Policy paper

UK–Southeast Asia regional development partnership summary, July 2023

Published 17 July 2023

This was published under the 2022 to 2024 Sunak Conservative government

Introduction

The UK’s development work underpins our efforts to act as a force for good in the world, to defend our values, reducing poverty and tackling global challenges with our international partners. The International Development Strategy (IDS) sets a bold new vision; an approach that sets development at the heart of the UK’s foreign policy, one that goes beyond aid and brings the combined power of the UK’s global economic, scientific, security and diplomatic strengths to our development partnerships. We will deepen economic, security and development ties globally, champion British interests, and deliver jobs and growth in both the UK and low- and middle-income countries. It is about improving lives and unleashing the power of people, so people and countries can take control of and determine their own economic security and resilience. This Regional Development Strategy details how the IDS will be put into practice in Southeast Asia (10 ASEAN Member States plus Timor-Leste), complementing the UK’s bilateral programmes in Indonesia and Myanmar.

Regional development context

Over the past decades, Southeast Asia has experienced impressive development, with an average growth rate of 5% to 6% and steep reductions in those living in extreme poverty. Seen as a bloc, the 10 (Association of Southeast Asian Nations) ASEAN countries are now the fifth largest economy in the world. However, Southeast Asian nations are at a range of different stages on their development journey – from high-income countries ineligible for Official Development Assistance (ODA) funding (Singapore and Brunei) through to poor and conflict-affected countries with lower development indicators such as Cambodia, Laos, Myanmar, and Timor-Leste ^{[footnote 1]}.

The region is expected to return to pre-pandemic growth rates later this year, but this growth is currently incompatible with a Paris-aligned future. Across ASEAN, the demand for green investment is an estimated $3 trillion (2016 to 2030), and critical to ensuring the region does not lock in long-term emissions. Most economies have a relatively low share of renewable energy in the overall mix compared to the potential resources available (hydro, solar, onshore/offshore wind). Energy grids, and the archipelagic geography of many countries in southern ASEAN particularly, pose a challenging barrier to increased adoption of renewables at scale.

Southeast Asia is extremely vulnerable to climate change, particularly to flooding and through exposure of agriculture and coastal populations to inundation, salination, and sea level rise. Myanmar, Cambodia, Laos, and Timor-Leste have relatively low coping capacity. Lack of effective legal and regulatory protections means there is a high risk of degradation of ASEAN’s 15% share of the world’s tropical forests and almost a fifth of global biodiversity. Agriculture, fishery, and forestry is the dominant source of employment across the region, making sustainable land use and rural economy important priorities.

The quality of education and skills training is a barrier to development in Cambodia, Myanmar, Laos, Timor-Leste, Indonesia, the Philippines, Thailand, and Malaysia. Education suffers from low years of schooling completed, low quality schooling, reduced access to education in rural areas, and education that does not equip students with the skills needed for the workplace. More than 140 million children in Southeast Asia have experienced learning losses due to COVID-19 school closures and, of these, over 27 million children waited more than a year to return to their classrooms. This further impacts the most marginalised (eg women and girls in rural and poor urban areas, the disabled, and the undocumented/informal migrants). Singapore and Vietnam are the exception to this – with Vietnam ranking fourth in science and 13th in reading out of 79 countries in 2018. The region has fast-growing digital economies, talent, and access to data – particularly on climate/disaster resilience and health – though many countries have complex bureaucratic regimes, limited research infrastructure, and few opportunities to access funding.

Emerging and re-emerging infectious diseases, growing antimicrobial resistance, the health impacts of climate change, and frequent natural disasters pose threats to health security in the region. The burden of disease varies across countries, with Myanmar, Indonesia, and Thailand having the highest burden of non-communicable diseases, and Cambodia and Laos the highest burden of infectious diseases. Risk factors for health security are diverse: Singapore, for example, has an exceptionally dense population, and Thailand the most international connections due to significant tourist flows. Despite improvements, health-related inequities persist across the region and health system capacities vary between countries. Out-of-pocket health expenditure (a key indicator of universal health coverage) is high, particularly in Myanmar and Cambodia, disproportionately impacting the poorest groups. Only Cambodia, the Philippines, and Singapore spend over the World Health Organization (WHO) recommended minimum of 5% of GDP on healthcare.

Types of government and electoral systems vary greatly, with one absolute monarchy (Brunei), 3 constitutional monarchies, and 4 republics with parliamentary democracies (Thailand, Malaysia, Cambodia and Indonesia, Singapore, the Philippines, Timor-Leste respectively), 2 one-party state socialist republics (Laos, Vietnam) and one country (Myanmar) under a military government embroiled in a civil war. The culture and history, levels of socio-economic development, and colonial heritage, all inform how ‘open’ these societies are with very different levels of ‘freedoms’ (speech, media, religious belief), civil society, good governance, and the rule of law.

Whilst strong peacebuilding progress exists in countries such as Timor-Leste, Southeast Asia is still home to some protracted conflicts. The ongoing conflict in Myanmar has made it the world’s fastest growing displacement crisis outside of Ukraine. Economic collapse in Myanmar poses real risks to regional stability as does the increased refugee flows to its neighbours. Women and girls bear the impact of these conflicts, while still not having their full voice and leadership recognised in policy decision making processes. In recent years, there has been strong momentum to support the advancement of the Women, Peace and Security agenda.

The UK’s development offer for Southeast Asia

The UK’s work in Southeast Asia supports our long-term commitment to the Indo-Pacific and helps to promote prosperity, resilience, and security and deliver global public goods. Our development approach is poverty-driven, contributing to the 2030 Sustainable Development Goal Agenda, while supporting our wish to deepen our strategic relationships with these countries.

The UK has been engaged in the region for many years, especially through major bilateral development partnerships with Indonesia and Myanmar. We have established multi-country programmes focused on economic development, climate mitigation and adaptation, education and skills, women peace and security, and resilient health systems. These programmes helped to mobilise almost £600 million of green finance; strengthened health systems in Thailand, Malaysia, Vietnam, and the Philippines; and, supported sustainable urbanisation initiatives across 8 Southeast Asian cities, catalysing and developing investment-ready business cases worth up to £1.5 billion. We are now building on these successful foundations by integrating programming with other development levers.

The UK will not buy results at scale in this region, but rather make niche investments focused on policy reform and human development in targeted areas. We will complement these by drawing into the region other UK Government resources which amplify these investments over time. This ‘patient development’ approach is focused on openness, democratic resilience, and creating lasting policy change to tackle the root causes of problems. Our support will be based around 3 key principles to maximise our development impact:

1. building partnerships that deliver results

2. catalytic investments that leverage larger investments from others

3. UK expertise, to provide advice, exchange lessons and evidence

Our development activity in Southeast Asia is also guided by the ASEAN-UK Plan of Action, which sets out priority activities over the next 5 years across the 3 ASEAN pillars (economic, socio-cultural, and political and security), with development integrated throughout. In close consultation with ASEAN, we are designing 5 flagship ASEAN-UK programmes which flow from the Plan of Action:

• Women and Girls’ Education: improving the quality of education and skills for marginalised girls and young women; promoting inclusion of remote and ethnic minority communities, urban poor, and children with disabilities (£30 million)
• Economic Integration: drawing on British expertise to drive stronger, more equitable growth and investment and contribute to ASEAN economic integration, through regulatory reform, open trade, and developing financial services markets (£25 million).
• Women, Peace, and Security (WPS): strengthening expertise to implement regional and national policies on WPS which consider the impact on, and role of, women in conflict, leading to greater female participation in conflict prevention, resolution, and recovery (£3.8 million)
• Health Partnerships: improving pandemic preparedness and global health security by building countries’ capacity to prevent, detect, and respond to disease outbreaks and contributing to improved regional coordination (£25 million)
• Green Transition: supporting ASEAN on net zero and supporting access to green finance as part of a just economic transition (£30 million). This programme will complement the UK’s large portfolio of bilateral climate work, for example by supporting the Just Energy Transition Partnerships (JETPs) in Vietnam and Indonesia.

These 5 themes have strong relevance to the UK’s IDS, directly responding to the key themes of women and girls, climate change, health systems, and economic development.

There are many other UK development resources which we will draw from in support of our regional development objectives and in line with the IDS. Our largest investments will be in climate and economic development as the areas where UK and Southeast Asian priorities most coincide and we can have most impact, especially investment in green growth.

Climate and biodiversity

• the Climate Action for a Resilient Asia (CARA) programme will spend up to £274 million to build the resilience of economies and vulnerable communities to climate change, improve the natural environment and promote low carbon growth
• the ASEAN Catalytic Green Finance Facility (ACGF) will use UK investment of up to £110 million to increase access to finance for green infrastructure across Southeast Asia.
• The UK’s £500 million Blue Planet Fund supports developing countries around the world to protect the marine environment and reduce poverty, focussing on Vietnam, Indonesia, and the Philippines
• UK Partnering for Accelerated Climate Transitions (UK PACT) is a £260 million technical assistance programme which supports partner countries to increase their climate ambition, reduce their emissions and accelerate just transitions to clean growth. It currently works with Indonesia, Malaysia, Thailand, and Vietnam and is hoping to expand support to the Philippines, ASEAN Institutions, Cambodia, and Laos
• The Darwin Initiative is a grants scheme that helps to protect biodiversity and the natural environment through projects worldwide. Currently, it is implemented in Indonesia, the Philippines, Malaysia, Vietnam, Laos, Thailand, and Cambodia
• The Illegal Wildlife Trade Challenge Fund (IWTCF) is a competitive grants scheme aimed at eradicating the illegal trade in wildlife, which is implemented in Indonesia, Malaysia, the Philippines, Cambodia, Thailand, Myanmar, Laos, and Vietnam
• the UK’s £100 million Biodiverse Landscape Fund aims to reduce poverty, protect, and restore biodiversity and lessen the impact of climate change in 6 environmentally critical landscapes across the globe. In ASEAN, it is implemented in the lower Mekong of Laos, Cambodia, and Vietnam

Investment and mobilising private finance

• British International Investment (BII) – the UK’s Development Finance Institution – invests over £1.5 billion a year into businesses and funds. BII opened a new regional office in Singapore and, in May 2023, launched its first Southeast Asia investment of $15 million in a Fund focused on infrastructure for energy transition. All BII’s regional investments will support climate resilience and a green economic transition in the region
• Private Infrastructure Development Group (PIDG): The UK is the largest donor to PIDG, also based in Singapore, which provides viability gap finance, technical assistance to develop projects, guarantees to commercial banks, and equity investment and has committed over $300 million in investments across several Southeast Asian countries since 2007
• Mobilist: UK’s pioneering programme supporting public listings to scale finance for climate infrastructure and other developmental assets portfolios. Already supporting listings of South-East Asian assets on the London and local stock exchanges of the Philippines, with investment partnerships plans across the wider region
• in 2022, UK Export Finance (UKEF) became the first export credit agency in the world to offer Climate Resilient Debt Clauses (CRDC) in its direct sovereign lending. The clauses will offer low-income countries and small island developing states the ability to defer debt repayments in the event of a severe climate shock or natural disaster

Health

• Health Research: across 8 countries in the region, 13 research partnerships which support a broad range of research including epidemic preparedness and response, infectious diseases, and maternal, new-born, and child health. The UK is currently scoping new partnerships in the region under its recently approved Global Health Security Research and Development Programme (£175 million)
• Fleming Fund: country and regional grants and fellowships which are helping to address Anti-Microbial Resistance by strengthening surveillance systems and data use in at least 4 ASEAN Member States and Timor-Leste. The Fund invests in strengthening surveillance systems through a portfolio of country and regional grants, global projects, and fellowship schemes
• Department of Health and Social Care (DHSC) International Health Regulation (IHR): strengthening project with UK Health Security Agency staff deployed to embassies in Indonesia and Thailand. Initial work will include building technical capabilities through the ASEAN Emergency Operations Centre network on environmental health and technical support for the development of a One Health Joint Plan of Action for ASEAN
• DHSC Global Health Research funding, delivered through the National Institute of Health and Care Research: 14 active projects including institutions from at least 6 countries in the region

Education

• Chevening Scholarships: in 2022, the UK provided 200 Chevening scholarships in the region to enable outstanding students from across the region to pursue one-year master’s degrees in the UK. We hope to increase that number in the coming years
• UK-led Centre of Expertise for Education: a new central initiative under design via the Scaling Access and Learning in Education (SCALE) programme. UK Government and external experts will shore up countries’ capability to use evidence-based interventions to tackle the foundational learning crisis
• International Financing Facility for Education (IFFEd) is a new mechanism combining donor guarantees and grants to leverage additional financing to lower middle-income countries. The UK is a key partner involved in design and funding, through the Asian Development Bank (ADB)

Security and stability

• Indo-Pacific Cyber Programme: From 2022 to 2025, the UK will deliver approximately £10 million in cyber capacity building across the region. Priority countries include Indonesia, the Philippines, Thailand, and Malaysia, as well as multilateral delivery through support to ASEAN cyber centres. Activities will include strengthening threat detection and response, improving Critical National Infrastructure defences, and improving cyber skills and awareness

• Maritime Programme: The UK is working with Southeast Asian countries to ensure a secure, prosperous, and sustainable maritime domain. With funding of up to £6.5 million from 2022 to 2025, activities are focused on supporting the United Nations Convention on the Law of the Sea (UNCLOS) and the international system to tackle challenges such as:

  • illegal, unreported and unregulated (IUU) fishing
  • climate security risk
  • coordination of Maritime Domain Awareness (MDA).

Increasing dialogue on maritime issues is also a priority.

Open societies and democratic resilience

• via the Conflict Security Stabilisation Fund ‘Strengthening Resilience in ASEAN’ Programme, the UK will spend £2.5 million to support regional partners in building resilience to internal and external drivers of authoritarian forms of governance. The programme will support discrete projects in the areas of institutions, civic space, and rule of law

Trade policy

• the UK’s new Developing Countries Trading Scheme is open to Cambodia, Indonesia, Laos, Myanmar, the Philippines, and Timor-Leste. In addition, the UK’s network of trade agreements (bilaterally with Singapore and Vietnam and through our Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) Membership) ensures free, fair, and open trade to high standards, thereby growing economies. We also support multilateral efforts to address market distortions that detract from development, including liberalising trade in green goods, especially though our seat at the World Trade Organization (WTO)

Science and technology

• the UK’s primary vehicle for cooperation on science and technology in Southeast Asia was the Newton Fund, which invested over £114.5 million match-funded by middle income economies (Indonesia, the Philippines, Thailand, Vietnam, and Malaysia) for research and innovation collaborations from 2014 to 2021. We are shifting our approach to smaller and more agile catalytic interventions, in particular on technology commercialisation and transfer, capacity-building, regulation, and governance for Artificial Intelligence (AI), and engineering biology in line with the UK’s new International Technology Strategy

Who we work with

We have a strong diplomatic footprint in the region, with ten bilateral posts in addition to the UK Mission to ASEAN based in Jakarta. Our core partnerships are with ASEAN institutions – primarily the ASEAN Secretariat, ASEAN Member States plus Timor-Leste, as well as with a range of regional and multilateral institutions working in different thematic areas of interest to us, including a broad range of United Nations (UN) agencies.

We engage closely with International Finance Institutions (IFIs), especially the ADB which is headquartered in Manila, the Philippines. Our engagement with ADB is cross-sectoral, with a particular focus on mobilising private capital and the delivery of climate finance to help deliver the ambitions of the Bridgetown agenda. The World Bank is a major actor in the region, and our partner of choice on many key agendas such as the Just Energy Transition in Indonesia.

We also work closely with industry alliances, including the Glasgow Financial Alliance for Net Zero (GFANZ) to encourage financial institutions and the wider financial sector to transition to net zero. Other leading financial institutions we support include the Green Finance Institute and the UK Transition Plan Taskforce. We also work with partners to pioneer cutting-edge research and provide technical capacity building through the Cambridge Centre for Alternative Finance, Oxford Sustainable Finance Group, Imperial College, and Singapore Management University’s Green Finance Centre.

As the newest ASEAN Dialogue Partner, we are in the process of building new relationships as we roll out our bespoke ASEAN programmes. We look forward to new partnerships with regional institutions such as the Southeast Asia Ministers of Education Organisation (SEAMEO) on education, ASEAN Institute for Peace and Reconciliation (IPR) on Women, Peace and Security, and the ASEAN Centre for Biodiversity.

As part of our distinct UK offer, we will also bring partnerships with respected UK institutions to the region, such as British Council, NHS Consortium, the Bank of England, Westminster Foundation for Democracy, and sector regulators like Ofgem and the Committee on Climate Change.

1. Timor-Leste, with a poverty rate of 42%, was admitted to ASEAN in 2022 ‘in-principle’ and is now on the path to accession as set out in the Timor-Leste ASEAN Accession Roadmap. ↩