18 Nov 2015
Special Report – ASEAN – Growth in the Fast Lane
By Standard Chartered Bank
ASEAN is a high-growth region. Since 1980, growth has averaged around 5.4%. This is well above the global growth rate of 3.4% over the same period. It is also faster than other regions – including Latin America, Sub-Saharan Africa and Middle East and North Africa – over the same period. During the 1980-2013 period, ASEAN growth outpaced global growth by 2ppt on average. As a result, the per-capita GDP gap between ASEAN and the world narrowed to 2.7x in 2013 from 6.0x in 1980. We believe more than half of ASEAN has the potential to increase potential growth to 7% or higher. Countries such as Myanmar, Laos and Cambodia are already growing at such fast rates. At 7% growth, an economy doubles in size every 10 years.
We see tremendous growth potential for the ASEAN consumer market by 2020, owing to rising urbanisation and income growth. The anticipated shift in labour structure and demographics should create significant new demand. It should also cause a shift in consumption patterns as ASEAN consumers allocate a larger share of spending to high-quality products and services. We believe demand in Indonesia, Vietnam and Myanmar will surge, given their relatively large populations and low penetration rates for consumer durables and services. There are also potential challenges. The region’s diversity suggests that companies looking to tap its strong growth potential will need to develop multi-pronged strategies to cater to different cultures and tastes. Furthermore, protectionist measures are possible in strategic industries in the absence of strong domestic players. Even so, we expect the ASEAN consumer market to offer strong growth and substantial opportunities by 2020.
ASEAN will benefit from the shift in investment from China as China loses cost competitiveness and its labour supply tightens. ASEAN also has a demographic edge. ASEAN’s median age was about 27 years as of 2013. This is much younger than China’s estimated 32 years. ASEAN will also continue to add to its labour force over the next few decades. Compared to 2010, ASEAN’s labour force is expected to grow by 70mn by 2030, while China’s labour force is expected to contract by almost 70mn (source: UN data).
ASEAN economies need infrastructure development to attract investment that is shifting from China, and to compete with neighbours such as India. ASEAN economies are relatively advanced in telecommunications and have good access to electricity. Improvements are needed in transport infrastructure. To date, the focus has been on developing national infrastructure, but seamless regional transport infrastructure across ASEAN is needed to more closely integrate the region in the longer term.
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