ASEAN, home to over 600 million people, is poised to emerge from the pandemic stronger than before. The region is already seeing strong external demand for exports as economies around the world recover from the pandemic. In addition, continued fiscal support and increasing foreign direct investment due to global supply chain diversification trends are creating long-term opportunities.
“ASEAN accounts for about 4% of global GDP but we are getting close to 10% of global foreign direct investment and we expect to continue drawing in more investments,” said Edward Lee, Chief Economist, ASEAN and South Asia, Standard Chartered, during a recent webinar on intra-ASEAN growth opportunities that included a panel of ASEAN business leaders.
Indeed, with global trends tilting in its favour, ASEAN has the potential to generate up to USD600 billion a year in additional manufacturing output and an annual increase of up to USD22 billion in manufacturing foreign direct investment by 2030.1
Moreover, with a young, well-educated, and digitally-savvy population base and a rapid rise in affluence and urbanisation, ASEAN is both an attractive consumer market and a critical player in the global supply chain.
ASEAN-based businesses are tapping into these shifting macro trends, aided by digital advancements, to embark on new initiatives and deliver resilient growth.
Capturing new demand with technology
With ASEAN countries featuring more prominently in the global value chain, strengthening the region’s supply chain resilience is top of mind. To that end, industries are increasingly complementing their existing automation technologies with mobile applications and artificial intelligence (AI) to enhance manufacturing processes, improve and assure product quality, and adapt quickly to supply chain disruptions.
Empty supermarket shelves during the height of the pandemic underscored the fragility of ASEAN’s food supply chain and its critical nature. The agribusiness industry, which has weathered several health crises such as the bird flu and swine flu even before the COVID-19 pandemic, is reinforcing its production capacity with mobile-enabled remote monitoring and control capabilities.
Consumer-facing businesses, meanwhile, are rolling out new innovations to meet rising demand for digital products and services. Greater acceptance of online medical consultations, for instance, is driving growth in ASEAN’s nascent telehealth services market, which is projected to see a compound annual growth rate (CAGR) of 17.6% from 2021 to 2028.2 “We expect telehealth services to increase in popularity and eventually become mainstream,” noted Datuk Thomas Leong, Group Chief Strategy Officer, Sime Darby.
Traditional businesses are also collaborating with industry disruptors to stay relevant and develop new revenue streams – car rental companies’ foray into the shared economy through joint ventures with ride-hailing apps being one such example.
Investing for long-term gains
ASEAN’s digital transformation, its role as a key raw materials supplier and manufacturing base, as well as its diversity and appetite for premium consumer products and services, offer huge business opportunities. But to succeed, companies need to take a long-term view of their investment strategy.
“Just don't expect to come in and have everything ready. Be prepared to really invest and develop the infrastructure and resources within the area you invest in,” said Thossaporn Petporee, Senior Vice-President, Business Development, Charoen Pokphand (CP) Foods. “Once you build that, you will win the support of the government and the community, creating a strong bond between them and your company. That’s how CP Foods succeeded in the local markets.”
While slow economic revival and a drop in consumer spending are perceived to be the biggest roadblocks to business expansion plans in the short term, webinar panellists believe that a lack of tech talent is the larger long-term threat. Digital transformation initiatives will be hampered if ASEAN does not have enough people with the right skills. Fortunately, local and regional industry-university collaborations are helping to build ASEAN’s digital talent pool and create a reliable pipeline of skilled talent.
After all, strong alliances and strategic collaboration can go a long way in securing business success in a diverse ASEAN. Companies need to recognise that each market has its own regulatory environment and partnerships with those who know those markets and can offer guidance are invaluable.
Standard Chartered has been focusing on helping our clients navigate the regulatory nuances of each country and creating more seamless and sustainable supply chain financing and developing instant payment solutions for our clients’ ecosystems across the region, said Heidi Toribio, Regional Co-head, Client Coverage, Asia Corporate, Commercial and Institutional Banking at Standard Chartered.
For businesses taking a long-term view, ASEAN presents a unique mix of economic and social factors that will power growth for the future. The key is in forging the right local partnerships that can make capturing and executing on the new opportunities easier and more efficient for a resilient tomorrow.