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ASEAN: An emerging hotspot

Grant Thornton International

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Grant Thornton International

November 3, 2016
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The ASEAN (Association of Southeast Asian Nations) trade bloc is a growing force in the world economy and its increasing influence brings with it prime investment opportunities for businesses both inside and outside the region.

The region’s emergence as an economic powerhouse is partly the result of its rising middle classes enjoying increased spending power. This, in turn, is creating thriving new markets in a variety of sectors including health and technology, says Ian Pascoe, managing partner, Grant Thornton Thailand.

Increasing economic clout

The Association of Southeast Asian Nations (ASEAN) has ten member states: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam. These countries have been working for almost 50 years towards their goal of creating a single market with the free flow of goods, services, investment, skilled labour and capital.

And the journey doesn’t stop there. Last year saw the formation of the ASEAN Economic Community (AEC), whose plan for 2016-2025 is to accelerate progress by encouraging greater integration and cohesion, boosting competitiveness and innovation, and building the bloc’s economic clout.

Internal or ‘intra-ASEAN’ investment is an intrinsic part of that plan as it serves to increase the region’s ‘interconnectedness’. This rose by $15 million to $22.1 billion last year and is an increasingly significant contributor to overall foreign direct investment, which stood at $120 billion in 2015.[1]

The role of medium-sized businesses is critical in stepping up internal investment and helping the region continue to flourish. Regarded as the entrepreneurs, they contribute significantly to job creation through expansion and franchising and act as a vital link as suppliers or contractors to multinationals in overseas markets. Their contribution in helping ASEAN realize its ambitions ‘cannot be underestimated’, according to the ASEAN Investment Report 2016.

Local and foreign businesses therefore can take advantage of a more liberalized and lower-cost market, an area rich in natural resources and an abundance of talent and skills. There is also a market of 622 million people to tap into and, more to the point, an emerging consumer class.

While opportunities abound, businesses need to remain agile and be able to respond to regulations that are constantly changing and adapting amid the AEC’s pursuit of creating an integrated economic system.

Ian admits regulation is a huge issue. “In Thailand, the barriers to entering a new market can be high because of protectionism. But with the right advice, these can usually be navigated.” Increased competition means organizations will have to stay on their toes to defend market position although bringing in – and keeping – key talent as well as adopting best-practice methods will help stave off that threat.

Locating the right knowledge

ASEAN is not a homogenous market. Its diverse economies mean there is no one-size-fits-all approach and investors need to be aware that economies are at different stages of development. For example, Singapore ranks second in the Global Competitiveness Index 2016-2017, while Vietnam is ranked 60th. Pascoe also warns that the pace of change is incredibly rapid. “In five years everything has changed. Being able to adapt is vital,” he says.

This is a dynamic region with a compelling growth story and it presents many investment opportunities for organizations looking to make the most of the ASEAN bloc’s potential. It is essential, however, to have a thorough understanding of how markets are developing in each country and how the increasing economic interconnectedness of the ten countries can be made to work to your advantage.

 

About the author:

Grant Thornton International

Grant Thornton International

Email: GTIMarketing@gti.gt.com
Office: Grant Thornton International

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