The European Union (EU) is attempting to reconnect with members of the Association of Southeast Asian Nations (ASEAN) as both deal with various economic, diplomatic, and health-related challenges. Despite the EU is one of ASEAN’s largest trading partners alongside China and the United States (US), relations between the two blocs have not always been ideal. For example, they have repeatedly disagreed on how to treat Russia in the wake of the Ukraine-Russia war.
Even so, the EU and Southeast Asia have maintained communication and relationships for decades. In December 2022, they participated in a summit to commemorate 45 years of diplomatic ties. According to the Associated Press (AP), the announcement of a EUR 10 billion infrastructure deal funded by the EU was high on the agenda for ASEAN projects. This investment is part of Europe’s “Global Gateway” program, considered a counter to China’s “Belt and Road initiative”.
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With the VC trends Southeast Asia is expected to have in 2023 pointing toward a pickier approach to investments by venture capital firms in the region, the money from the EU could prove helpful to startups in Southeast Asia. Gavin Teo, a general partner at Altara Ventures, was quoted by CNBC saying that the deployment of funds in the region had contracted by about 25%-30%.
For startups, this reduction of funds in their ecosystem increases competition, and only the strongest can survive the economic hurdles on their way to profitability. But as the EU invests in infrastructure, companies can get more access to funds and investments in their innovations.
The EU-ASEAN summit discussions
In 2020, the EU and ASEAN decided to establish a Strategic Partnership to benefit their citizens by boosting security, enhancing prosperity, enabling free and fair trade, and promoting sustainable development. These goals have been tested, with the world enduring many challenges in recent years. The two blocs face threats like the COVID-19 pandemic, the Ukraine-Russia war, energy crises, geopolitical tensions in the South China Sea, a possible war between China and Taiwan, economic trouble and inflation, and supply chain issues hindering trade.
Amidst this backdrop, the EU-ASEAN commemorative summit in Brussels occurred at an ideal time to reinforce previously agreed positions and chart a way forward in dealing with the Ukraine issue and handling China. The President of the European Council, Charles Michel and the 2022 ASEAN chair, Cambodian Prime Minister Hun Sen, chaired the summit.
The two blocs reaffirmed their partnership and discussed their continued engagement on peace, defence, maritime security, transnational crime, and cybersecurity. Secondly, as cooperating trading partners, the leaders wanted to promote free, inclusive, sustainable, and transparent trade and investment. Thirdly, both sides supported digital transformation and connectivity that was reliable and affordable, leading to more inclusiveness.
Furthermore, the EU and ASEAN leaders reaffirmed their commitment to sustainable development, transitioning to clean energy sources, and fighting climate change. On international issues, there were discussions regarding the crisis in Myanmar, the need to ensure peace and access in the South China Sea, ballistic missile testing by North Korea, and the situation in Ukraine.
What does this mean for startups in Southeast Asia?
The EU and Southeast Asia summit holds much promise for startups in ASEAN as Europe seeks to improve trade and cooperation with the region. The EUR 10 billion investment creates new opportunities for businesses to strategically deploy funds, leading to growth and expansion in ASEAN and beyond. According to Bloomberg, the investment package would come from public funds and would support projects in infrastructure, renewable energy, transport, and other sectors.
Although the VC trends Southeast Asia will likely experience this year are not encouraging due to the limited deployment of capital. However, some of the plans from the summit will try to kickstart the struggling global economies and help the EU and ASEAN economies recover. The EU-ASEAN Plan of Action 2023-2027 outlined cooperation in COVID-19 pandemic recovery, sustainable trade, sustainable connectivity, security, and disaster preparedness. It was also vital to ensure food security and stable supply chains.
Startups in Southeast Asia should expect to operate in a conducive and business-friendly environment, especially after reading the final joint statement from ASEAN leaders after the summit. The leaders highlighted their commitment to ensuring regional peace, supporting the flow of essential agricultural products, adopting technology and ensuring cyber safety, collaborating and coordinating on defeating the pandemic, keeping supply chains open, and more.
The reaffirmation of the drive to meet the UN’s Sustainable Development Goals (SDGs) will shape the direction startups take. It will be necessary for startups to innovate in an environmentally-friendly way, reduce waste, and create access to clean energy. Moreover, investors will focus on companies with sustainability as part of their business model.
Overall, the partnership between the EU and Southeast Asia will enhance trade, the exchange of ideas, and mutually-beneficial investment deals.