A PIVOTAL MARKET POISED FOR TAKE-OFF
In a global economy where growth prospects are for the most part dim, Asean is a bright spark.The Asean growth story comes at a time when companies globally are making the move towards inshoring – also known as reshoring or next-shoring, or the practice of bringing back manufacturing activity to where the demand is.
It is the reverse of offshoring, or the practice of setting up production facilities in low-cost, developing countries like China, which has been the industry norm in the last decade, notes Mr Matteo Mancini, partner at global management consulting firm McKinsey & Company.
But Asean presents a unique proposition – it is able to host the entire spectrum of business activity, from production to consumption.
With a total market size of more than 600 million people, if the countries work well together and, increasingly, if the markets are more integrated, it represents a tremendous opportunity for companies in Asean, and that includes Singapore.
At a conference on Singapore’s Future Economy, Mr Caesar Sengupta, Google’s vice-president of product management, spoke of South-east Asia as a region enjoying “exponential growth”. It is the world’s fastest-growing Internet region with an existing Internet user base of 260 million that is set to nearly double to 480 million by 2020. The region’s Internet economy is also expected to grow to US$200 billion (S$269 billion) by 2025.
Already, the 10 Asean countries combined – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – make up the seventh-largest economy in the world, with a gross domestic product (GDP) of US$2.43 trillion last year.
No one can really predict how fast or how slowly things will progress, but the direction is correct. Ten or 20 years down the road, I think Asean, as an economic region, will be quite a formidable entity. It will be twice the size of Europe, almost 1.5 times the size of the United States. And if you believe as I do, the standard of living within Asean will continue to grow, which means the purchasing power and the consumption ability of these 600 million people should be far better than it is today.
So yes, there is plenty of reason for optimism here.
– Corporate Titan Koh Boon Hwee (Chairman of Credence Partners Pte Ltd)
If growth trends continue, the Asean region could be the world’s fourth-largest economy by 2050. And as incomes and purchasing power rise, the region’s significance as a centre of demand – not just supply – is set to grow.
“Asean never had it so good. It is poised for the next stage of takeoff – though only if its members know how to play their cards right,” says Associate Professor Tan Khee Giap of the Lee Kuan Yew School of Public Policy.
For Singapore, Asean’s growth as an entity will open many more doors, says SIM University senior lecturer Lim Tai Wei. “Asean represents a large market for Singaporean products and services, especially with an expanding middle class of consumers. Singapore is at the centre of this regional trade arrangement, and it enjoys a fast-mover advantage as an energetic advocate of free trade for decades,” he notes.
“If someone wants to invest in Singapore, he will be told by consultants that Singapore is expensive and he should instead put his headquarter functions there, but the manufacturing operations somewhere else, like Malaysia or Vietnam,” says Mr Ong Keng Yong, former Asean secretary-general and Singapore’s Ambassador-at-Large.
He adds: “These days, US and European companies are thinking about moving back to home countries because of issues like rising labour costs, regulatory compliance costs and the protection of IP (intellectual property) rights. Going forward, Asean investors must play a more prominent role in the business and manufacturing sectors of Asean member states.”
The opportunities in Asean are “immense”, says CapitaLand president and group chief executive Lim Ming Yan. “As key cities in the region develop, demand for infrastructure and real estate will invariably rise.”
By 2030, the continued growth of Asean cities could add US$930 billion to the region’s annual GDP, says Mr Mancini. This shift will be supported by the growing consumer class, which could double to 163 million households by then, making South-east Asia “a pivotal market of the future for companies in a range of industries”.
Analysts see Singapore playing a key role in supporting the growth of the rapidly-emerging digital economy, says Ms Alison Kennedy, managing director for Asean at Accenture Strategy.
Extract from Straits Times Report.
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