SINGAPORE — With the ongoing trade standoff between the United States and China fuelling fears of a full-blown trade war, Finance Minister Heng Swee Keat warned that protectionism could upset the “positive outlook” for the economies of the Association of South-east Asian Nations (Asean).

“We are only too aware of the headwinds that lie ahead, including rising protectionism and trade tensions, technological disruption and demographic trends. If not managed well, these profound forces can dramatically affect our growth trajectories. But working together, we can rise to meet these challenges,” Mr Heng said during his opening remarks at the 22nd Asean Finance Ministers’ Meeting on Friday (April 6).

Asean saw strong economic growth of 5.2 per cent last year, and the momentum is expected to be sustained this year, on the back of broad-based global economic recovery, trade expansions, sustained private consumption and growing infrastructure investment.

The region’s growth is expected to outstrip most other regions this year, Mr Heng said, noting that the meeting was held at “a time of optimism for the regional economies”.

“However, we should not take this positive outlook for granted,” he cautioned.

At a joint media conference on Friday evening to wrap up the 4th Asean Finance Ministers’ and Central Bank Governors’ Meeting, Mr Heng also said that finance ministers and central bank governors’ of the 10 Asean member states had “spent quite a bit of time” discussing the impact of trade wars and importance of trade.

However, even though they warned of the risks of rising protectionism, the authorities are confident that the region’s growth momentum for this and next year is likely to be maintained, he added.

Asked if there are concerns that investors’ sentiments in the region could take a hit, given that recent trade disputes have already rattled global financial markets, Mr Heng said: “Those are things that we really have to watch. It is too early for us to conclude and revise growth projections. These are risk scenarios that we always have to watch for, but our central scenario remains pretty benign.”

While globalisation may have adversely affected some segments of national populations, it has brought significant benefits to many in the world, including lifting millions out of poverty, the Finance Minister said.

The solution to alleviating the negative impact is “not to close the economy, but to integrate our economies better”, he said. One key to this is to continue to find ways to “upskill” people for new jobs and new growth areas. “As structural changes happen, there will be new areas which we will have to adjust to, and we have to build that capacity in our people and our companies to be able to do that.”

Member states have also agreed to step up efforts to promote “financial inclusion” across their populations, and recognise the significance of financial technology (fintech) in achieving this, Mr Heng said.

Mr Ravi Menon, managing director of the Monetary Authority of Singapore and co-chair of the meeting, noted that smartphone penetration is “extraordinarily high” in Asia, making it an effective way to reach out to under-served markets in rural or isolated areas in member states.

The respective central banks and regulators are also keen to tap key financial institutions and small fintech players to improve their populations’ access to financial services, Mr Menon added.

In a joint statement outlining key priorities for financial cooperation this year, the authorities reiterated their commitment to accelerating infrastructure development and financing through mobilising private capital.

At the 8th World Bank-Singapore Infrastructure Finance Summit on Thursday, Mr Heng had called on Asean states to step up efforts in making infrastructure investments more mainstream and available to a larger pool of investors.

To this end, Asean has committed to showcase the pipeline of investible projects and raise greater awareness of infrastructure investment opportunities in the region, strengthen cooperation with multilateral development banks such as the World Bank Group and the Asian Development Bank, and promote the wider adoption of standardised contractual provisions to help attract more sources of private capital financing.

Among other things, member states will also work to boost disaster and cyber resilience, and promote sustainable finance through the issuance of green bonds.