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Investing in ASEAN: 4 Key Takeaways on Growth in Southeast Asia

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The past year has put nearly every economy in the world to the test.

With companies making rapid layoffs and some entire industries struggling to stay afloat, it makes sense that countries would race to prioritize the needs of their economy and people.

But the members of the Association of Southeast Asian Nations (ASEAN) saw it differently. Instead of focusing internally only, they saw merit in banding together to create a uniform exit strategy out of the pandemic.

Is your company considering Southeast Asia as its next destination for expansion and growth? Here are four reasons you shouldn’t wait:

#1: Southeast Asia is emerging stronger than ever.

Members of ASEAN, an economic union comprising 10 member states across Southeast Asia, quickly signed trade agreements and established partnerships to leverage their mammoth market size and a fast-growing, middle-income population.

With a combined GDP 3.2 trillion U.S. dollars and a population size of over 650 million, the regions’ total GDP in 2019 even doubled from a decade ago and increased nearly fivefold since 2000.

If that isn’t impressive enough, the region also boasts a substantially growing hub of highly educated, young entrepreneurial talent — over half of Southeast Asia is under 30 years old.

A recent survey conducted by CFO Research of Industry Dive and Globalization Partners found 46 percent of polled senior finance executives in Asia-Pacific believed their businesses were in a state of accelerated growth despite the pandemic. This figure was far more significant than their peers in other regions.

#2: New free trade agreements will boost growth further.

ASEAN is an economic juggernaut that stands as the fifth-largest economy globally (after the U.S.) and it just inked its most successful alliance to date — the Regional Comprehensive Economic Partnership (RCEP).

What is the RCEP and how is it a game-changer?

Signed in November 2020, the RCEP is a free trade agreement between ASEAN and five of its major trade partners: Australia, China, Japan, Republic of Korea, and New Zealand.

Right now, it’s the world’s biggest free trade pact and covers a market of 2.2 billion with a combined GDP of US$26.2 trillion, or 30 percent of the world’s GDP.

While the pact heavily focuses on trade liberalization, it also aims for a competitive investment environment with standard “rules of origin; customs procedures and trade facilitation; sanitary and phytosanitary measures; standards, technical regulations, and conformity assessment procedures; and trade remedies.”

Overseas contract dilemma

Greater trade facilitation and connectivity

One of the main aims of the RCEP agreement is to improve trade connectivity. Partnering with an economic powerhouse member like China, the world’s second-biggest economy, significantly increases the likelihood of its success.

According to the 2020-2021 Investing in ASEAN report, Stuart Tait, Regional Head of Commercial Banking, Asia-Pacific at HSBC, believes Korea and Japan will also play essential roles.

He said the pact would further deepen “ASEAN’s connectivity with China, Korea, and Japan, who are the global heavyweights for the electronics, automobiles, textiles, and garments industries, which the region is reliant on.”

The deal will eliminate over 65 percent of tariffs and quotas, with this number expected to rise to 90 percent within 20 years. This essentially strengthens economic affinity within the region, provides advantageous entry into emerging markets, and creates new opportunities.

#3: Global investors are taking notice.

Investors in the region have funneled US$70 billion into ASEAN in 2020 alone.

Of the few countries globally to achieve a positive 2020 economic outlook, Vietnam was able to gain a GDP growth of 2.3 percent. The Philippines achieved an impressive near 30 percent rise in investments from a range of American, Dutch, Japanese, and Singaporean firms.

The 2020-2021 Investing in ASEAN report also believes that ASEAN offers plenty of long-term incentives to investors, due to its growing geostrategic relevance that draws in political, military, and economic powers.

With a flow of healthy investments, ASEAN continues to build itself up as a region of resilience and grit. The signing of free trade agreements also hints at robust long-term economic growth that creates opportunities and opens doors.

[bctt tweet=”With a flow of healthy investments, ASEAN continues to build itself up as a region of resilience and grit.” username=”globalpeo”]

#4: What benefits one benefits all.

The emergence of ironclad regional supply chains 

“The Hanoi Plan of Action on Strengthening ASEAN Economic Cooperation and Supply Chain Connectivity in Response to the COVID-19 Pandemic” was born out of this shift in mindsets.

The plan, that all ASEAN members adopted in April of last year, pledges to keep markets for essential goods, including food, medicines, medical, and other basic supplies open. The plan promises to strengthen economic cooperation among countries as well.

It also encourages sharing of information and best practices on new technologies and systems that facilitate trade so the smooth running of critical goods and services can continue.

What does this mean for your company?

A sure-fire sign of economic recovery and a thriving hub isn’t always obvious. But with collaboration and solidarity on this massive a scale, it can’t be denied that ASEAN has created its own vaccine against economic decline.

It’s always risky to know precisely when to move your products and services into a new region, and the highly competitive world of international business provides zero guarantees.

But if your company has been waiting for a sign, this is it: Southeast Asia is an ideal place to consider for a new growth region.

With solid economic recovery plans in place, a thriving investment hub, and a tech-savvy consumer market with considerable buying power — the foundation for success is ready.

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