived in the East, were naturalized at the time of national reunification of Germany. This has meant that in addition to the 20,000 Vietnamese legally in the country, another 23,000 continue to remain in Germany illegally.

The Vietnamese community has also reached the Czech Republic, settling in the city of Prague since the country's entry into the Warsaw Pact in 1955. Little Hanoi is located in the Sapa district of the Czech capital, counting between 60-80,000 Vietnamese throughout the country, growing very rapidly and representing the third largest foreign ethnic group in the Republic. Outside of Prague, the town with the highest concentration of Vietnamese is Cheb, near the border with Germany.

In the Netherlands, the Asian migration comes mainly from the Indonesian archipelago, counting for about 352,000 people who arrived because of colonial ties and following the escape from the country due to the Indonesian War of Independence that lasted from 1945 to 1949 that led to the victory of the forces of Sukarno, the first president of the Indonesian Republic. To date, the third generation counts for about 800,000 people and gather in the main cities of the country.

The most peculiar story, made of interculturality and multiethnic, comes from France. Known in the country as "the city of the sleeping dragon", Lognes is a village in the Seine-et-Marne 20 kilometers east of Paris with the highest Asian concentration after the XIII Arrondissement of the capital. The epithet was not chosen randomly: in French, Lognes is pronounced very similar to "lóng" (龙), which means dragon in Chinese and Vietnamese. Here the migration from Southeast Asia dates back to the proclamation of the People's Republic of China on October 1st 1949. While Mao Zedong was giving his historic speech from Beijing's Zhongnanhai, they en masse fled from southern China to French Indochina and then reached Europe after the First Indochina War. Since the first generations lived in Chiang Kai-Shek's China or are descendants of Chinese who emigrated to Indochina before the communist victory in '49, ties with Taiwanese associations are very strong. In fact, community life revolves around the pagoda built by the Taiwanese association Fo Guang Shan, "the mountain of Buddha's light". The village has been experiencing a consistent demographic growth for decades: from about 250 inhabitants in the immediate post-war period to over 15,000 today, 70% of Asian origin. The growth has been enhanced by the large funding from the French government to simplify the purchase of property in the village, the construction of the A4 Eastern Highway, the so-called Francilienne, and the RER rail link with Paris and the rest of the Asian diaspora living in the capital.

Every diaspora lives its identity problems. The first generations experience the distance and detachment from the homeland and from a past from which they often fled. Following generations experience the existential doubt that leads them to wonder whether they are Asian or European. It is not uncommon for Asian European youth to choose to go to their parents' countries on journeys of rediscovery: to see the places where their parents grew up, to meet family members they never got to know, to live the experience of that place where, after all, they feel they belong. The European Asian youth thus mends those bonds of affection that seemed broken, that past that didn’t seem to belong to them but that, after all, has always been part of them.

High Level Meeting: seeds of a shared future

The “summit” between top public and private managers of ASEAN countries, Italy and the United Arab Emirates was successfully held at the Italian Pavilion of Expo Dubai 2020

On Thursday, December 9th, was held the High Level Meeting, “A Partnership for Success in Asia, the Gulf and Europe”, organized by the Italian Commissioner at Expo 2020 Dubai in collaboration with the Italy-ASEAN Association and the Chamber of Commerce of Dubai.

The “summit” was opened by the speech of Romano Prodi, President of the Italy-ASEAN Association and former President of the European Commission, and Lim Jock Hoi, Secretary General of ASEAN and has had the objective to define innovative models for the relaunch of economy after the health emergency through multilateral relations among countries that play a strategic role in the area of the world - from Mediterranean to Asia, passing through the Gulf - where in the next years will have the highest rates of economic, technological and financial growth, but also major issues related to climate change, energy transition and social sustainability. “Italy wants to deepen the already strong collaboration with ASEAN”, declared Prodi. “After the pandemic, sustainability is no longer just rhetoric but has become a strategic objective”, said the President of the Italy-ASEAN Association: “With environmental sustainability we are called to preserve social sustainability as well. The pandemic will not be the end of globalization, but a deep correction of it, and we need to be ready”.

Lim Jock Hoi highlighted the strength of the link between Italy and ASEAN, mentioning the circular economy sector, and underlined the trajectory of development of the region, that must “find a more sustainable way of production and consumption” based on a “safer and greener” development. Jamal Saif Al Jarwan, Secretary General of UAE International Investors Council, and Amedeo Scarpa, Director of the ICE Office of Dubai, also spoke. The event then developed with three parallel working groups dedicated to: technologies and finance for sustainability, renewable energies and sustainable agriculture.

At the end, the two Vice-Presidents of the Italy-ASEAN Association summed up the results. “This was a very productive meeting during which there were established bilateral and trilateral relations. With this event we have opened new useful links to develop follow up”, explained Ambassador Michelangelo Pipan. “The participation has been fantastic”, said Romeo Orlandi. “Everyone agrees that we need to move towards renewables, but how to do it? We tried to give some answers about wind, solar and other types of energy. Conclusions are promising and all the involved parts will stay in contact after this event”. President Prodi summed it up: “Competence, culture and heart. We are at the beginning of a fertilization process to develop ideas and proposals that were put on the table during this meeting”.

The green transition will be stronger than inflation

In the long term, the demand for renewable sources will not decrease due to production costs

The costs of renewable energy production are increasing considerably. Inflation associated with the transition to a green economy - better known as "greenflation" - is a controversial topic of discussion, as it could have a significant impact on the balance sheets of governments and businesses. In recent months, the increase in demand for clean energy has plumped the boom in requests for raw materials, which have experienced a surge in costs since the use of traditional extraction methods has now been limited: the prices of Metals, such as tin, aluminum, copper, nickel and cobalt, all essential for energy transition technologies, have increased between 20% and 91% this year. A trend that could discourage the use of clean energy.

However, although the ecological transition is increasingly expensive, at least in the short term, there is no need to fear for the economic sustainability of the sector. This was stated by the Reuters Global Markets Forum. In fact, when solar panels or other necessary components of the renewable energy chain are mass-produced, production costs are reduced, generating what are called "economies of scale", facilitating the reduction of costs related to taxation, labor and advertising, allowing the sector to grow even more. "The overall costs for the green industry will tend to decline," said Harry Boyd Carpenter, the chief executive officer for green economy and climate action at the European Bank for Reconstruction and Development.

The forecasts are therefore positive: Allied Market Research expects that the global renewable energy market, now valued at over 1.2 trillion US dollars, will double in 2030, reaching almost 2 trillion dollars. Gauri Singh, Deputy Director General of the International Renewable Energy Agency, said that despite inflation and supply chain disruptions, lower financing costs contributed to the record generation of 260 gigawatts of energy from renewable sources last year. "The renewable energy market is softening - said Singh - From now on it will no longer be so easy to earn from those products that are considered harmful to the environment."

Now you can also participate online at the ASEAN-UAE-ITALY High Level Meeting

The High Level Meeting "A Partnership for Success in Asia, The Gulf and Europe" is approaching. Temporally but also physically. Top public and private managers from ASEAN countries, Italy and the United Arab Emirates will meet for the first time on December 9th in Dubai to explore objectives and concrete ways of bi and trilateral collaborations in the field of sustainable development through the use of innovative technological and financial resources.

But, given the latest health developments related to the Covid-19 pandemic, it has been decided that remote participation will be allowed. Everyone will therefore be allowed to follow the event, no matter where they are.

The "summit", organized by the Commissariat of Italy at Expo 2020 Dubai in collaboration with the Italy-ASEAN Association and the Dubai Chamber of Commerce, will be opened by Romano Prodi, President of the Italy-ASEAN Association and former President of the European Commission, Lim Jock Hoi, Secretary General of ASEAN, and a representative of the United Arab Emirates government.

The High-Level Meeting, “A Partnership for Success in Asia, The Gulf and Europe”, will have the objective to define innovative models for the relaunch of the economy - in the aftermath of the pandemic - through multilateral collaborations between countries that play a strategic role in the area of the world – from the Mediterranean to Asia through the Gulf – where the major economic, technological and financial growth rates are likely to occur over the next few years, together with some of the major problems related to climate change, energy transition and social sustainability.

In the aim to set the pace for new trilateral and bilateral partnerships between public and private players of the area, the proceedings will focus on the issues of technologies and finances for sustainability, renewable energy and sustainable agriculture. These topics will be dealt with in three separate working groups, led by the Vice-Presidents of the Italy-ASEAN Association, Ambassador Michelangelo Pipan and Prof. Romeo Orlandi, and the Deputy Commissioner for the Dubai Expo Marcello Fondi. The moderators will be flanked by representatives of the authoritative specialized institutions that provided the background documentation: ERIA (Economic Research Institute for ASEAN and East Asia), Irena (international renewable energies agency), Confagricoltura with a board member.

See all the details and register from this page.

Netflix, Facebook and Google under pressure from Southeastern governments

Manila's demand for the removal of two episodes of the Australian series Pine Gap from Netflix Philippines’ catalog is just the tip of the iceberg of recent government pressure on Western digital platforms in Asia.

On November 1st, the Philippine government requested and obtained the removal from the Netflix Philippines’ catalog of episodes two and three of the Australian series "Pine Gap". Manila's irritation arose from the appearance of a map of the South China Sea representing the so-called "nine-dash line", typical of Chinese maps of those resource-rich waters disputed between China, the Philippines, Brunei, Malaysia, Indonesia, Taiwan and Vietnam. The Philippine film classification authority has defined the deleted episodes as "unsuitable for airing" and the Philippine Department of Foreign Affairs argues that the appearance of such a map must be countered as it is aimed at legitimizing the "nine-dash line" with the risk of "corrupting the knowledge and memory of young Filipinos about the real territories of the country". The removal of the two episodes was almost immediate, taking place in the evening. However, the hurry with which Netflix complied with the Philippine government's request was not the same in providing explanations to Reuters, responding only late at night. The cancellation decision was only made public on November 1st for currently unknown reasons.

It's not the first time that streaming services have had problems with authorities about film performances touching on sensitive issues in the region. Vietnam is an example of how pressure from local governments can become real coercion. If in the Philippines two episodes of Pine Gap were eliminated, in Vietnam the series was entirely deleted from the list for the same reason. Similarly, in 2019 Hanoi had withdrawn from theaters the Dreamworks film "Abominable" as well as the Chinese rom-com "Put Your Head on My Shoulder" and the American political drama "Madam Secretary" from on-demand services to avoid "hurting the feelings of the entire Vietnamese people".

Netflix is just one of the actors in this relationship between governments and platforms. In Asia-Pacific there are 40% of Meta’s social media users, formerly Facebook, which therefore has great interests in the area. Vietnam alone has 100 million users and a market worth a billion dollars. Filipinos are the most active on Meta platforms, spending on average over four hours a day online according to eMarketer, while Indonesians use WhatsApp as their main means of communication and information. Given the great impact of Meta on the populations of the region, local governments pay particular attention to what is happening on its platforms, especially since 2017.

Facebook works with the Ministry of Information and Communication (MoIC), the State Bank of Vietnam, the General Department of Taxation, and the Ministry of Public Security to identify and prosecute political crimes on social media. Under threat of shutdown and with the obligation to maintain its registered office, servers and local data storage in Vietnam, Facebook may have taken part in the censorship activities of the Hanoi government: according to Transparency Report, since 2019 the repression of dissent in the country has increased by 983%, the year in which Facebook has shut 200 anti-government sites down. From the Facebook Papers, documents leaked this year along with an investigation by the Washington Post on the Californian company, it emerges that in early 2021 Mark Zuckerberg may have given the approval to the censorship of many Vietnamese dissidents on the platform on the way to the thirteenth Congress of the Vietnamese Communist Party, essential for the selection of the leadership for the five years to come. Google's YouTube is not excluded from these dynamics. In 2019 it was forced to remove dissenting contents about the Hanoi government by deleting over 7000 videos and 19 channels. 58 Vietnamese games have been deleted from the Play Store, as well as from Apple.

Meta's Facebook also plays a role in the Philippines. Since 2017, it has participated together with Rodrigo Duterte’s government in the development of fast internet infrastructure in the country. Facebook's balancing with the government is difficult: in 2020 Duterte did not approve the shutdown of various accounts linked to the Police and the Philippine Army because of their role in the war on drugs initiated by the President. Duterte threatened the social network saying that for Filipinos there would be a life after Facebook and that some spokesmen of the social network should explain what occurred.

In Indonesia, the government uses the Law on Electronics Information and Transactions Act (ITE) to counter dissidents. Invoked about two hundred times since 2019, according to Amnesty International, this excessive use of it violates freedom of expression. To integrate this law, Ministerial Regulation 5 will come into force from December 2021 allowing foreign platforms to be taxed and involved in the legislative process, under threat of possible shutdown of the platform to prevent the spread of material "prohibited, illicit or that disturbs public order". For this reason, Facebook collaborates with the Ministry of Communication and Information Technology (Kominfo).

Beneath the surface of the digital sea, freedom of expression freezes more and more, thus magnifying the iceberg of repression.

Chipped away. What does the global semiconductor shortage teach us?

The semiconductor supply chain has been in crisis since 2020 and the shortage will continue. It takes little to stop global trade flows. Governments want to invest in the sector to strengthen their technological autonomy, and ASEAN and the EU could play an important role.

2021 looks like an annus horribilis for global trade, even more so than 2020. Many sectors of the economy have benefitted from the post-crisis rebound and seem to be returning to pre-pandemic levels. Other sectors, however, are still struggling, with tangible effects on consumers. Energy, raw materials, cars, IT products. Everything is more difficult to obtain and therefore more expensive. Of particular relevance is the shortage of chips, which are now essential components for many everyday objects. The global crisis in the semiconductor supply chain is an excellent case study for understanding the nature and fragility of the globalised economy. And it affects ASEAN countries closely: a couple of them - Singapore and Malaysia - are among the main global producers and a large proportion of chips, even when they come from other parts of Asia, pass through the seas of South-East Asia.

The global value chain for semiconductors has very particular characteristics. All the world's economies need these products, yet their manufacture is concentrated in very few countries that are interdependent since nearly every stage of the production chain takes place in a different country. Companies in each country have specialised in a specific stage of production or a certain type of chip, sometimes creating regional monopolies. For example, 92% of semiconductors below 10 nanometres are produced in Taiwan. One EU company, ASML, is the world's only producer of EUV scanners, an essential piece of equipment to produce sub-7 nanometres chips in Taiwan. This dense network of trade has prompted governments to significantly reduce tariffs and semiconductors are indeed among the least taxed products in the global trade system.

Chips need to circulate and need a liberalised and interconnected global market. Major events that can slow down trade flows, such as the Covid crisis, can produce a succession of bottlenecks and ultimately the unprecedented global shortage we are witnessing. Many chip factories in Asia have been forced to close or reduce production due to the pandemic. The transportation industry is also going through a crisis and can no longer distribute semiconductors produced in Asia to the rest of the world. Increasing production capacity in Asia may not be enough if there is a lack of carriers. The trade war between the US and China waged by Donald Trump until last year also had an impact: restrictions on imports of Chinese chips led American companies to turn to Taiwan Semiconductor Manufacturing Co. (TSMC) and Korea's Samsung, whose production levels were already stretched to the limit. However, the Covid crisis or trade tensions are not the only triggers. What is new is that even smaller events, which at first glance may only be of local relevance, have global effects.

‘A flap of a butterfly's wings in Brazil can set off a tornado in Texas’. The butterfly effect theorised by US meteorologist Edward Lorenz also applies to globalisation and the semiconductor market. A failed manoeuvre by a single ship - built in Japan, operated by a Taiwanese company, registered in Panama and managed by a German company: the now-famous Ever Given - blocked the Suez Canal for days, stopping 12% of world trade and almost $10 billion in goods for every day of obstruction. A few weeks after the Suez incident, another seemingly local event, the drought in Taiwan, had a negative impact on the global semiconductor market - and drew public attention to how much water is needed for their production. A few weeks earlier, a fire in a single factory in Japan had dealt a further blow to the sector’s capacity, causing the concern of the global automotive industry, for which chips are increasingly indispensable.

How long will it take to resolve this crisis, according. to the chipmakers? At least another year. Lisa Su, CEO of AMD, believes the situation will improve in 2022, while Pat Gelsinger, head of Intel, is less optimistic and predicts that the semiconductor shortage will last until 2023. In the short term, semiconductor prices will remain sky-high, partly due to the hoarding of chips by companies. Hoarding is taking on unexpected dimensions and forms, even causing the Biden administration to react. On eBay and other online platforms, freelancers are active, buying single, used or disassembled parts at auction and then reselling them to companies. A symptom of the hardship business is facing in procurement. It is natural then to ask how companies and governments are dealing with the emergency. The consensus solution seems to be massive investment plans to increase production. However, the US and EU governments want new plants to open on their territory. The issue goes far beyond the strengthening of the supply chain or economic and employment returns: semiconductors are a strategic asset too important to leave them to the monopoly of Asian countries. In Joe Biden's and Ursula Von der Leyen's speeches on the subject, expressions such as 'national security' and 'technological sovereignty' come up more and more often. Companies too are interested in moving part of their production out of Asia, especially when they are promised generous incentives by governments: TSMC has already started building a $12 billion plant in Arizona and promises further investments in the US, while Intel intends to invest up to $80 billion to open new factories in the EU. The only question is: where? Italy is courting the American gian to attract part of the investment, as is Baviera since one of the plants will probably be built in Germany.

Unfortunately, these projects may not have the desired effect. Although the global value chain of semiconductors is carefully and rigorously studied by experts, it remains difficult to codify the competitive advantages of the sector’s leading companies. Much of the know-how required falls into the realm of tacit knowledge and cannot easily be transferred from the factories in Asia to those in Europe or the USA. So much so that companies build new plants by strictly reproducing the organisation and layout of their existing ones - in line with its famous Copy Exactly! strategy, Intel reproduces details such as barometric pressure, the colour temperature of the lighting or the colour of workers’ gloves. Moreover, the fact that global semiconductor production is so concentrated in a single region, East Asia, and depends on a dense network of regional value chains is a weakness but also a strength of the industry. Will the new factories in the EU or the USA be able to find their place in the global value chain? Will they be able to be competitive?

ASEAN countries can play an important role in the future of semiconductors and already account for 22% of world exports of electronic components. As mentioned above, Singapore and Malaysia are major players in the sector and could attract new investment from the USA, Taiwan and Korea. Thailand and Vietnam have launched ambitious incentive and investment plans to encourage the growth of the sector in their territory. Although Hanoi should pursue an ambitious plan of infrastructure upgrades and reforms if it wants to attract foreign direct investment. Indonesia is also a promising environment for the development of the semiconductor industry, even if this development is held back by a lack of infrastructure and deep free trade agreements. Even for semiconductors, trade deals will play a crucial role in the development of regional and global supply chains: all ASEAN countries are part of the RCEP agreement and, among them, Singapore and Vietnam already benefit from very close trade ties with the EU.

It is difficult to predict the future of the global semiconductor market. Or rather, where that future will take place. The traditional producer states intend to maintain their central role, while the ASEAN countries, the EU and the USA want to start playing a greater part. The only certain thing is that the sector will attract billions of dollars in private and public investment in the years to come.

I thank Filippo Bizzotto for his assistance throughout the writing and revision of the manuscript.