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27 Mar 2018 Updated 26 Mar 2021

2018 Outlook:

Navigating Opportunities in ASEAN

Since its formation, ASEAN has made significant progress to become a major economic force in the region. With a combined GDP of US$2.4, trillion ASEAN presents tremendous market opportunities for companies to tap as the region develops further.

Presentation on key mega trends and future of ASEAN
Sanjay Singh, Frost & Sullivan’s Senior VP (Asia-Pacific) and Senior Fellow, gives a presentation on upcoming trends to look out for in the region

At our 2018 Outlook seminar, business leaders discussed just that – why there’s growing interest in the region, how firms can better identify upcoming trends and opportunities while avoiding potential pitfalls, and what firms should note if they want to take their business regional.

Here are 3 key takeaways:

1. Greater regional integration will facilitate cross-border trade

As ASEAN member states continue strengthening ties across the economic front, reduced trade tariffs and import and service taxes across the bloc are set to facilitate greater cross-border trade. Stronger regulatory convergence will also help with the streamlining of rules and procedures related to customs and trade-related infrastructure, increasing ASEAN’s attractiveness as an investment destination.

The fact that countries are placing more importance on cross-border trade is best underscored by Free Trade Agreements (FTAs) – a highlighted by Sanjay Singh, Senior Vice President (Asia-Pacific) & Senior Fellow at Frost & Sullivan, He labelled FTAs a “positive enabler for growth opportunities”, citing the recent conclusion of the Singapore-Sri Lanka Free Trade Agreement as another step forward in breaking down geographical barriers – something that ASEAN is striving to do both within the bloc and with other countries outside the region. Echoing Sanjay Singh’s sentiment, Head of Treasury Research and Strategy at OCBC Bank Selina Ling described FTAs as the “basis for win-win trade outcomes” in expanding business opportunities for SMEs.

Greater regional integration will also result in the freer flow of services across borders –making it easier companies to address skill shortages. As it stands, countries such as Singapore, Malaysia, Vietnam and Thailand require more workers, while Myanmar, Indonesia and the Philippines have a surplus of human capital. Greater labour mobility can therefore ensure that this expertise is appropriately deployed across ASEAN.

2. Demographic growth dividends will underpin ASEAN’s growth

Panel discussion on navigating opportunities in ASEAN
From left to right: Sanjay Singh, Senior VP (Asia-Pacific) and Senior Fellow, Frost & Sullivan; Joe Morris, Principal, Control Risks; Selena Ling, Head of Treasury Research & Strategy, OCBC; Khairul Anwar; Regional Group Director (Southeast Asia), Enterprise Singapore

ASEAN has a current population of 630 million, with over half of its people under the age of 30. This presents a large labour market with much potential. In addition, the rapid emergence of the middle class will contribute to greater demand for consumer durables. Alluding to this fact, Sanjay Singh pointed out that “52% of the ASEAN population will be part of the middle class in 2025”. Dane Chamorro, Senior Partner at risk consultancy firm Control Risks, added that the addition of “100 to 150 million new urban consumers by 2030” will propel the future growth of ASEAN.

As China develops, wages and setup costs relative to other manufacturing hubs have also risen in tandem. As a result, investors are increasingly looking to ASEAN as an alternative. The region’s strategic location between India and China also serves as a pull factor as it means shorter times for goods to reach markets and lower logistics costs. Global manufacturers such as Nike and Samsung have already relocated their manufacturing bases to Southeast Asia.

3. Rise of the Greater Mekong Sub-region

Over the next decade, countries comprising the Greater Mekong sub-region (Cambodia, Laos, Myanmar, Thailand, and Vietnam) are projected to form a new strategic frontier in Asia. It’s not just manufacturing that’s set to benefit – key developments in the region such as Thailand’s Eastern Economic Corridor are also set to open up opportunities in engineering and connectivity projects.

However, companies should still exercise due diligence when venturing to the region. Local laws and regulations may be complicated and are sometimes not well-known to foreign investors. In such instances, a trusted local partner with strong local networks would help Singapore companies overcome these potential obstacles.