Innovation will be at the heart of Asean's next phase of development, Deputy Prime Minister Tharman Shanmugaratnam said on Wednesday (Jan 24), as he outlined several areas of priority, including fintech and e-commerce, for the regional bloc.

He was delivering the opening remarks on the strategic outlook for Asean at a session at the World Economic Forum in Davos.

DPM Tharman told an audience of business and political leaders that despite challenges such as a shifting geostrategic balance, uncertainties over trade and globalisation, cyber security and terrorism, there are huge opportunities for Asean.

"The shift in economic balance globally is playing to Asean's favour. The rise of China and India is a huge opportunity for Asean, and in particular the 'Belt and Road' initiative has Asean as a core part of that initiative - I would say an anchor along the initiative," he said.

The regional bloc, home to about 639 million people, is currently the world's seventh-largest economy and is projected to become the fifth-largest by 2020.

Singapore assumed chairmanship of Asean this year, and DPM Tharman said its main emphasis will be to build resilience to cyber-security threats and terrorism, and push the innovation agenda.

While Asean is still a major commodity exporter, with highly competitive export manufacturing, and an attractive market for goods and services, innovation is now "being breathed into all the existing dimensions of economic activities", he said.

Areas that could be developed include the use of financial technology, digital payment systems, e-commerce, developing smart cities, and getting youth interested in innovation, DPM Tharman added.

The use of fintech has huge potential as Asean is a diverse region with "large under-served populations without banking accounts" and inadequate access to financial services.

DPM Tharman also mentioned a goal to link digital payment systems across Asean, pointing out that experiments are underway.

"Thailand and Singapore have just started detailed discussions on linking up our payment systems so that with just mobile phone numbers, you can make payments across countries. We intend to spread that around Asean," he said.

In the area of e-commerce, the goal is to develop trade rules to lower costs for consumers and improve access for businesses.

Asean has also designated smart cities across the region, and will work with the private sector to develop them.

Finally, DPM Tharman pointed out that these efforts will not be executed by just "sagely experts or high-level government people - youth will also have a part to play".

"We intend to involve the youth, especially. Developing a workforce that is very comfortable with innovation, that feels innovation gives them advantage is going to be critical," he said.

DPM Tharman's remarks were followed by a panel discussion on the topic. Panellists included Vietnam's Deputy Prime Minister Vuong Dinh Hue, and other corporate leaders such as CIMB Group Holdings chairman Nazir Razak. The discussion was moderated by former Indonesian trade minister Mari Elka Pangestu.