ASEAN’s economic performance continues to outpace the rest of the world with the Asian Development Bank predicting that GDP in ASEAN countries will grow 5.3% in 2013 and 5.6% in 2014. This impressive performance and the even greater prospects that will emerge following the introduction of a single market resulting from the introduction of the ASEAN Economic Community (AEC) at the end of 2015, are shaping the Region as a key investment opportunity.
Member states are already making good progress towards economic integration. ASEAN Secretary General, H.E. Le Luong Minh, has said that almost 80% of the measures in the ASEAN Economic Community Blueprint agreed in 2007, have now been implemented.
An important landmark has been reached in 2013, with the ASEAN Agreement on Movement of Natural Persons which eases entry by citizens of member states to other Southeast Asia countries and provides agreement on their length of stay.
Of equal significance is the completion in 2013, of pilot tests of the online ASEAN Single Window customs data transfer system, following agreement on its final design in 2011. The Single Window connects individual countries’ computerised systems and supports the exchange of intra-ASEAN certificates of origin and customs declarations documents. The system is now being expanded to include other types of data and will do much to end cross-border delays.
Over the next 20 years, Southeast Asia will be one of the world’s fastest growing consumer markets with ASEAN members’ GDP forecast to rise more than fourfold to US$10 trillion by 2030. The combined GDP of member nations is already significantly larger than India’s economic output and by 2018, it will exceed that of Japan according to US industry analyst IHS Global Insight.
The AEC will unleash a new era of growth by creating a competitive market of more than 600 million people in the ten member countries comprising Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
Economic integration through a range of measures including tariff reductions and streamlining of administrative procedures, aims to enable an easier movement of goods, services, investment, capital and people across the Region. This will open up new markets for companies in member states and new ways to operate supply chains.
Intra-ASEAN trade is steadily improving and is likely to gather pace in the next few years. The Region is already Thailand’s largest market, for example, absorbing 23% of the country’s exports.
According to former ASEAN Secretary General, Dr Surin Pitsuwan, the movement of goods and services among ASEAN countries represented 25% of the total US$2.8 trillion trading volume in the Region during 2012. After the implementation of the AEC in 2015, he expects that intra-ASEAN trade will increase to 30% and touch 35% five years later.
The momentum is seen in the growing number of cross-border investments as well as merger and acquisition activity seen in banking, manufacturing, transport and communications sectors.
For international as well as regional investors there are many opportunities opening in an area that will be able to be addressed as a single market. Integration of the diverse economies promises to make ASEAN much more competitive in attracting global investment and as a location for establishing manufacturing operations.
The Region’s increasing focus on infrastructure including major telecoms developments, roads, railway and ports projects also promised to nurture a much improved environment for export industries.
Astute pathfinder investors from the mining sector, manufacturers and technology industries are already flowing into the area. In 2012, the Region was the only part of the world to experience an increase in Foreign Direct Investment (FDI). This followed a record inward flow of FDI in 2011.
This is a time of positive and accelerating change, as new growth and development strategies are implemented to sustain economic and social progress. ASEAN countries are as a result, likely to play a far more significant role in the global economy as the 21st century unfolds.
Myanmar’s geographic position, for example, could in the long term prove as important a factor as the opening of its economy to greater foreign investment. The country provides the only land bridge between South Asia and Southeast Asia via its borders with India, Bangladesh and China, Thailand and Lao PDR.
ASEAN, longer term, is looking to become an even more dynamic and mainstream global supplier. It wants to ensure that its internal market will remain attractive to foreign investment. In view of this need, member states are already looking beyond the bounds of the forthcoming AEC.
In addition to its focus on economic integration, ASEAN member states, Brunei Darussalam, Malaysia, Singapore and Vietnam are negotiating a Trans-Pacific Partnership (TPP) Free Trade Agreement with seven countries comprising the US, Canada, Chile, Peru, Mexico, Australia and New Zealand.
Negotiations are also continuing to set up the Regional Comprehensive Economic Partnership (RCEP). This is designed to link ASEAN’s ten member countries with New Zealand, Australia, South Korea, India, Japan and China into one regional Free Trade Agreement. Together, these countries account for almost half the global population and about a third of global output.
The TPP and RCEP are very ambitious regional trade arrangements that will involve complex negotiations. Alongside the inauguration of the ASEAN Economic Community, a successful conclusion to these additional negotiations will propel ASEAN countries into an era of growing prosperity and opportunity.