To ultimately boost UK trade with the ASEAN region, the Prime Minister's strategy needs to focus on increasing collaboration for innovation: understanding when to take a regional or national approach; playing to the UK's strengths but understanding where ASEAN is leading, and building international networks.
David Cameron has been on a whistle-stop tour of some of the ASEAN countries this week, with increasing trade between the UK and Singapore, Thailand, Indonesia and Malaysia top of the diplomatic agenda. Big potential gains for the UK are being talked up (for example see UKTI’s rather breathless promotional video here, and No 10’s claims of potential £3bn a year upside to the UK), and certainly the average recent growth rates of ~5% for each of those countries is enough to garner envious looks from the UK and other becalmed post-crash EU economies.
The broader opportunity certainly is there: an enterprising UK can ill-afford to ignore a region that has 620 million people, and provides a combined £1.2 trillion (and ever-growing) contribution to the world economy. While pure trade deals and projects - for example around export guarantees to support infrastructure projects in the region, or for ASEAN inward investment in the UK - will garner the headlines, we strongly believe that the key to really boosting economic relations with the ASEAN countries will rely on the forging of longer-term partnerships aimed at fostering innovation in both the UK and the region.
To take Malaysia (where I worked with a Malaysian government agency on a project for much of 2014) as an example: despite the long (albeit occasionally fraught) history between the UK and Malaysia, the UK is a relatively trivial trading partner for them. We rank 17th for their exports - half as important as Germany, and almost 3 times less than the Dutch, and most recent data seem to point to that figure deteriorating.* Yet in areas of collaboration for innovation we are arguably key, and increasingly important, partners: UK academics are Malaysian academics most regular research publications partners, and a recent British Council review found several of the ASEAN countries punching above their weight in specific research areas like energy (including green energy, agricultural and biological sciences, and engineering (albeit some from a pretty low base of research investment overall).
Nesta’s international innovation team seeks to understand and support countries around the world with the development of their innovation systems, and to use that knowledge and insight to boost the UK’s innovation. One of the key levers for both these goals is increasing, and increasing our understanding of, the depth and quality of international collaborations for innovation. From our work around the world - and ASEAN governments in particular - I suggest the following three areas the PM should be focusing on build on to boost collaboration for innovation, and, through those improved ties, broader trade and investment.
1. Consider when to take a pan-ASEAN approach, and when to have country specific approaches to innovation collaboration
Broad trade liberalisation deals encompassing whole regions - like the new ASEAN free trade deal, or the proposed one between ASEAN and the EU - have their place, but the UK can be nuanced in when to try and forge collaborations on a bilateral rather than regional basis. The main ASEAN countries share some characteristics, but, for example, vary wildly in the capacity of their innovation system: measured using the Global Innovation Index, ASEAN countries stretch from a UK-like 7th in the world for Singapore, through Malaysia in 33rd right down to Philippines at 100. The UK’s main international innovation collaboration fund - the Newton Fund - is mostly on the right lines here, tailoring collaborations so that larger scale or more sophisticated programmes, projects and deals can be supported in countries like Malaysia, and more modest institutional links for other ASEAN countries, but it also could look to explore pan-ASEAN collaborations where the systems can support it.
2. Look to play to the UK’s strengths and expertise, but also seek out when we can learn from ASEAN innovation
Joint interests in innovation: The UK should seek out areas where there is joint interest in innovation, particularly where we share a competitive advantage. For example, both Kuala Lumpur and London are recognised as key global hubs in the development of islamic finance - KL in particular around Islamic-compliant insurance products: sukuk and takaful.
Using UK strengths to build relationships: The UK is an acknowledged leader in developing its innovation system - around areas such open data, challenge prizes, or impact investment. The UK’s reputation as a global hub for knowledge of how to support innovation can be boosted by using that expertise to support the development of the innovation systems of ASEAN countries.
Learning from ASEAN leadership: Cutting edge approaches to supporting innovation can come from ASEAN too. As a single example, the Malaysian National Innovation Agency has developed a National Corporate Innovation Index which looks to help firms measure their return on investment from intangible assets. It did so with input and support from the Nesta Innovation Index approach, but few, if any, nations have taken the initiative to systematically support firms to account for flows of innovation funding in this way, despite the importance of intangibles to global economic growth. The UK increasingly has the opportunity to learn from ASEAN leadership in innovation support.
3. Work to build global networks around the support for innovation
In July 2015, Nesta convened (probably) the world’s most extensive gathering of innovation public sector innovation labs, with representatives from more than 60 gathering to hear best practice, and problem solve. Building the capacity of international networks is a crucial element of increasing the capacity of the innovation system to support collaboration. While some parts of the world, such as Europe, have embryonic network associations for those engaged in innovation support, most - including ASEAN - do not. There is a clear opportunity for the UK to assist in connecting UK and ASEAN expertise to support innovation. Enduring collaborations for trade in high value goods and services where the UK benefits most strongly will be based in effective UK-ASEAN innovation networks.
Some may say this is very government-action focused, when the majority of innovation spend - including in some ASEAN countries - is from the private sector. But with recent UK research showing the ‘leverage effect’ - public investment in science and innovation driving greater private sector engagement - is even stronger than considered before, actions to build capacity and strengthen the national innovation systems of ASEAN countries are all the more crucial for the (joint) development of private sector high value goods and services. Through strengthening collaboration for innovation, the UK’s position as an innovation hub can be enhanced, and the emergence of more innovation-driven economies in ASEAN will form the basis of larger, more substantive, and more enduring trade deals.
* This fits our poor broader export levels to emerging economies: 'Only 20 per cent of our exports go to emerging and developing countries (compared with 29 per cent for Germany and 31 per cent for Italy)'