Con­flu­ence of pos­i­tive tail­winds to spur lower labour costs, greater con­sump­tion

New Straits Times - - Business / World -


AF­TER decades of liv­ing un­der the shadow of neigh­bours in the North, South­east Asia is tak­ing over as the re­gion’s growth leader.

Ex­pan­sion in the Asean-5 — In­done­sia, Malaysia, the Philip­pines, Thai­land and Viet­nam — will ex­ceed five per cent through 2022, while growth in North Asia will av­er­age just three per cent, ac­cord­ing to In­ter­na­tional Mone­tary Fund data.

“There’s a con­flu­ence of pos­i­tive tail­winds like favourable de­mo­graph­ics” for South­east Asia which would spur lower labour costs and greater do­mes­tic con­sump­tion, said Wei­wen Ng, an econ­o­mist at Aus­tralia & New Zealand Bank­ing Group Ltd, here.

“North Asia is at a more ma­ture stage of devel­op­ment, so you ex­pect a more mod­est growth from them.”

While the likes of China, Ja­pan and Hong Kong have all seen a con­trac­tion in their work­forces since 2015, South­east Asia will see its work­ing-age pop­u­la­tion ex­pand through 2020, No­mura Hold­ings Inc es­ti­mates showed.

The Philip­pines, for ex­am­ple, is pro­jected to see a 1.9 per cent ex­pan­sion of its 15-to-65 year-old pop­u­la­tion this year, with Malaysia’s due to rise 1.6 per cent, said No­mura in a re­port.

The re­gion’s strong growth out­look is lur­ing com­pa­nies such as Coca-Cola Co, which is ex­pand­ing in Viet­nam and in Myan­mar. Ap­ple Inc is build­ing re­search cen­tres in In­done­sia, while Heineken NV is com­pet­ing with An­heuser-Busch InBev NV, Asahi Group Hold­ings Ltd and Kirin Hold­ings Co for a stake in Viet­nam’s largest brewer.

The dif­fer­ing de­mo­graphic out­look is a contributor to each of the re­gion’s growth tra­jec­to­ries, ac­cord­ing to No­mura.

Age­ing would clip the po­ten­tial growth rates of all ma­jor North Asian economies in com­ing years, while those of South­east Asian economies might ac­cel­er­ate, with the ex­cep­tion of Sin­ga­pore’s, said the bank.

South­east Asia coun­tries are also ramp­ing up on am­bi­tious large-scale in­fra­struc­ture projects. In­fra­struc­ture spend­ing by the 10-mem­ber Asean will av­er­age US$110 bil­lion (RM478.23 bil­lion) a year through 2025, ac­cord­ing to Ernst & Young LLP.

These projects will im­prove the de­liv­ery of goods, ser­vices and peo­ple across Asean.

But given their scale, hic­cups were bound to oc­cur, said Max Loh, Asean and Sin­ga­pore man­ag­ing part­ner at Ernst & Young.

“Un­for­tu­nately, there will al­ways be road­blocks as you try to do this,” said Loh. “Some of these in­fra­struc­ture projects are across coun­tries, so you have to nav­i­gate the po­lit­i­cal and so­cial and eco­nomic en­vi­ron­ment.”

As economies grow rapidly, Loh said South­east Asia would need to stay the course.

“With ris­ing na­tion­al­ism or pop­ulism in var­i­ous coun­tries, that could be an im­ped­i­ment if coun­tries move backward in terms of glob­al­i­sa­tion,” he said. “But at the end of the day, if all the coun­tries come to­gether and have one vi­sion, it can be done.” Bloomberg


Asean’s strong growth po­ten­tial is lur­ing com­pa­nies such as Co­caCola Co, which is ex­pand­ing in Myan­mar.

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