Ambassador Donovan’s Remarks at the APCAC Business Summit

Good morning, everyone.  Thank you for the kind introduction.  I would like to thank all of you for coming, and especially the Asia-Pacific Council of American Chambers of Commerce (APCAC) for making this event happen.

It’s a pleasure for me to be back in Hong Kong to speak to this distinguished gathering on “The Future of U.S. Trade and Investment in Asia,” and to see many old friends and colleagues in the audience.

For this keynote address, I was asked to talk about the United States’ trade and investment with ASEAN, which I will certainly do.  However, given the diverse audience – representative of the wider region – I thought it useful to first set the scene by talking about our already extensive economic ties with the entire Indo-Pacific.

So, why is the Indo-Pacific important to the United States?  The people in this room will instinctively know the answer to this question.

With 38 economies and 60% of the world’s population, the Indo-Pacific already constitutes one-half of all global trade.

In this regard, it’s worth reminding ourselves that the United States has been the most vigorous driver of regional trade for decades, as an investor, producer, and consumer.  The United States alone conducted over $1.8 trillion in two-way trade with the Indo-Pacific in 2017.

American engagement over the decades has contributed to the economic momentum we see in this region today.  But we are not resting on past accomplishments.  We intend to help fuel the future growth of this region.

Let me just give a few examples here.

Gas consumption in Asia is poised to grow rapidly.  The Indo-Pacific region will account for roughly 85 percent of the growth in net gas imports globally, requiring an estimated $80 billion in liquefied natural gas (LNG) infrastructure investment in ASEAN and India alone.

Commensurate with this demand spike, improvements in extractive technologies have led to record volumes of U.S. production.  Today, the United States has about 30 billion cubic meters of LNG export capacity, with additional capacity coming online in the future.

Nearly half of the cargos in this early stage of U.S. LNG exports have landed in the Indo-Pacific.   These U.S. energy exports are already strengthening the energy security of our allies and partners in this region.

Similarly, given our long experience in this part of the world, we remain focused on building strong, reciprocal, and balanced bilateral trade and investment relationships throughout the region.  Our robust trading relationships in the Indo-Pacific include three free trade agreements and 14 Trade and Investment Framework Agreements in the Indo-Pacific.

The United States has updated investment and trade agreements to make them fairer to U.S. workers and businesses, and better suited to 21st-century economic realities.  This also makes our trade relationships more politically sustainable for ourselves and our partners over the long term.

Our efforts in this regard include the updated KORUS agreement with South Korea.  And on the margins of the 2018 UN General Assembly, President Trump and Japanese Prime Minister Shinzo Abe announced their intent to pursue a bilateral U.S.-Japan trade agreement.

Of course, trade goes hand in hand with investment.

U.S. investment in the Indo-Pacific is extensive, touching nearly every sector of the regional economy.  American companies have played a key role in the region’s economic success, providing billions of dollars in capital and creating jobs for millions of workers.

The U.S. direct investment position in the Indo-Pacific region was $940 billion in 2017, measured at historical cost.  This amount almost doubled from $502 billion in 2009, with average annual direct investment of $45.8 billion over the past ten years.  No country has invested more in the Indo-Pacific than the United States.

Unlike others, where we invest, we also create jobs.

U.S. investments support over 5.1 million jobs in the Indo-Pacific.  There are many specific cases in point from across the region.  For example, just to cite those in Indonesia, the country where I’m U.S. Ambassador.

From the apparel industry: where Nike is celebrating its 30th anniversary of sourcing from Indonesia, and employs more than 171,000 Indonesian workers in contract factories.

To the oil industry: where Exxon’s plant in Bojonegoro, East Java uses cutting edge technology, industry best practices, and a team of talented Indonesian engineers and oil-workers to produce 25 percent of Indonesia’s daily output of oil. The $44 billion in government revenue collected from the facility is more than ten times the total investment cost, while since 2007 Exxon has invested more than $30 million in projects supporting the local community.

To the latest technologies: Cisco has announced that Indonesia will become the first country in Southeast Asia to join its Country Digital Acceleration program. This commitment is on top of the 212,000 Indonesian students Cisco has already trained with the skills needed to succeed in the modern digital economy.

The bottom line is that we have always been here and we have always cared about this region.

Now, someone famous once said, “80 percent of success is showing up.”  But we don’t think that showing up in this region is enough.  We believe that our long-standing presence needs to be supported by a comprehensive plan and by action informed by a set of guiding principles.

So, how should the United States build upon our existing economic ties in this region to participate in – and contribute to – the enormous growth trajectory that we expect in the next decades?  Formulating the answer to that question is what led to the development of the U.S. Indo-Pacific strategy.

At its core, the Indo-Pacific strategy recognizes that prosperity and security of this part of the world is essential to the prosperity and security of the United States.  It recognizes that democratic and secure nations that provide opportunities for their citizens are good for the United States.

Our approach is different from some initiatives put forward by other nations.  We seek to demonstrate an alternate model for development that promotes private sector-led economic growth and empowers U.S. firms to compete fairly and successfully with others in the region.   The United States will do this by catalyzing the resources that all of your companies in this room represent – the know-how, the investment, and the relationships that the private sector nurtures every day.

Under the Indo-Pacific strategy, the U.S. Government doesn’t tell U.S. companies what to do.  But we do help build environments that foster fair, productive capitalism.

We don’t tell U.S. companies where to invest for strategic purposes.  But we do advocate for the level playing field and fair treatment that helps attract investment and allows American firms to succeed – so that local communities can flourish, and bilateral partnerships can grow.

To advance this vision of a free and open Indo-Pacific, it is first and foremost important to bring a true sense of partnership to this endeavor.  Secretary of State Pompeo likes to say that the United States practices “partnership economics.”  I believe that as businesspeople, you intuitively understand the mutual trust that undergirds that phrase.

In business, a partnership is an arrangement where parties cooperate to advance their mutual interests, including – importantly – sharing in the joint management of an effort or project.  The U.S. government has a long history of supporting private sector partnerships that build prosperity for citizens in countries on both sides of a transaction, investment, or business deal.

Our vision for a free and open Indo-Pacific excludes no nation.

It is important to emphasize that we are not asking anyone to choose between the United States and China.  Like the United States, China is an Indo-Pacific country.  We welcome their constructive participation in upholding an international system based on clear and transparent rules.  Indeed, we welcome investment from all countries – if it is commercially motivated, transparent, and follows international rules, such as those of the Asian Development Bank, World Bank, and the International Monetary Fund.

The Asian Development Bank has estimated that by 2030, $26 trillion in investment will be needed to support Indo-Pacific nations in developing their full potential.  No single country can meet this need, but by using government resources to catalyze private business opportunities, and by advocating for a level playing field for firms to compete, the United States can create the conditions that will bring the needed private investment.

That’s why as part of the Indo-Pacific strategy, and based on consultations with allies and partners, we identified three priority sectors for new initiatives.  Those priority sectors are: the digital economy; infrastructure; and energy.

The specific initiatives we have in these three areas will draw on all U.S. tools – development finance, technical assistance, capacity building, feasibility studies, and commercial advocacy – to spur greater private investment and provide open platforms for collaboration with partners.

New U.S. economic initiatives in infrastructure, energy, and the digital economy will spur greater investment.  U.S. technical assistance will improve regulatory practices, build expertise in contracts and procurement, expand public-private partnerships, and foster business-to-business connections.

Let me discuss each of these three initiatives:

Digital Economy

We live in a digital world and the digital economy fuels global growth. In 2015, the global digital economy was worth $3.5 trillion, up from $1.2 trillion in 2008.

The Digital Partnership will promote access to an open, interoperable, reliable, and secure Internet in developing countries.

This initiative will establish public-private partnerships to build digital infrastructure; deploy technical assistance to support projects ranging from crafting ICT sector regulations to improving cyber incident response capabilities; and expand opportunities for U.S. exports. But the businesses that stand to gain the most from the digital economy also face significant challenges, such as policies that force data localization or restrict cross-border data flows.

We must ensure governments are not undermining this growth through unfair, protectionist measures, but rather serve as the champions of open platforms for innovation, the free flow of data, and other market-based measures that lift up all our economies.

Infrastructure

As the ADB noted, this region needs trillions of dollars in investment by 2030.

No government has this amount of money – only the $70 trillion in private capital located in the world’s financial centers can meet these requirements. The United States supports open business environments to attract this capital.

As part of the Indo-Pacific strategy, the Infrastructure Transaction and Assistance Network, or ITAN, is a whole-of-government initiative to help develop sustainable infrastructure in the Indo-Pacific.

The initiative establishes a new interagency body to optimize U.S. tools for assessing projects, directing development finance, and deploying technical assistance to strengthen infrastructure planning and procurement in partner countries. ITAN also establishes a new Indo-Pacific Transaction Advisory Fund to help partner countries access private legal support for infrastructure contract negotiations.

Energy

 Our initiative in this area is called Asia Enhancing Development and Growth through Energy, or “Asia EDGE.” It is also a whole-of-government effort to strengthen energy security and ensure energy access across the Indo-Pacific.

With some of the world’s largest energy producers and consumers, the Asia-Pacific region accounts for roughly 60 percent of global energy consumption and greenhouse gas emissions. At the same time, many populations still lack reliable energy access.

The United States will provide technical assistance to improve partner countries’ regulatory environments and procurement processes; work with partners to develop national and regional energy market plans; and help countries develop smart grids and other forms of modern energy infrastructure.

This work helps create and grow markets for high-tech, efficient, and clean energy goods and services.

These three initiatives are supplemented by a host of other new, existing, and in some cases, reinvigorated U.S. government programs in support of the Indo-Pacific strategy.

For example, thanks to passage of the BUILD Act in October, the United States is in the process of establishing a new International Development Finance Corporation with the authority to make equity investments, and the ability to conduct feasibility studies.  The BUILD Act more than doubles the amount of available USG-backed financing available, from $29 billion to $60 billion, and gives us more flexibility in which development and infrastructure projects we can support.

The goal of this U.S. engagement is to offer avenues for our partners to make progress in attracting good money from the private sector.  In this regard, U.S. development finance tools mobilize private investment by reducing risk.

The Administration is also working to revitalize the Export-Import Bank of the United States, which could begin to consider $10 billion in Indo-Pacific projects currently in its pipeline once a board quorum is in place.

Additionally, the United States is actively expanding its partnerships with countries such as Japan and Australia that also bring important resources and capabilities to bear in diverse investment environments.  As one example, the U.S. Overseas Private Investment Corporation, the Japan Bank of International Cooperation, and the Australian government signed a trilateral partnership last year to invest in projects in the Indo-Pacific region that build infrastructure, address key development challenges, increase connectivity, and promote economic growth.

The United States and Japan are also cooperating on a wide variety of economic projects across the region.

I mentioned earlier the importance of the growing regional natural gas market.  Today in Jakarta, my Mission has organized an LNG Workshop, in cooperation with the Japanese embassy and the Japan External Trade Organization.  This workshop will demonstrate that the U.S. and Japanese governments, and our private sectors, seek to be partners of choice – bringing the best technology, the best safety and environmental records, and a commitment to transparency and sovereignty.

More examples of this kind of collaboration will leverage our combined strengths to advance prosperity across the Indo-Pacific.

Which brings me to ASEAN’s place in the Indo-Pacific strategy.

As Secretary Pompeo has said, ASEAN is literally at the center of the Indo-Pacific, and it plays a central role in the Indo-Pacific vision that America is presenting.

The 10 countries of ASEAN together are the fourth largest export market for the United States, and the number one destination for U.S. foreign direct investment in Asia.

Driven by their young population and growing middle class, ASEAN countries will play an even greater leadership role in the integration and development of the Indo-Pacific region.

Our two-way trade in goods with ASEAN was the highest yet in 2017, at $241 billion.  And we’re on track to easily beat that number for 2018, once final data come in.  Our trade with ASEAN supports over half a million American jobs.

Similarly, our investment in ASEAN is bringing prosperity and jobs throughout Southeast Asia.  Our private sector investment in this vital part of the globe is large and growing.  U.S. companies have invested nearly $329 billion in ASEAN, more than they’ve invested in China, Japan, Korea, and India combined.  These U.S. investments in ASEAN supported close to a million jobs around the region.  Just as importantly, we would also like to see increased investment from the region into the United States.

Given this region’s economic importance, we are highly engaged with ASEAN as a region and as an organization.  We work with ASEAN through our U.S. ASEAN Connect framework, leveraging our network of U.S. government agencies and U.S. private sector partners to amplify our cooperation on business, energy, innovation, and policy issues.  Our Mission to ASEAN based in Jakarta works with the ASEAN Secretariat and member states to advance the interests of the U.S. business community.

Making trade easier for our exporters is a high priority, and our team in Jakarta has worked with ASEAN over the last decade to create an ASEAN wide “single window” for customs clearance.  The ASEAN Single Window lets exporters submit their documents electronically to one central location that can be shared across the region.  The Single Window went live last year with five out of the ten countries, exchanging over 35,000 documents every month, and saving exporters nearly $9 million.

USAID’s new IGNITE project (and that stands for Inclusive Growth in ASEAN through Innovation, Trade and E-Commerce), will take the ball forward on trade facilitation, getting the rest of ASEAN on board with the ASEAN Single Window, and working on new programs to reduce non-tariff trade barriers, improve logistics, expand access to trade finance, and promote harmonization of standards.

We’re also taking on the challenges around the digital economy and the Fourth Industrial Revolution.  ASEAN has the fastest growing Internet population in the world, with over four million new users coming online every month.  This rapid digital expansion could add up to $360 billion to the region’s GDP by 2025.

Yet a thriving digital economy relies on a supportive policy and regulatory ecosystem.  Although our ASEAN counterparts are excited by the prospects of linking their economies to the global digital economy, there continue to be regulations that stifle its growth.  Restrictions on cross-border data flows and requirements that companies store or process data on local servers hinder innovation and investment, and raise costs for small and medium-sized enterprises that rely heavily on access to global data servers and e-commerce networks to reach global markets.

In addition to its work in the trade field, our IGNITE program is also promoting the growth of the regional digital economy by supporting efforts to expand digital finance, improve cybersecurity, strengthen data privacy, improve consumer protection, and expand broadband access and affordability.

Our U.S. ASEAN Connect team is continuing their Digital Economy Series, an ongoing set of roundtables and workshops that promote best practices for developing policy and regulatory ecosystems for a thriving digital economy.  We’re bringing together key ASEAN government decision makers with leading U.S. and regional technology companies to share best practices and expertise, discuss opportunities for U.S. companies to contribute to the growth of the digital sector, and facilitate a more open and innovative environment in which both local and American small and medium enterprises can thrive.

We’ve also just launched our new U.S.-ASEAN Smart Cities Partnership, linking up with ASEAN’s Smart Cities Network of 26 cities around the region that are looking for technology-based solutions to their urban challenges.  Our commercial teams have already successfully hooked up U.S. companies with some of these cities to work on smart city projects, and we look forward to creating more opportunities for our leading companies to provide the technology and smart solutions that ASEAN cities desperately need.

Since all of you here are from the best of our companies, I want to put in a pitch for another new program, the U.S.-ASEAN Internship Program.

Launched last year in conjunction with the US ASEAN Business Council, the program highlights internship opportunities at U.S. companies around the region.  Our program website is a one-stop searchable platform for local students to find internships by country, company, and specialty.  In its first phase, 11 U.S. companies are now on board offering over 100 internships in seven ASEAN countries.  Our posts around the region are organizing promotional events and spreading the word through our Young Southeast Asian Leaders Initiative alumni network to help find the best young talent in Southeast Asia.  If you’d like to be a part of the program and include your internship opportunities, we’d encourage you to contact our U.S. Mission to ASEAN in Jakarta.

In closing, let me be clear:  We are committed to expanding our economic engagement in the Indo-Pacific region and with ASEAN countries.  We will continuously strive toward the goal of a trade and economic relationship that abides by the principle of partnership economics – freedom and openness, a commitment to democracy and good governance, fairness and respect for local autonomy and national sovereignty.

The United States and countries in this region have many shared experiences, and together we can pursue opportunities that demonstrate leadership, and improve the lives of all our citizens.

These are compelling developments for the United States and for the countries of this region.  I am willing to bet that most of you at this Summit count yourself lucky to be working in such a dynamic part of the world at such a critical time.

I know that my colleagues and I, across the various U.S. Missions in the Indo-Pacific, feel the same way.

We look forward to working with you to leverage business opportunities and strengthen the people-to-people ties between Americans and citizens of this exciting region.

Thank you very much.

(As Prepared)