Event: Future of Trade - Energy and Utilities (22 May 2019)
The Future of Trade – An Energy and Infrastructure Perspective
On 22nd May 2019, BritCham hosted a packed-house breakfast event featuring HM’s Trade Commissioner for the Asia Pacific, Natalie Black, as keynote speaker, followed by a panel discussion moderated by Peter Godfrey, APAC Managing Director of the Energy Institute, featuring Satvinder Singh, Assistant CEO of Enterprise Singapore, Wesley Mort, Senior VP UK desk at ASEAN HSBC and Tim Rockell, Director of KPMG’s Energy and Natural Resources Sector and Chairman of the Chamber’s Energy and Utilities committee.
The Asian region will play an increasingly dominant role in global trade over the next decade. More than 50% of the world population and around 35-40% of global economic wealth is already residing in the Asian region, with purchasing-power parity growing at significantly higher annual rates than anywhere else.
As Asian economies develop and become more capable, the trade intensity of manufactured goods will continue to decline. Low wages are no longer the driving force in global trade flows, but services in the form of more specialist business, legal, financial, IT and other professional services, telecommunications and transportation are on the rise.
Historically, intra-regional trade within the Asian region has been relatively small compared to the wealthier West. But as countries within Asia become more affluent and developed, there is growing pressure to redress this balance in favour of more regional connectivity as a means of addressing both security and further development of competitive capability.
Whilst in the past, globalisation was seen by most as developing low-cost production. Today, there is a move towards investment in higher skilled work-forces and infrastructure, rather than enabling localised production aimed at developing market share within a rapidly growing regional ecosystem.
The region’s sustained economic growth, increasing population, expanding industrialisation and rapid urbanisation are driving strong growth in energy demand.
Ensuring that energy supplies are adequate to meet that growth in ways that are socially, economically and environmentally sustainable, together with the challenge to substantially decarbonise & create more efficient energy systems & circular economies in line with climate change objectives creates a vast new set of challenges for policymakers.
Additionally, whilst the region already consumes more than half of global energy supply, over 325 million people across Asia remain without electricity and almost two billion people still have no access to clean cooking.
Within this context, the event focused specifically on how the UK and Singapore could work more closely to deliver collaborative solutions aimed at creating mutual benefit, as well as to the region as a whole.
Ms Black commenced proceedings with an emphasis on the importance of the energy sector to both the UK and Singapore economies contributing some 84 billion pounds in the case of the UK and 81 billion Singapore dollars - around one third of Singapore’s total manufacturing output. She then provided an overview of the UK’s Industrial Strategy with, in particular, a core focus on shifting towards a low carbon economy which would create many challenges but also strong impetus for the government and businesses to create partnerships, including robust international collaboration. Within this context, she stated that UK’s renewable energy sector had a particularly strong track record and global offering, particularly in relationship to offshore wind that has garnered significant interest from Japan, South Korea and Vietnam.
She ended her opening remarks by focusing on the South East Asian region, stating that the region’s current relatively under-developed energy infrastructure and poor grid connectivity continued to pose a challenge to the region in terms of its strong continuing reliance on coal. However, it also created significant opportunity for the UK in terms of supporting regional governments to tackle barriers to transition towards lower carbon energy systems by providing both green finance and technical expertise focused on energy efficiency, energy storage and renewables. Within this context, Ms Black stated that she believed that UK’s Export Finance (UKEF) / credit agency offering has significant headroom for further development, particularly with the clean energy sector. She also acknowledged that both the hydrocarbons and nuclear industries remained important sectors for the UK to also focus in given the countries recognised expertise, as well as the fact that both these segments would remain of vital importance for some time to come.
THE PANEL DISCUSSION
Throughout the dialogue, there was a unanimous perception that the UK and Singapore have significant potential to collaborate more closely. The collaboration can span across a wide range of local and regional development opportunities within the energy sector, ranging from finance to technology development, in addition to human resource capacity-building.
Satvinder Singh of Enterprise Singapore went as far as saying that in many ways, the UK is the “natural partner” of Singapore given our common legal frameworks and regulatory systems with similar governance systems in place.
Whilst global trade had its challenges brought about by a re-emergence of protectionism in the West and uncertainties surrounding BREXIT, both the panellists and audience were united in their view that these would and should not get in the way of developing stronger collaborative activity in the years to come. Wesley of HSBC added that the bank was ready to support build-out of the supply chain in Asia as UK manufacturers move capacity closer to the burgeoning markets in ASEAN.
Core areas that the panel felt should be focused on were:
- UK and Singapore working together more closely to increase regional financial capacity for projects that facilitate the energy transition.
- Develop greater opportunity for collaboration in energy technology development with a focus on proof of concept early commercialisation projects.
- Collaboration regarding developing appropriate regulatory frameworks aimed at increasing the pace of the energy transition. Great opportunities to share lessons learned and develop good practice guidance etc.
- Increased focus on the Circular Economy and phasing out subsidies that result in distortions to creating greater resource, energy efficiency and waste minimisation.
- Recognition that hydrocarbons are not going away any time soon and, on this basis, greater focus needs to be placed on working alongside existing energy majors be they state owned or private, not against them.
From a UK standpoint, the audience identified four core strengths that it believed the UK should focus on bringing to the region (in order of polling):
- Engineering excellence, standards development within a local/regional context and training/capacity building throughout the region.
- Shared plans based on UK’s clean energy policy and recent commitment to go net-zero carbon by 2050 and resultant new opportunities for development that will bring across the whole energy value chain.
- Collaborative finance and financial services (including UK Export Finance).
- R&D collaboration including commercialisation of intellectual property through collaborative innovation.
There was strong conviction, added Tim, that this panel, which was the inaugural event in the Chamber’s ‘Future of Trade’ campaign for 2019-2020, “will be the start of activity to generate increased connectivity and opportunity” in the energy and utilities, and associated sectors, and that value creation will be a two-way street between the ASEAN region and the UK.