In Asia, richer countries are inking deals amid energy crisis, but poorer ones are left out  - Singapore News

SINGAPORE: The conflict in the Middle East has caused a global energy emergency, with countries in the Asia Pacific region particularly affected, and yet, nations have not been affected in the same way, depending on the resources each one has.

The war, which began just over two months ago when the United States and Israel began bombing Iran, resulted in the closure of the Strait of Hormuz, a key chokepoint for 20% of the world’s fuel. Countries that are heavily dependent on oil and gas from the Middle East, as many in the Asia-Pacific region are, have had to scramble to secure enough supply for domestic use amid substantially higher prices.

Amid the crisis, a new trend of supply-chain security agreements is emerging. Beyond classic free trade deals, these are focused on critical minerals, energy, food, technology, and crisis resilience.

Singapore, for example, inked a pact in late March with Australia for energy supply chain resilience and with New Zealand on May 4 for the continuous flow of essentials, such as food and fuel, between the two countries.

This week, Japan and Australia also entered into agreements for boosting cooperation on critical minerals and energy. Japan has also been entering into deals with Indonesia and Vietnam.

However, while the Association of Southeast Asian Nations (ASEAN) has been entering into agreements as a bloc, such as an upgraded free trade deal with China, its member countries with fewer resources may find themselves out in the cold.

With a number of recent agreements focusing on critical minerals, advanced manufacturing, and digital trade, the countries that lack capacity in these sectors are left out.

While Singapore is not a producer, it is an orchestrator when it comes to trade, finance, and supply chains. The city-state is a leader when it comes to “resilient trade” agreements, such as those dealing with essential goods and crisis supply. As such, Singapore stands to become a control centre for regional supply networks.

Vietnam, which has been attracting foreign investment and is emerging as an alternative to China for manufacturing, also has an edge in the region, as does Indonesia due to its mineral resources.

However, in other countries that are left out of these supply chains, such as Cambodia, Laos, Myanmar, and the smaller ASEAN economies, this is not the case, and it will have adverse effects.

“In countries such as New Zealand and Australia, the shock will be absorbed and passed through — higher fuel costs feeding into inflation, squeezing households, and slowing economic activity.

However, in poorer, more fuel-dependent economies, the consequences are more immediate and more severe. Those economies cannot simply pay more. They consume less, or not at all. And that’s why richer countries can keep getting supplies: They pay for it.

That is the unspoken edge of the current crisis: it is global, but its pain is highly uneven,” reads a May 4 analysis in New Zealand’s The Post.  /TISG

Read also: Poorest across Southeast Asia are the hardest hit by energy crisis due to Iran war

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