Time to wise up and tap into ASEAN

Australia should focus on ASEAN’s burgeoning middle class if it’s to fully exploit opportunities arising from the economic integration of a USD2.6 trillion¹ bloc with a spending might that may soon rival China’s.

ASEAN’s 10-strong group of nations is already a formidable economic powerhouse in its own right. Its population is roughly double that of the United States. Its growth rate easily tops that of the Eurozone or the US. And its consumption and manufacturing prowess have turned it into a key location for companies and investors from around the world.

If it were a nation, ASEAN would today be the world’s seventh-largest economy². By 2020 it could be the fifth-largest³ and Accenture estimates its consumer spending could be worth as much as USD2.3 trillion⁴, driven by the 120 million middle class households who are expected to reside in ASEAN’s 10-member nations by mid next decade⁵.

Urbanisation and this rapidly growing middle class are quickly turning Southeast Asia into an important market for anything from household appliances and mobile phones, to healthcare, education, tourism and agri products.

The region has gone from being primarily a hub for manufacturing cars, electronics and other goods to being a market for those very goods. Much like “Made in China” became “Made for China,” “Made in ASEAN” is rapidly becoming “Sold in ASEAN.”

It’s true that ASEAN is not an easy market to tap. Companies need to adapt their business models to a wide array of religions, cultures and languages, multiple political systems, and vastly varying levels of economic development. GDP per capita in Singapore, for example, is more than 40 times that of Myanmar or roughly 15 times that of Indonesia.

At the same time, the region is sprawling and physically disjointed: the 250 million inhabitants of Indonesia alone are spread out over thousands of islands. Infrastructure links in many parts of South East Asia remain underdeveloped or overloaded.

But all this means that ASEAN’s enormous potential is often not fully appreciated. Regional per capita GDP is forecast to rise to more than USD 9,000 by 2030, from about USD 3,000 in 2010,⁶ to make GDP is forecast to rise to more than USD 9,000 by 2030, from about USD 3,000 in 2010, to make ASEAN’s inhabitants a powerful source of global demand and potential game-changer for companies looking for growth in offshore markets.

Its new consumer class is expected to embrace the digital economy, particularly as more than half of the region population is under the age of 30.⁷ ASEAN’s young consumers, just like their millennial counterparts in China, the US or Australia, are highly likely to want to incorporate online and mobile innovation into multiple aspects of their lives.

Indeed, Southeast Asia’s internet economy is expected to expand sixfold to about USD 200 billion by 2025⁸. Its e-commerce has the potential to jump to USD88 billion in the same period⁹, partly fuelled by the spending patterns of a middle class wanting to purchase items previously beyond their financial and physical grasp.

ASEAN’s diversity means that a one-size-fits-all business approach will not prove a recipe for success but Australia already has bilateral free trade agreements (FTAs) with three of the largest ASEAN markets – Singapore, Thailand and Malaysia – and a fourth with Indonesia is imminent. It has also signed a strategic partnership with Vietnam.

These FTAs coupled with the recently-signed Comprehensive and Progressive Agreement for Trans Pacific Partnership and mooted Regional Comprehensive Economic Partnership have the potential to greatly enhance Australia’s competitiveness in the Asia-Pacific region.

ASEAN is too easily forgotten in all the noise about the economic transformation of its regional neighbours, India and China. But it is undergoing many of the same demographic shifts occurring in both those countries and Australia needs to wise up if it’s to capitalise on the opportunities in the region before competitors in rival countries gain a foothold.