Most Southeast Asian economies have doubled in size since 2000.
But a new report says their energy security is at risk if they don’t develop more renewable power.

These nations also need to take urgent action to curb their greenhouse emissions, after relying on coal to power their economic growth.

It’s rare to read about economic growth at the moment, but most Southeast Asian countries have seen their economies double in size since 2000.

However, this growth has been so rapid that it’s now threatening to outstrip the region’s ability to keep itself supplied with energy, according to a new report from the International Energy Agency (IEA).

Power generation in the region has almost tripled in the past two decades to keep pace with economic growth, with the largest increase coming from coal-fired power plants, the Southeast Asia Energy Outlook 2022 says. Rising living standards have led to a threefold increase in the number of air conditioning units over the same period.

There has also been a tripling in the length of paved roads and the number of vehicles on them. Meanwhile, the proportion of the population with access to electricity climbed from 60% in 2000 to 95% in 2020.

But first COVID-19 and now the turbulence in global oil and gas markets caused by Russia’s invasion of Ukraine have dented Southeast Asia’s energy and economic prospects.

Governments across Southeast Asia have pledged to reduce their dependence on fossil fuels and set targets to move to carbon neutrality. But the IEA says these countries are unlikely to hit these targets with their current policies.

Energy demand in Southeast Asia has increased by an average of 3% a year since 2000 – a trend that is set to continue as economic growth returns after the pandemic. However, the IEA says three-quarters of this new demand is likely to be met by fossil fuels, increasing CO2 emissions by a third.

Although the region imports most of its oil from the Middle East and Africa, market turbulence caused by Russia’s war on Ukraine has “shone a spotlight on the energy security vulnerabilities of Southeast Asian countries”, the reports says.

Clean energy solution

The transition to clean energy will provide a long-term solution to soaring oil and gas prices, the IEA says. However, it warns that energy costs will rise in the short term for a number of Southeast Asian nations, as they need to increase their fossil fuel stockpiles to guard against supply disruptions.

In recent years, only about 40% of the region’s energy investment has gone into renewables. That needs to increase sharply to help keep global temperature rises below 2°C, the IEA says, estimating that these nations will need to spend $190 billion a year by 2030 on solar and wind capacity and on improving energy grids.

Solar energy in Indonesia would cost 40% less if its investment and financing risks were similar to those of advanced economies.

Unpredictable regulation and restrictions on foreign direct investment are holding back private-sector investment, the report adds. It says solar energy in Indonesia would be 40% cheaper if its investment and financing risks were comparable to those of advanced economies.

Contracts with power generators also need to become more flexible to reflect the variable nature of renewable generation, the report says. Power stations in some countries are currently paid whether their electricity is needed or not.

Cutting emissions

The region could also cut its emissions in the short term by increasing its use of low-emissions biofuels and carbon capture technology, the IEA says. Even switching from coal to natural gas would cut emissions by 30% by 2050 compared with current policies.

Ferdinand Marcos Jr is set to become President of the Philippines and Sara Duterte, the daughter of the current President, Rodrigo Duterte, is set to become Vice President.

Foreign investors are expected to resort to a wait-and-see approach since the President-elect has not made his economic policies clear. The immediate challenges facing Marcos Jr include the Philippines’ high budget deficit, income inequality, and balancing relations between the US and China. Putting the colorful family legacy aside, a question on everybody’s minds is whether Marcos Jr will continue some of Duterte’s flagship economic programs, such as infrastructure spending under the Build, Build, Build program.

On May 9, 2022, Filipinos went to the polls to choose their next president and vice president in what has been touted as the most significant election in the country’s history. Unofficial results show that Ferdinand ‘Bongbong’ Marcos Jr, son of former strongman President Ferdinand Marcos Sr, captured 31 million votes, double that of his closest rival, the current Vice President Leni Robredo who had some 14 million votes. Some 67.5 million were eligible to vote in this year’s elections.

Foreign investors are expected to resort to a wait-and-see approach, particularly since the President-elect has not made his economic policies clear. What is clear is that the new President will inherit a country with immediate and long-standing challenges, which include an economy battered by the pandemic, a record national debt of PHP 11.7 trillion (US$232 billion), deep poverty, and increasing inequality.

President Ferdinand Marcos Sr was elected in 1965 before declaring martial law in 1972 to suppress the threat of a communist takeover and civil strife following a series of bombings in Manila. Though it was formally lifted in 1981, the powers granted under martial law continued to be granted to the President for the duration of his presidency. Allegations of human rights abuses and mass corruption led to a People Power Revolution in 1986, which removed him from power. He and his family fled to Hawaii where hundreds of criminal and civil cases were filed against him and his family as they were accused of amassing a fortune worth about US$10 billion through ill-gotten gains.

Under his presidency, the Philippines saw a growth rate rise, peaking at nine percent in 1973 and 1976. He pursued an aggressive infrastructure program, funded by foreign debt that would lead to an inflationary crisis in the latter years of his presidency. The economy contracted by as much as 7.3 percent in 1984 and 1985. External debt ballooned from US$599 million at the start of his presidency to over US$28.3 billion when he fled into exile — amounting to 80 percent of the GDP.

Ferdinand Marcos Sr died in Hawaii on September 28, 1989.

Bongbong Marcos was elected as Vice Governor of Ilocos Norte province in 1980, a stronghold of the Marcos family. He became Governor of the province in 1983, before the revolution, taking over from his aunt who had held power for over a decade. Upon the family’s return to the Philippines, Bongbong was elected to the House of Representatives in 1992, from where he began his decades-long effort to attain the presidency. He suffered a setback in 2016 when his Vice-Presidential bid came up short to the current Vice President Leni Robredo.

Bongbong Marcos filed a protest to the country’s Supreme Court to contest the results. The Supreme Court dismissed his protest.

The Marcos campaign has offered little in terms of policies on how to tackle the myriad of problems in the Philippines. The benchmark Philippine index dropped amid a selloff as investors wait for Marcos Jr’s economic plans. The selloff erased as much as US$9.3 billion on May 10, 2022. The Marcos Jr campaign has focused on the theme of ‘unity’. Bongbong snubbed invitations to partake in pre-election debates, and rarely gave interviews; even his campaign website contains no clear overview of any policy pledges.

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This article was first published by AseanBriefing which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, India, and Russia. Readers may write to [email protected]