‘South-east Asia will pick up growth rate’
KUCHING: The Southeast Asian economy has been forecast to grow by four to five per cent annually over the next 10 years, with Vietnam leading the charge at a projected growth of five to seven per cent.
While many economists have correctly focused on the pro-growth policies, stable macroeconomics and healthy demographics of Southeast Asia, they are often missing two critical sources of additional growth.
These are the growing impact of tech-enabled entrepreneurs on investment, productivity and economic inclusion and that SE Asia’s largest trading relationships are with China; as China grows SE Asia grows.
Contrary to conventional wisdom that SE Asia benefits most from businesses diversifying away from China, SE Asia benefits most from a growing Chinese economy.
These are among the findings from a new report by Bain & Company and Monk’s Hill Ventures’ Angsana Council, “Southeast Asia’s Pursuit of the Emerging Markets Growth: How four factors could propel Southeast Asia to improved growth”.
Since 1991, SEA has experienced strong and steady growth, with per capita income rising 2.5-fold from US$1,900 to US$4,700 in 2020.
Contributing factors include stable government policies, surging entrepreneurial activity, favourable demographics, and a relatively benign international environment.
SEA’s gross domestic product (GDP) per capita income has been growing and could return to leading emerging markets growth on the back of four factors: robust traditional growth policies, a vibrant ecosystem of tech-enabled disruptors (TED), attractive demographics with a growing working and middle class and taking a neutral stance amidst geopolitical winds.
Bain & Company and Monk’s Hill Ventures’ Angsana Council projections for growth in Southeast Asia foresee a modest uptick for all major Southeast Asian countries except Thailand, which should be interpreted as a “rosy scenario” relative to the growth headwinds faced by Europe, Japan, China and emerging regions like Latin America and Eastern Europe.
SEA countries have made steady progress towards improving several of the seven traditional growth drivers Bain has defined in the study.
These are improving the ease of doing business, enabling healthy competition, facilitating investment, strengthening government and reducing corruption, raising education levels and promoting re-skilling, improving infrastructure and increasing macroeconomic and social stability.
Probably the most noticeable improvement in Southeast is the marked increase in macroeconomic stability since the 1997 Asia Crisis.
This reduction in risk will benefit Southeast Asia during this time of global headwinds.
Today, the greatest force of progress in most developing countries are tech-enabled disruptors or TEDs.
The TEDs are directly and indirectly impacting six of the seven traditional growth drivers by promoting business creation, enabling healthy competition, raising investment, strengthening e-government, improving education and productivity levels, and improving infrastructure.