ASEAN is now at a turning point. Over the next half-century, climate change could see Southeast Asia lose $28 trillion in the present value term. However, rapid decarbonization could yield gains for Southeast Asia’s economy of approximately $12.5 trillion in present value terms by 2070.
The numbers presented in Southeast Asia Turning Point report have confirmed the importance of sustainable development.
“What seems a cost today is an investment in the climate-driven economy to open great opportunities,” said Ha Thu Thanh, Chairperson of Deloitte Vietnam on the sidelines of the ASEAN++ Bridge event held in Ho Chi Minh City.
Ng Jiak See, Deloitte Asia Pacific Financial Advisory Leader said that ESG (environment, social, and governance) commitment and capabilities – and going in-depth into the market forces that are driving sustainable investments is one of the four megatrends in ASEAN. The remaining ones include geopolitical shifts, digital advances, and changing demographics.
She highlighted that businesses can unlock value with sustainable investments, where ESG should now be regarded as a key lever of value. She also demonstrated the importance of business leaders in driving this change. That is the need for leaders to customize their own sustainability strategy for their organizations, what are the challenges leaders are currently struggling with, and the needle-moving actions they can take to seize the opportunity of sustainability.
“For ASEAN, in acting now, the region can generate a cycle of positive outcomes. Sustainable financing will support improvements to existing infrastructure, which in turn unlocks new sustainable assets, furthers transition into a low carbon economy, increases investor trust in sustainable investments, enhances attractiveness to investors, allows sustainable infrastructure to gain access to more funding; and the cycle goes round,” Jiak See noted.
Understanding the importance of sustainability, Deloitte has announced a significant expansion and investment in Deloitte Sustainability & Climate including an investment of $1 billion in client-related services, data-driven research, and assets and capabilities.
In order to promote sustainability in Vietnam, Deloitte has recently launched Sustainability & Climate service line. Enterprises need support in defining a path to a more sustainable through redefining strategies, embedding sustainability into the operations, meeting tax, regulatory requirements, and disclosure, and helping to accelerate the transformation of the organizations and value chains.
Fertile ground for trade and investments
Over the past decade, ASEAN’s economy has developed rapidly, largely due to its unique geographical location and favorable business environment. As a single market, ASEAN is currently the 5th largest economy, valued at $3.2 trillion, after the United States, China, Japan, and Germany. Furthermore, the region is on track to becoming the 4th largest economy by 2030, eclipsing Japan.
The region’s FDI growth has been driven by strong investment mainly in Singapore, Indonesia and Vietnam. These three countries received more than 80 per cent of the inflows in 2019. That same year, ASEAN recorded the largest FDI inflow of any emerging market. Although affected by Covid-19, by 2021, FDI into ASEAN had returned to pre-pandemic levels of $175 billion.
Where investments are concerned, due in part to its strategic geographical location, ease of doing business, tax incentives, and free trade agreements, ASEAN is currently one of the most attractive investment destinations for investors who are seeking to expand their global footprint.
Vietnam is one of four ASEAN countries amongst the faster-growing economies in the world, one of three ASEAN countries that recorded the large FDI inflows. Vietnam is also the top choice when multinational companies consider to relocate a growing proportion of their manufacturing from China to ASEAN countries, to assert supply chain resilience. This exercise contributes to Vietnam’s annual 6 - 7 per cent economic growth over the past decade.
However, ASEAN in general and Vietnam in particular need immediate action to maintain its attractiveness to investors, said Jiak See.
Chairperson of Deloitte Vietnam affirmed that Vietnam is clearly a destination for investment and trade, thanks to competitive advantages such as labor costs, political stability, and social-cultural conditions. But it is also one of the most vulnerable countries to climate change.
“Therefore, all parties, including government, businesses, and individuals – need to take action against climate change today. Collective climate actions in this decade will contribute to realizing Vietnam's commitment to achieve net zero by 2050,” said Thanh.