ASEAN – a region on the rise

The Association of Southeast Asian Nations (ASEAN) is an economic powerhouse. The ten-member bloc has a combined population of 672 million, and in the decade up to 2022, its economy grew by annual growth rate of 4.2%, making it the world’s fifth largest economy¹.

The HSBC Global Investment Summit brought together a panel of Southeast Asian business leaders, who discussed how the region is cementing its position in the global economy.

ASEAN benefits from a range of positive factors that are supporting regional economic growth.

A standout element is ASEAN’s demographics. The bloc has a young population, with 213 million people in the 15 to 34 age bracket, which equates to a large pool of potential workers that is forecast to keep on growing until 2038². A young population also means that a large section of the population comprises of digital natives, creating opportunities for businesses.

“There is a demographic dividend for us because young people use their smartphones a lot,” said Arthur Lang, Chief Group Financial Officer, Singtel. “They might have their first movie experience on their phone, or they could conduct their first financial transaction. For companies like ours, this is very exciting.”

ASEAN is also benefiting from broader geopolitical trends – most notably any tension between China and the US. The region is generally seen as a more neutral party between the two superpowers, which allows it to do business with both sides. China is ASEAN’s largest trading partner³, with the US coming second⁴.

Furthermore, there are additional benefits, and as Western companies aim to reduce their supply-chain exposure to China, some ASEAN countries are key beneficiaries. Vietnam, for example, has seen more investments under the so-called “China Plus One” business strategy.

Each of ASEAN’s member states has its own economic profile and growth story – from countries in the early stages of development all the way up to advanced economies with high incomes.

“There are more manufacturing-driven economies, while Singapore is very modern,” said Cezar P. Consing, President, Chief Executive Officer and Board Director, Ayala Corporation. “There are opportunities when ASEAN can come together as a bloc and present itself as a very whole economy."

The Philippines, for example, has a consumption-driven service-oriented economy, with business process outsourcing a key export. By contrast, Vietnam has positioned itself as a global manufacturing hub. The most developed economy in the region is Singapore, which stands out for its financial and professional services.

Such wide diversity within ASEAN is beneficial for businesses operating there, said Le Thi Thu Thuy, Vingroup Vice Chairwoman, VinFast Chairwoman: “Each country has strengths, and we play to the strengths of those countries.”

She described how VinFast is able to manufacture electric vehicles in its home country of Vietnam, while Indonesia is a source of the nickel required to make batteries. And when a car is produced, the entire ASEAN region presents an export market for the company’s goods.

In addition to electric vehicles, Vietnam is also a major manufacturer of such as smartphone and flatscreen televisions. And although the country’s manufacturing still relies on goods like clothing, its recent success in high-value goods shows how ASEAN countries can climb the value chain.

The shift to more valuable goods is fuelled by investment. In terms of foreign direct investment, ASEAN is receiving record inflows, reaching US$224 billion in 2022⁵. In addition to the opportunities on the ground, investors are attracted to tax breaks and intellectual property protections that are effectively enforced across the region.

In terms of the region’s capital markets, ASEAN is very different to how it was in the nineties, when the Asian Financial Crisis hit, said Ayala’s Mr. Consing. He pointed out how ASEAN is now a net exporter of capital with robust local currency markets, unlike in 1997, when the region was dependent on external capital that was usually denominated in US dollars.

This means that ASEAN companies have options when looking for capital: “Sometimes you get funding from domestic investors, and sometimes it can come from investors in the bloc, or from international firms like private equity or sovereign wealth funds,” said VinFast’s Ms. Thuy. “It really comes down to what the investor can bring with them, in addition to the money.”

Overall, the panel gave an optimistic outlook for ASEAN, showing the region’s advantages, with a focus on how it thrives from its diversity, as well as its favourable geopolitical position. Going forward, ASEAN will remain a region to watch.