ASEAN’S YOUNG WORKERS TO DRIVE GROWTH
Confluence of positive tailwinds to spur lower labour costs, greater consumption
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.