DON’T UNDERESTIMATE the Asean consumer. As a whole, Asean’s more than 620 million inhabitants are an increasingly powerful source of global demand and a potential game-changer for companies looking for growth in a tough and uncertain global environment.
Spanning nations as diverse as Thailand, Singapore, Vietnam and the Philippines, the region has gone from being primarily a hub for manufacturing cars, electronics and other goods to becoming a market for those very goods. Much like “Made in China” became “Made for China”, “Made in Asean” is rapidly becoming “Sold in Asean”.
Asean is not an easy market to tap. Companies need to adapt their business models to breathtaking diversity: Asean spans a wide array of religions, cultures and languages, multiple political systems and vastly varying levels of economic development. A one-size-fits-all business approach is not a recipe for success.
At the same time, the region is sprawling and physically disjointed. Infrastructure links in many parts of Southeast Asia remain underdeveloped or overloaded.
All this means that Asean’s enormous potential – and “Mr and Ms Asean’s” consumption power – is still not fully appreciated.
Yet the region’s gross domestic product – US$2.6 trillion in total – is already the seventh-largest in the world, and by 2050 it could be the fourth-largest.
Accenture estimates that annual consumer spending will rise to $2.3 trillion by 2020, roughly 80 per cent more than the 2012 level. The number of middle-class households in Asean will top 120 million by 2025, roughly double compared with 2010. This will help boost spending on anything from white and brown goods, to travel and entertainment, to insurance and education.
A number of factors support Asean’s growth prospects.
Infrastructure links are improving. The China’s “Belt and Road” initiative, for one, is expected to inject political momentum and financing into many projects in the coming years.
In Thailand, the government is planning to increase infrastructure spending to 4 per cent of GDP from 3.5 per cent to boost growth. Aside from 20 prioritised projects, others are waiting in line as part of its plan to make Thailand into a regional transport and logistics hub.
The recently formed Asean Economic Community is gradually liberalising the flow of goods, services and capital, smoothing cross-border activities for companies doing business within this dynamic region. Full implementation of liberalisation reforms envisaged under the AEC could lift regional GDP by 5 per cent by 2030, by our estimates.
Meanwhile, Mr and Ms Asean are not just growing in numbers, but also becoming more urbanised and wired. The increasing connectivity is making it possible for much of Southeast Asia’s population to access goods and services that were once beyond their financial and physical grasp.
Improving Internet connectivity and the introduction of digital banking technologies will in coming years allow tens of millions people to access savings, loans, investment and insurance services for the first time.
In Thailand, the digital plan for the economy and society is set to be implemented and we can expect more investment to boost the capability of information and communications technology across the country. This will help Thailand achieve its long-term economic and social goals.
Asean is not an easy market, and like many economies right now, its immediate economic outlook is challenged by slowing growth in China, “Brexit” and the general uncertainty in Europe, as well as volatility in the commodities markets. But Mr and Ms Asean and their physical and virtual wallets represent a rare bright spot in the global economy – and a prize worth going for.
Kelvin Tan, the author, is chief executive officer, HSBC Thailand.