ASEAN: the EU of South East Asia

Thao Le, International Trade Practice Director, discusses some of the high growth opportunities offered by the ASEAN market


Credit: Pixabay (Dragon Bridge, Da Nang, Vietnam)

If you have an interest in new opportunities in Asia, this article is for you. It covers some of the high growth opportunities offered by the Association of Southeast Asian Nations (ASEAN) – dubbed “the EU of South East Asia”.

It was established in 1967 by Indonesia, Malaysia, Philippines, Singapore and Thailand and later joined by Brunei Darussalam, Vietnam, Lao PDR, Myanmar and Cambodia. More than half of ASEAN’s population of 630 million is under the age of 30. It is predicted to become the fourth-largest economy in the world by 2030, after the US, China, and the EU.

Real GDP growth in the ‘five fastest-growing economies’ in South East Asia (annual percentage change):

ASEAN-5 country 2017 2018 2019
Vietnam 6.8 6.9 6.7
Philippines 6.7 6.4 6.5
Indonesia 5.1 5.2 5.2
Malaysia 5.9 4.9 4.8
Thailand 3.9 4.5 4.1

Source: OECD

The Singapore case

Singapore is the de facto ASEAN’s financial capital. It is already a major finance and fintech hub with an advanced economy and the best governance in Asia, arguably. In addition, it is the base for many Western businesses of all sizes who want to invest and trade in South East Asia. Singapore banks and professional services help them navigate the complex and unique regulations of each ASEAN country.

There is a Fintech boom across the ASEAN countries. Singapore stands out in terms of market maturity and number of regional fintechs based there, according to an Economist Intelligence Unit report published in 2018. Its financial regulator, the Monetary Authority of Singapore (MAS), want fintechs to succeed and are willing to help them. There are a lot of global fintech start-ups looking to set up shop there.

The World Bank ranked Singapore 2nd (behind New Zealand) among 190 economies in its latest Ease of Doing Business Index.

The Vietnam case

Due to the Us-China ongoing trade war, American companies, alongside Chinese ones, have re-routed more than half of the 2,000 circa tariffed products in the US-China trade war so far, reported Bloomberg in June. Vietnam is the biggest winner of the trade war so far, with a boost equivalent to 7.9% of its projected 2019 GDP through the first quarter of the year, according to Nomura Holdings.

In addition, Vietnamese companies in sectors ranging from Trucking to Fintech are attracting a record wave of VC money, reported FT in July. VNG, an online games, platforms, digital payments and cloud services company, was valued at an estimated $2.2 Billion in a fundraising round led by a unit of Temasek, an investment firm from Singapore, reported Reuters in March.

After much progress since the launch of the “doi moi” (renovation) policies in 1986, Vietnam could soon be included in the MSCI Emerging Market Index, potentially attracting billions to its stock market.

ASEAN challenges

In 2018, the World Economic Forum identified the following as the top two challenges for the future of ASEAN.

1. Geopolitical stability and regional relationships

ASEAN states are located at a strategically important junction, bordering China and India, which makes ASEAN a focal point for both regional and global powers. ASEAN members are also enmeshed in territorial disputes with interested powers. China’s claim to territories in the South China Sea, for example, overlaps with competing claims by Brunei Darussalam, Malaysia, the Philippines and Vietnam.

Closer coordination and common goals among ASEAN governments can help promote stability.

2. Governance challenges for businesses

There are huge family-owned conglomerates and state-linked businesses. Such as the Central Group in Thailand, Salim Group in Indonesia, Singtel in Singapore, and Vinamilk in Vietnam. Yet small and mid-sized businesses are 90% of business activity. Entrenched interests with conglomerates and corruption are undermining the business environment, particularly hurting smaller businesses.

Digital innovations may enable greater transparency and promote economic growth.

Final thoughts

In 2020, ASEAN will host not one but two Formula 1 Grand Prix races. Next year, Vietnam will join the elite nations (which already include Singapore) organising the races valid for the prestigious F1 World Championship. Which is not an official index, but a signal that the region, despite its challenges, is a “buy”!


To learn how we can help you take advantage of the opportunities in ASEAN:

International Trade services