Economics & Strategy DBS F lash Kopi Time E050 Transcript: Piyush Gupta on the future of banks, work, data privacy, and sustainability

Group Research March 22, 2021

• 50th episode of Kopi time, a podcast series on Taimur Baig, Chief Economist markets and economies from DBS Group [email protected] Research. Recorded on 12th March, 2021.

• Youtube link is here. Available also on all major podcast platforms, including Apple, Spotify, Amazon, and Google.

Piyush Gupta Guest Speaker

Producer: Martin Tacchi Publication support: Violet Lee and Daisy Sharma

Please direct distribution queries to Violet Lee +65 68785281 [email protected]

Refer to important disclosures at the end of this report.

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

Welcome to Kopi Time, a podcast series on markets downtime and making every service available to the and Economies from DBS Group Research. I'm consumer at scale around the world was not easy. I Taimur Baig, chief economist, welcoming you to our think banks have benefited from the recognition half century mark. Yes, it's the 50th episode, and we that they were able to support customers through have a very special guest with us. this period. So, I think that's the second positive.

Piyush Gupta is Chief Executive Officer and Director A third positive to me is the first cousin of that. I of DBS Group. He has been with us since 2009. Prior think banks, and particularly at DBS, we also to that, Piyush spent 27 years at , where his stretched ourselves to find new solutions through last assignment was CEO for , this period of time. So, stitching up last mile, , and . accepting documents digitally, helping companies to digitize their supply chains. All of these were Piyush, a warm welcome to Kopi Time. interesting solutions.

Piyush Gupta But perhaps the most important, obviously, is that we were at the core of the fiscal and monetary th I'm happy to join you on the 50 show of yours, policy response that governments came up with. So, Taimur. the government decided to provide moratoriums, the government guarantees, and they decided to Taimur Baig put new money again with government guarantees. Thank you. I want to talk about a bunch of things And because the banks were at the forefront of with you, but let's start with one of the learnings having to make the judgment, do the analytics, but from the pandemic. Agustin Carstens, head of BIS finally dole out the money. Well, you always look wrote around March of last year, just as the good when you're doling out money. And I think economic and the financial gravity of the crisis was there was a tremendous degree of recognition, becoming more evident that banks should be part of therefore, that banks were seen as people who are the solution, not part of the problem in this crisis. providing liquidity, providing forbearance and that's Have they delivered? always a good place to be. So, I think by and large, banks have come out looking quite good. I think frankly, we were part of the solution. Now, there’s Piyush Gupta always a caveat to these things. Well, I think it's fair to say that the banks have come out of this crisis looking and smelling a lot better I think the next year is going to be a little bit more than they did through the 2008-09 crisis, and there challenging for banks. And that's only because, as are many reasons for that. the moratoriums run out and the government programs run out, banks now have to go back to the I think the first is that the banking system is much fundamentals of making choices on who do they healthier. So, banks came out without having support and who do they not support anymore? And themselves a need for bailouts, financial funding, frankly, we owe it to our shareholders to be Central Bank response, etc. In fact, banks were circumspect on our credit decisions. So we will have strong enough to build really large buffers and to go back to people and start calling our loans, will cushions ahead of time. And I think the solidity of have to go back to people and trying to make sure the system, financial system stability engenders a that they are disciplined about payments and that's level of trust. So that's the first, but that is the antithesis of what we've been doing for the last important. 12 to 18 months. So, I do think that there will be a little bit more tension in the system over the next I think the second reason banks are looking good is year as banks start fulfilling their obligation to the because they were very resilient. Banking in a other stakeholder group, which is the shareholders. completely service-oriented activity and for banks to function with everybody working from home at scale, without losing any productivity, any

Page 2

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

Taimur Baig you have made a subconscious choice to trade off your privacy for convenience and benefits. Speaking of obligations, banks reside on a lot of data. I know that data is very close to your heart and And that is true, particularly with the younger one of the issues that came up during the pandemic generation, if the value exchange is reasonable, they last year was this issue between data privacy and will trade off their privacy. So, I think, I will start with the need to track and trace various aspects. I that. That privacy is not absolute, and people are remember, back in April, you wrote a rather strident willing to trade off privacy for various reasons. op-ed in The Financial Times. I think there are 350 comments on that at the bottom of the article, even Then you come to the bigger question. What are you today, and I was struck by your argument that prepared to trade off privacy for and where does it between balancing data privacy and collective start making sense? And I've always been a big action, “We the people” trump “I the individual.” I'd believer in the fact that there's a trade-off between like you to expand on that. rights and responsibilities. Everybody talks about the Declaration of Human Rights. Few people know Piyush Gupta that in the 50th anniversary of the Declaration of Human Rights, there was a global endeavour to pass I'm not sure if I would call it strident. But yes, it is a a declaration on human responsibilities. That point of view, which obviously evokes a lot of endeavour failed, and it failed principally because of emotions. The way I think about privacy is from two push back from the US. or three dimensions.

But to me, this idea that we, as members of society First, remember, and privacy is not an absolute, and human beings have an intrinsic responsibility to privacy is a relative concept and the notion of each other is as important as the fact that we have privacy has changed over time. It is different across a right to ourselves. And when you want to make the cultures. It is, frankly, different across generations. trade-off, there are points in time where the Even in the West, if you go back 1000-1500 years responsibility to each other, the responsibility for ago and you go back to the Roman public baths, society, to my mind, is perhaps more important than everybody bathes together. Everybody swam our own individual right. together. People have common bedrooms. We're all together at night, people raised and reared families In this pandemic, public health was a great case in together. So where did this notion of modern-day point where everybody is suffering. Nobody knows privacy come from? It doesn't go back, deeply who can get infected. If you can use data to try and rooted into the psyche. Actually, in some ways, the triangulate where the problem is, how we can notion of privacy came from the emergence of the actually bring succor to people, how we can remedy photograph. Kodak invented the photograph, and it. What's wrong with that? And so that was the that’s when people started ringfencing, “can you genesis of the article that there are situations and use this image and not use this image?” points in time where public responsibility actually

trumps the individual need. So, the point I am making is that it's not an absolute thing. And certainly, in large parts of the world, people are less hung up about the notion of Taimur Baig individual privacy than they are in Western liberal But would you say that in some cases the pendulum countries and democracies. swung a bit too much? And now we're going to see, for example, apps have opt-in as opposed to opt-out The second dimension to me about privacy is that feature? Or that in certain social media space, we're even we in today's day and age are not consistent seeing some backlash that yes, in terms of public about how we think about privacy. We change our emergency, national crisis, wartime efforts, there minds about privacy from time to time. Every one of are certain trade-offs that are more stark. But in day us will say we want to be private. But if I ask you to to day life, maybe we have given up a bit too much. show me your mobile phone and I look at the apps, every app has location on, every app is sharing data,

Page 3

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

Piyush Gupta Piyush Gupta These are different questions. First, the question is, I'm going to mention two. But I'm going to dwell on are there circumstances in which responsibility the second. The first thing though that does intrigue trumps rights. And I said there are. The next me is the exponential increase in the nature of question is that are there situations in which too digital consumption. And if you think about the much data has been made available and I would say movie that was done a few years ago, “Avatar”, I the answer is yes, like everybody, I feel guess maybe a decade, 15 years ago, it first brought uncomfortable. But I would also tell you that I think the notion that you could effectively live your life in the train's left the station. a virtual world and your Avatar went around and did everything for you. I think we live in a world where the notion of having control of your data privacy is dead and the digital I think today we're getting to the stage where more footprint is too strong, too immense, and too and more of our life is in that virtual world. And this powerful. And today, with visual data, digital data, year it showed you that whether it's health services all kinds of data, it's really hard to ensure privacy at or education services or financial services, people any level. And so, we're going to have to think about are willing to consume a lot more digitally. And I different ways of protecting what we want to think this has some pretty important implications on protect, not the traditional ways that we've been what happens in real time, real world, and what able to do it. happens in the virtual world.

I think in some ways, and I have the analogy of guns But I think more immediately, the thing that does and knives. So how do you guard against guns in intrigue me the most is the nature of change in our most countries, through a licensing regime, which is work environment and our work habits. I think ahead of time. How do you guard against knives? everybody knows that the whole work from home Everybody can buy a knife, but you do it through or work from anywhere that we saw this year was regime of trying to determine what was the nature unprecedented. If somebody had told me a year ago of the use. If you use the knife to eat your food, you that we could run a bank for the whole year with are okay. If you use it to kill somebody or not, so 90% of our people not showing up at office, it would that's a post facto regime. have been unbelievable, you'd have laughed at it. And nevertheless, you were able to do it. My own sense is that data and the appropriateness of data used is going to have to slip to a post facto Now, the implication of this, people have not really regime where you go back and determine was the got the minds around yet, and that implication is data used for the purpose it was meant for, was it actually quite contrarian to things you're hearing legitimate, as opposed to ahead of time regime. about, which is the end of globalization or reverse globalization. I think the main implication of this is a Taimur Baig massive increase in globalization, and that comes from the fact that the global availability of the That's very interesting. And I think, even from an workforce and the labour pool is now a reality. app developer perspective, I think that sort of stuff would be a very high level of standard to live up to. When you think about the BPO industry, the But I suppose you're right. From a law enforcement offshoring industry, it's been important. But there perspective, that probably would be the most are a couple of million people who work out of India, efficient way of applying it. who do this whole BPO work for the world and

everybody talks about it. I think in the next 10 years Piyush, so many accelerated disruptions over the that couple of million is going to go into tens, 15 and last year. So, from tele-health to distance education, 20mns of people who can sit anywhere and work for digital payments, food delivery, you track all of anywhere. these; which one intrigues you the most, positively, or negatively?

Page 4

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

I can see us having a small bunch of people in Israel We've all got used to a world where social doing innovation, and I can see us having a team in interactions, getting up in the morning, going out, Silicon Valley and what's quite clear is that you can meeting people, that is what makes us who we are. stitch all of these teams together in a way that is And, if you ask us to turn off 60 -70% of our life seamless and it's productive. And that change will forever, you're going to have a serious problem. A be quite disruptive in the way work gets done in the lot of people suffer the stress of being on Zoom calls future. this whole year. I think you've seen at the end of 12 months, that a large part of that stress comes from Taimur Baig the fact that you're sitting by yourself and you want to be with people. I always wonder how the tax regimes will deal with that. I work for DBS, but I sit in Israel. So, do I pay So, I think the underlying thesis of change in the taxes there or here. We saw that for some of the nature of work does not mean that people are not people who were working away from their country going to meet. In fact, as we think about our own of operation and now the tax authorities are giving workplace situation, we are re-architecting the them a hard time about how to tax them. office space to allow people to collaborate more, to

create more, to come and have more celebratory In terms of professionals versus say, the low-end moments, etc. But without doubt, expecting people frontline workers, the dynamic is a bit different. I to be back. suppose if you are at an executive level job where your job is decision making and mostly meetings as opposed to developing a specific product, I suppose Taimur Baig you can do that remotely. But do you think that the creative energy that comes from people sitting On education, you seem to think that more around the table and arguing and iterating, that can disruption is possible, because it seems to me that be replicated in a virtual environment? the really good schools have had basically an artificial constraint created around how many Piyush Gupta students they accept and very low acceptance rate. I think that probably gets broken down with this No, frankly, even for white collar workers, it can't accelerated disruption. be. When I said that, the work will get distributed and you can have teams and workers anywhere, Piyush Gupta that doesn't take away from the need to physically get people together frequently and to recognize I think education is rife for change. In countries like that what makes us human beings is human , everybody gets a good education. But if interaction. We are social creatures and you cannot you go back to India and you explore that there's eliminate that. So, I'm not suggesting that is going to just not enough schools. There are just not enough be 100%, we all go virtual, never meet each other. I good teachers. So, most kids drop out. They don't don't think that's productive. have access to anything. I think that's just going to be completely be disrupted dramatically and for the Frankly, in our own context, we announced the positive. whole set of new work policies. And, we put a cap, work two days a week from home, 40%. My own But even with education, I'd be reluctant to take it assessment is that if you're new to the company, for beyond a point, because when you think back at example, you can probably get about 20%., you will your own education. I certainly think back at mine. work from home or work flexibly. And I think that's How much was it the content that I got from my where you will wind up at. I think that's a good thing pedagogy and from my books? And how much of it because it is important to get people together. To is what I learned through social interaction, being me, it's not just about innovation, ideation, with people? It's hard to say that it's all pedagogy. serendipity, meeting people, I think all of those are important. I think it's about something deeper and So, beyond the point in time, you still need to get more profound. And that is what is our life about? people together so you can learn from each other

Page 5

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

and learn from your life. I don't think even that is a you're looking at as far as the banking system is binary 0-1 situation. But without a doubt, I think concerned? education will see a huge change. Piyush Gupta Taimur Baig It depends on time frames. In the short term, the Personally, I think that the power of a large lecture cost of credit is not behind us. In fact, I would argue room where you have an authority figure sharing that in many cases, bad loans, or provisioning the insights, the live experience is unparalleled. I cost of credit is still ahead of us. And that's remember when I was an undergrad, Elie Wiesel, principally because of where I started. who was a Holocaust survivor coming to my college to give a speech. You can see celebrities talk about The government support programs have been very tragedy and in-depth stuff online, on TV, all the beneficial in kicking the can down the road. But as time, but to have a survivor in front of you talk. the programs come to an end, when the tide runs There were 1000 people, but it was so powerful. It's out, we'll start finding more and more companies never left me, and that can never be replicated. and sectors who are not able to cut it and make it.

Piyush Gupta So, I fully expect that you will see a pickup in delinquencies and cost of credit both in the That’s my point. Its rightly said we underestimate consumer space as job benefit schemes run out. But the sense of touch and the sense of physical perhaps more importantly, in the small and medium presence. I've asked a lot of people this question enterprise space, there are many companies which and everybody says, “I am productive, I do are just existing hand to mouth, particularly food everything on Zoom. It works well.” And so, you're and beverage, retail, construction. Sooner or later, on Zoom every day with your family, with your when the support on the largess winds up, many of parents, your children and remote location, and them will not able to continue to exist with their you're seeing them every day on the screen. So, model. So, I think there's going to be one source of does that mean you're happy, never meeting them challenge for the banking system. again. And 100% of people are not happy. So obviously, just seeing you on the screen is not good I think the second source of challenge which will enough. You're still missing something. You're accompany that is something I alluded to earlier, missing the capacity to hug. You're missing the which is the idea of the social role of banks. A lot of capacity to see the full body language. You're people will have the expectations that banks should missing a physical warmth that exists because be a lot more forgiving, be a lot more generous, be you're with each other. So, I think we have to willing to put a lot more money out as people recognize that those things will not change, and we continue to transition. Frankly, as I said, banks have are talking about disruptions. I think they're come out looking good because they did that to all important, but in a relative sense, there will be a last year. A large part of that was support from the shift from where we were. But I certainly don't see government. Some of it was not; in our own case, a shift going to a world which is just completely ex for example, our moratorium program, we kicked any human interaction, cannot be. off way before the government programs did. But there is also a need to recognize that there's only a Taimur Baig finite time to which the banks can continue to defer Right. It's remarkable that the 1918-20 pandemic their loan collection process or to go and ask you to was so devastating. But by the time it was 1921-22, pay your legitimate interests and so on. And I think the world had moved on to a status quo ante in the time is on us. many ways. So, the next couple of years, that’s the second Coming back to banking, low interest rates, of challenge I see. How do you make sure people course, are a perennial headache for banks’ understand that when you're trying to do your job, profitability. But what are the other big challenges a regular job as a banker, you have an obligation to

Page 6

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

protect the depositor’s money, protect build economies, maybe there's an opportunity for shareholder’s money. You're not just doing this banks. because of an evil Shylock. I think you'd have to deal with that. Taimur Baig

I want to go back to one phrase that you used earlier Further out, I think there are two challenges, one which is regulatory arbitrage. So, the non-bank which has been on us for some time, but which has financial system, in your view, is not on a level continued to gather pace, and that is the impact of playing field with the banking system, and do you technology, which is effectively eliminating see that as a potential source of systemic risk? industry-borne boundaries.

So, as you know, in our part of the world, the Piyush Gupta Chinese big tech-fin companies have been in the Actually, I think it's changing. So, it has not been on financial services space for several years. But in the a level playing field. I made this point earlier that last couple of years you can see the advent of the many of the companies which take public money, American companies. So, Google, Amazon and they call it a fund. They move money around. They Apple, etc. are beginning to enter the space. And do insurance, they give out loans. And frankly, if it apart from the fact that they're obviously very talks like a duck and walks like a duck, then you competent companies, in some cases benefited know it's a bank. But they've not been regulated like from regulatory arbitrage. But most of all, they banks, and therefore they haven’t had liquidity benefit from a source of capital, which is very requirements, capital requirements, supervision different from the source of capital of public listed requirements. firms. Which means that they can actually burn a lot of money in being able to gain market share. So So, I made the case for a period of time that both that's going to be a challenge for the incumbent from a financial system stability standpoint, but also banking system. from a level playing field and competitive standpoint, there needs to be a different way of And, finally, if I can add the last one, I think there's a thinking about many of these players. challenge and an opportunity, that is around the whole sustainability agenda, particularly the However, in the last two years, I think that environmental part of the agenda. One of the good environment has been changing. You can see, in things of the pandemic has been broad recognition many ways, there's a backlash against big tech. You that tail risk can happen, and it is incumbent on all talked earlier about privacy and data privacy. So of us to start thinking about those tail risks. As a obviously that has some issues. I saw more recently consequence, regulators, risk managers around the the Australian issue, where the regulators have world are increasingly focusing on the tail risks that pushed and said big tech needs to pay for the extant come from climate change or from biodiversity loss. infrastructure that incumbents have put into place through some, pay for the news. So, banks are going to have to focus very hard on getting the hands around those tail risks and the risk If you look at the consultation paper the Chinese come in many forms, is the transition from authorities have pushed out, that to me is really regulatory change, the physical risk from rising thought provoking. They've defined monopoly and water levels or big storms. It is the technology risk oligopoly situations. They've defined a predatory from technology obsolescence, which accompanies pricing situation. They've defined anti-tying some of this stuff, so those risks we are going to situations. And they said they're going to try and have to think about. But like I said, there's an regulate all of these and make sure they don't opportunity in that as well. happen.

And the opportunity is that when you see such Just yesterday in , the President talked a profound shift in the way people want to build and little bit about making sure that there is level playing field between online and offline retailers in terms of

Page 7

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

licensing requirements. So, I think the playing field where people, at least in many parts of the world if is beginning to level. not universal, are open to now thinking about welfare in different terms. What keeps me happy? And I think it's a useful because while you do want What is my welfare all about, the Maslow’s innovation, you also want to make sure that you hierarchy of needs, you get to a point in time where keep systemic stability, that you have consumer you are looking for a more holistic measure of protection and you have a level and competitive outcomes, which are more than just a tangible playing field. outcomes and things that you see on the balance sheets and profit and loss of companies today. Taimur Baig This is also important because when you start Absolutely, I fully agree. thinking about the future, the next generation and

2-3 generations after that, what they will see and I've heard you talk about business as usual as far as inherit is not the physical assets that we see around the way we run our lives, our society may have run us. They will inherit the planet, so they will have to its course. And remember, in a podcast last year, worry a lot more about natural capital, about social you sort of criticize the generally accepted capital, not just the physical capital and financial accounting principles-based business model. capital that we currently measure. Expand on that, what is missing in the way we look at companies or assess their balance sheets? I think fundamentally the problem is that our

current method of accounting does not address and Piyush Gupta capture what the world today calls externalities, Let me start with the GDP itself. I think that the either positive externalities or negative Gross Domestic Product is a construct, created by externalities. So, we don't price carbon. We don't Kuznets and people, in the 1930s, in the height of price human rights. We don't price child labour. the Depression. It was created for its times, which is the time of massive under consumption. So, the big On the positive externalities, equally, we don't price focus was on measuring the productive capacity and somebody who's done work and created the productive output of a country’s goods and incremental education. We don't price somebody services. And we found three different ways of who has created better living conditions or health measuring that. That's how you measure GDP. It's conditions. I think we need a measure of accounting an absolute nominal value of what is measurable which captures these externalities. and reflected in the GDP accounts of a country. And therefore, a lot of people are working at what The same principle is what GAAP sort of adopts in they call impact weighted accounting. So how can thinking about companies, which is what is you actually weigh what you do in respect of the measurable, what is visible and tangible in assets positive and negative impact that you create? and liabilities or maybe some intangible assets. But those are the things that you can see and account For many years, I've been sceptical that this could be for. Now, this whole metric has been useful in done because this is all very airy - fairy. It's up in the driving economic growth for the past 70, 80-100 cloud, how do you actually put a number to it? years. So, I think has been very helpful. It keeps you Everybody does green washing, so is it really real? focused on development. It gives you focus on economic value creation, which is not a bad thing. In the last year, I'm getting a little bit more confident that this can happen because the power of data and But today you got to the stage where you start artificial intelligence. The amount of data we have thinking in terms of what we really want for us. and a capacity to now sensor technology, data What do we want for society and people, and often technology to capture everything is immense. And times it is not just getting more. It's not more then the compute power we have to run on top of physical goods. I don't actually need more shirts or that and make sense of this is also tremendous. So more buildings or more cars. You have got to a state exactly, we're using all of this big data and AI to try

Page 8

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

and determine on Facebook, what is the next thing So, let me give you another example, which to my you should do or who you should vote for? We mind, is not that easy. And that is palm oil. A lot of should be able to use that data and AI to determine people raise the question on palm oil. But first of all, what are you doing that is really producing good the science around palm oil is not obvious. A lot of outcomes. And what are you doing that is not people say it is a lot more healthy than other forms, producing good outcomes and take a more holistic from a health standpoint. From biodiversity view of this. standpoint, quite clearly it’s negative because you cut down rainforests and have monoculture, so I'm encouraged that where we are today in terms of that's not good. technology as well as our own thinking that over the next decade or so, we will be able to do much better But on the other hand, palm oil, most of it is in justice to this idea of impact weighted accounting Indonesia and , is the source of livelihood and looking at the externalities than we've been for 15 million people and the 15 million people who able to do in the past. were translocated by government policy, from places like Kalimantan to places like Sumatra, they Taimur Baig were given smallholder plantations and their entire livelihood, the education of their children, their Okay, one decade is very far away. As a bank today, health, all depends on they being able to cultivate how would you influence your investment or these palm oil plantations. lending decision around such considerations?

Now, when you try and do the trade-off between Piyush Gupta the positive and negative externalities of financing Well, we are already doing that. Let me answer in palm oil, it becomes very complex. So, there is a two ways. So, one, we are influencing it in things negative because of the biodiversity loss, but there's which are obvious. For example, it's quite obvious a positive around millions and millions of people that coal is not the most effective way of creating whose livelihood you are closely involved with in energy when you take a look at the overall cost of financing. I often wonder and say so how do you nature, healthcare, pollution, etc. That’s still the play God, and how do you decide one is better than cheapest cost of production in many countries, and the other? there are still many people who don't get electricity, you have to keep that in mind. But if you put all of it So, what we've been trying to do is work with together, then it's perhaps time for us to wean extremely well renowned agencies and thinkers to ourselves of coal and move to something else. come up with methodologies sector by sector, to try and determine what is the positive and negative You can see that for several other sectors, mining impact. We've done three sectors so far. Palm oil, and metals, plantations. There are use cases you can interestingly, was one. We've done one for the find, which are easier. For those kinds of use cases, energy sector, the lithium, and the EV sector, and a we've actually just put lines in the sand. For each of third, where we're actually working with people the sectors, we've come up with policies of what we from think tanks, from Oxford University, will do less of and what we will try to do more of. So, universities in Singapore to help us dimension, what in the energy complex, for example, we said we is the best way to measure these positive and stopped doing new coal financing, but we will try to negative impacts? do a lot more wind, solar and renewable energy financing, so that's not a difficult choice to make. So far, we've done three pilot studies and once we've got our hands around understanding how to The choice starts becoming a lot more complicated measure this, we will try and apply it to the rest of when the look-through is difficult, what are the our banking activities. But when I say it's a decade, positive impacts and what is the negative impact? this is not going to happen overnight. It's going to take us a few years to really understand how best to be able to calibrate this appropriately.

Page 9

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

Taimur Baig exchange, to be able to deal in the voluntary carbon markets. Why? Because every company in the world Absolutely. In my former life, I used to be in has got carbon commitments. And the voluntary Washington, D.C., working for the IMF and the carbon markets are going to be very, very large. impact assessment store, and the narrative was Now to be able to provide services to authenticate there even in those days, but at a very macro level. and validate the carbon credits, to trade the carbon What you're talking about is very granular and credits, to be able to rate the carbon credit is going addresses the reality at the ground level. I think to be a completely new activity that never existed multilateral agencies have been remiss in before. And participating in such infrastructure addressing these issues in that way. So, I commend creating activities is going to be a new source of you for taking that very difficult approach. income and opportunity as well. That's another example for you. I've heard you talk about and it feeds right into what you just said that you know, ESG type issues are not Taimur Baig necessarily an obligation, they can be opportunities. So, here's an example where you are telling us that Would you want to help the effort in Singapore to how you can engage in these critical sectors, any bring in more EVs? other opportunities that you want to share with us? Piyush Gupta Piyush Gupta Yes, of course. As you know, DBS announced the last First of all, this whole agenda in the last year around, month, we have tied up with Tesla to do financing what they started calling “build back better,” and for a lot of Tesla cars. So certainly, that's something some people now call “build forward better,” will that we are keen on. create a tremendous range of opportunities. I think industry and infrastructure is being re-architected But there are also other things that we announced for the future and as that happens, people are going recently. Last month, we announced with the to have to build out completely new infrastructure. Inditex, the owner of the Zara, a program to help So green buildings, the energy complex moving from them source organic cotton from India. Now this the internal combustion engine to either battery or cotton is grown by hundreds of thousands of hydrogen, hydrogen itself as an industry. farmers. We have tied up with 2000 farmers. These 2000 farmers, through our supply chain financing There is going to be tremendous amounts of money and our tracking mechanisms, provide organic going into this building back better, and you can cotton, and we can certify the provenance of the already see that. Think about the Euro Green cotton and create entire supply chain visibility for Recovery Fund, EUR750bn, or you look at President Inditex. That's another opportunity. Biden's stimulus program, large chunks of this are architected around rebuilding in a different way. So as people start looking at provenance, looking at sustainability, there are millions of opportunities In Singapore, I am on the emerging stronger task you can create, whether in the EV space, as you force and, as we're thinking about investing for suggested, or in the Zara example that I gave. Singapore's future, there’s really a very clear focus on digitization and sustainability because we think Taimur Baig sustainability and focusing on some of these issues Absolutely fascinating. Finally, a bit of a regional will create tremendous opportunities to invest in question. So, we're lucky to live in Southeast Asia, opportunities for growth. which is increasingly prosperous and relatively

speaking, stable. But there are three big In addition to change in the infrastructure industry, undercurrents. Climate change is one, great power I think there's also going to be a tremendous rivalry is the other one. And then this issue of the opportunity from recasting the plumbing, the supply chain that is getting bifurcated around the infrastructure. In our case, for example, one of the things that we're trying to build out is the carbon

Page 10

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

great power rivalry. How do you see all this painting Asia continues to integrate, and I think that sense of out in the coming years? integration will still be there. That's notwithstanding the geopolitics etc. of Asia. Piyush Gupta The third is technology. For a bunch of these, I think, I think the demographics and the fundamentals of to a large extent linked to the first question of Asia are intact and they will continue to drive a lot demographics, digitally native populations. Asia’s of opportunity in this region for the foreseeable adoption of digital technology has actually been far future. I’ll list a few of those. So, I think it's a young more rapid than other parts of the world. And population, and you could argue that in some cases perhaps it's just that the average Asian age is 27, in the young population could be a time bomb. You the US is in the late thirties. In Europe, it's almost 40. know, in the countries like Indonesia and India, employment is a problem. But by and large, I think And therefore, if you look at the use cases in China the basic truth that growing and young population and India and Indonesia, ecommerce, gaming, still drive GDP growth, that still stands. And I think finance, it's just at a different level from many other that will be a big driver of economic activity and parts of the world. So, I think that fundamental is growth, certainly large growth in consumption very much in place, and I don't think that is demand. disappearing in a hurry either.

There's also an increasing link to that, growth of I think there will be some challenges. It'll be trickier. wealth in Asia, more millionaires and billionaires The next decade will be trickier than the last 20 being formed in Asia every day than in any other years have been for the reasons you cited; I think part of the world. And when you put that together, geopolitics was important in Asia’s success. Stability I think that will continue to underlie 4.5 -5% growth in the region was helpful. We're now going to have in real GDPs around the region for the foreseeable to duck and weave, and to make sure that we don't future. If you add some inflation on top of that, that get caught between two elephants dancing. That's gives a very decent nominal economic activity and never an easy thing to do. growth. I don't think that's going away in a hurry. Climate change is a big issue for many of our The second fundamental, which is really helping, is countries, Singapore, Jakarta with low lying what I think of as the integration of Asia. So, Asia locations. Now this is not imminent of the next 5 -10 doesn't have Brussels, but that notwithstanding, the years, but it is something that is going to get us to private sector and the people sector in Asia, focus on a different set of challenges. continues to integrate rapidly. If you look at even the last decade and track intra-Asia trade relative to And in Southeast Asia, I do think that the capacity of global trade, intra-Asia trade outperforms. the region to come together and address these challenges is sometimes underestimated. We don’t But perhaps more important, if you think about have Brussels, but ASEAN is not a bad grouping. And intra-Asia capital flows, those have really Kishore Mahbubani says often ASEAN is probably exponentially grown over the last 10, 20 years. I the second most successful grouping in modern day remember in 1998-2000, the big question mark history. It works in a strange way; everybody moves used to be that there are no fixed income markets in their own bilateral pace, is not a unified agenda, in Asia, all of the money round trip from the US, but if you look at the outcomes ASEAN has achieved while that's no longer true. in the last 50 years, you can't scoff at them either.

And frankly, even if there's money sourced from the So, I think collectively in the region, we still have the West, a lot of the decision making now takes place wherewithal to be able to give people the livelihood, in Asia. So, this integration of Asia on trade, capital, to be able to get growth rates that we've been I think that's quite powerful. Sometimes people say, talking about in the foreseeable future, And my last Asia grows at night when the government sleep. So comment, from a financial standpoint, we approach not having Brussels might actually be a good thing.

Page 11

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

the next 10 years with much better condition than we were 20 years ago.

We go back to the Asian financial crisis. Today, corporate leverage is lower, banking sectors are stronger, currencies are more flexible. Foreign exchange reserves are far more robust than they used to be. So, yes, I think there will be challenges, but I still continue to be confident about the future of the region and about Southeast Asia in particular.

Taimur Baig I fully share your micro realism and macro optimism. Thank you so much for your time and insight.

Piyush Gupta It's been a pleasure, Taimur. Thank you very much indeed.

Taimur Baig Great, thanks. And thanks to our listeners too.

Page 12

Kopi Time E050: Piyush Gupta on banks, work, data privacy, sustainability March 22, 2021

Group Research Economics & Macro Strategy

Taimur Baig, Ph.D. Chief Economist - G3 & Asia +65 6878-9548 [email protected]

Chang Wei Liang Radhika Rao Strategist Economist – India, Indonesia, Thailand & EZ +65 6878-2072 [email protected] +65 6878-5282 [email protected]

Nathan Chow Irvin Seah Strategist - China & Hong Kong Economist - Singapore +852 3668-5693 [email protected] +65 6878-6727 [email protected]

Eugene Leow Samuel Tse Rates Strategist - G3 & Asia Economist - China & Hong Kong +65 6878-2842 [email protected] +852 3668-5694 [email protected]

Chris Leung Duncan Tan Economist - China & Hong Kong FX and Rates Strategist - Asean +852 3668-5694 [email protected] +65 6878-2140 [email protected]

Ma Tieying, CFA Philip Wee Economist - Japan, South Korea, & Taiwan FX Strategist - G3 & Asia +65 6878-2408 [email protected] +65 6878-4033 [email protected]

Sources: Data for all charts and tables are from CEIC, Bloomberg and DBS Group Research (forecasts and transformations).

GENERAL DISCLOSURE/ DISCLAIMER (For Macroeconomics, Currencies, Interest Rates) The information herein is published by DBS Bank Ltd and PT Bank DBS Indonesia (collectively, the “DBS Group”). It is based on information obtained from sources believed to be reliable, but the Group does not make any representation or warranty, express or implied, as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions expressed are subject to change without notice. Any recommendation contained herein does not have regard to the specific investment objectives, financial situation & the particular needs of any specific addressee. The information herein is published for the information of addressees only & is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. The Group, or any of its related companies or any individuals connected with the group accepts no liability for any direct, special, indirect, consequential, incidental damages or any other loss or damages of any kind arising from any use of the information herein (including any error, omission or misstatement herein, negligent or otherwise) or further communication thereof, even if the Group or any other person has been advised of the possibility thereof. The information herein is not to be construed as an offer or a solicitation of an offer to buy or sell any securities, futures, options or other financial instruments or to provide any investment advice or services. The Group & its associates, their directors, officers and/or employees may have positions or other interests in, & may effect transactions in securities mentioned herein & may also perform or seek to perform broking, investment banking & other banking or financial services for these companies. The information herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Sources for all charts & tables are CEIC & Bloomberg unless otherwise specified. DBS Bank Ltd., 12 Marina Blvd, Marina Bay Financial Center Tower 3, Singapore 018982. Tel: 65-6878-8888. Company Registration No. 196800306E. DBS Bank Ltd., Hong Kong Branch, a company incorporated in Singapore with limited liability. 18th Floor, The Center, 99 Queen’s Road Central, Central, Hong Kong. PT Bank DBS Indonesia, DBS Bank Tower, 33rd floor, Ciputra World 1, Jalan Prof. Dr. Satrio Kav 3-5, Jakarta, 12940, Indonesia. Tel: 62-21-2988-4000. Company Registration No. 09.03.1.64.96422

Page 13