Economic growth across the Southeast Asia (SEA) region is expected moderate to 4.5 percent in 2019, from 5.1 percent in 2018 - Photo by ASEAN Secretariat Office

JAKARTA (TheInsiderStories)Association of Southeast Asian Nations (ASEAN) grows economically at an average of 5.4 percent annually, way above global rates, attracting many investors to the region. The rise of industry 4.0 creates more opportunities in digital economies and other sectors, according to the recent report.

The ASEAN region is of vital geostrategic importance to the world. Each year, trade valued at some US$5.3 trillion passes through its sea lanes, while an estimated 15 million bpd of oil is transported through the Malacca Straits. With a population of some 650 million and fast-growing wealth, it is also becoming an economic superpower.

Ranking as the fourth largest exporting region in the world, the countries that constitute ASEAN account for some 7 percent of global exports. They had a combined GDP of $2.8 trillion in 2017, making them the third largest economy in Asia and the sixth largest globally. Economic growth continues to average 5.4 percent, way above the global
average and this rate are forecast to continue for the near future.

Singapore’s Prime Minister, Lee Hsien Loong, has predicted that ASEAN will become the fourth largest economy in the world by 2030, led by the United States, China, and the European Union. In view of this, ASEAN presents a compelling investment proposition for businesses who are looking to expand in one of the most dynamic and ambitious parts of the world.

This attraction is illustrated by the level of FDI flows into ASEAN countries, which rose to record levels from $123 billion in 2016 to $137 billion in 2017. An important development is rising investment in their digital economies, including e-commerce, financial technology, the development of data centers and ICT infrastructure. Significant growth opportunities are available for business across a range of industries and commercial sectors, including automotive, financial services, consumer goods, medical services and equipment, telecoms and transportation.

ASEAN countries have now concluded six Free Trade Agreements with seven of the region’s main trading partners – Australia and New Zealand, China, India, South Korea, Japan, and Hong Kong. The challenge is to continue to support an open and inclusive multilateral system and to work with like-minded partners to deepen cooperation, says Singapore’s Prime Minister.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is one of the largest Free Trade Agreements in the world and accounts for almost 13.5 percent of global GDP. The Agreement brings together Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, offering those countries investment access and freer trade. It has been estimated, for example, that Vietnam’s GDP could be boosted by 2 percent over a decade as a result of new trading opportunities created by the Agreement.

Alongside its remarkable journey of economic growth, ASEAN countries have not neglected social development with millions across the region now lifted out of poverty. More than 100 million people are estimated to have joined ASEAN’s workforce over the past 20 years and another 59 million are projected to be added by 2030.

Human resources are a key factor with a growing, young and increasingly better-educated workforce that is manifested in a fast emerging middle class. Almost 70 million households in ASEAN countries can be considered as consumers with incomes exceeding the level at which they can begin to make significant discretionary purchases. Examples of these include entertainment, air travel as well as the ability to access such services including private education and healthcare.

The steady movement of people to urban environments, particularly to medium-size cities, combined with the enthusiastic take-up of digital technologies will further power the advance of ASEAN’s growing middle class. The region is the fastest-growing internet economy in the world with an online population expanding by an estimated 124,000 new users each day.

Adoption of new technologies is changing the way business is conducted, with countries such as Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam on course to run digitalized economies by 2025.

Indonesia, with 269 million people has the world’s fourth largest population and is rapidly becoming a digital nation. The population is exceeded by the number of mobile phone subscriptions and there are more than 100 million internet users. Financial technology (FinTech), in particular, has the potential to dramatically increase the scope and availability of financial services in previously underbanked parts of the region.

This will be of immense benefit not only to individuals and communities but also to SMEs which comprise most economic activity in ASEAN countries. Increasingly new mobile applications technology will enable them to access capital and the advisory services needed to develop their businesses.

ASEAN Secretary-General, Lim Jock Hoi, says that member states are intensifying cooperation to strengthen the competitiveness of their ICT industries, expand e-commerce and facilitate digital connectivity, including through working towards signing an ASEAN e-commerce agreement and adopting an ASEAN Digital Integration Framework to help transform the region into a competitive global digital hub.

The developing ASEAN Economic Community (AEC) provides an opportunity to create a seamless intra-regional market and to build an integrated manufacturing and production base, equipped for the technological challenge of the Fourth Industrial Revolution. Intra-regional trade in goods increased by 47 percent to $543 billion in 2017, from $369 billion in 2007. Such trade is likely to expand further as ASEAN’s economic integration strategy is improving the movement of goods, services, skilled personnel, and capital.

ASEAN has strengthened and widened the use of its Qualifications Reference Framework to further the movement of skilled labor between countries. Meanwhile, the move towards a Single Aviation Market continues, allowing airlines from ASEAN member states to
operate freely throughout the region. In addition to creating better connectivity, this policy is enhancing competition and increasing the range of services available for passengers.

The Asian Development Bank estimates that at least $60 billion will need to be spent each year on both improvement and new infrastructure projects. Countries are eager to embrace PPPs for infrastructure finance. ASEAN is home to young, literate and increasingly urbanized and aspirational populations. A new generation, with higher incomes and brighter employment prospects, is demanding a range of better quality products and services and this presents a significant opportunity for businesses to tap into.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com