Written by the UK-ASEAN Business Council
It is clear that economic power in the world is shifting to the east. Southeast Asia sits in a key strategic position in Asia at the heart of a network of important global powers, with more than 40% of world trade passing through the Strait of Malacca.
Southeast Asia’s economy is predicted to grow by 5 to 5.5% in 2014. The 10 member states of the Association of Southeast Asian Nations (ASEAN) currently have a combined GDP similar to the UK’s and greater than India’s. By 2030 the ASEAN economy is predicted to eclipse Japan’s and be the 4th largest ‘single market’ after the EU, US and China. The Asian Development Bank (ADB) predicts the size of the middle class in emerging Asia will rise from 24% of the population in 2010 to 65% in 2030.
Because of this predicted growth, ‘business as usual’ for UK companies is not an option – according to a recent report produced by Oxford Analytica for Prudential. The report suggests that the UK faces an important choice in its trade and investment strategies: focus on maintaining the status of its current partnerships, primarily with slow-growing EU partners; or increase the pace of its shift towards the fast-rising emerging markets.
The report predicts the future dominance of Asia to the extent that by 2050 it will dominate the global economy with an estimated 50% of world trade, compared with 20% today. The rise of ASEAN as the second largest contributor to Asia’s GDP after China is impressive.
Total UK exports in 2012 to the six largest ASEAN economies – Indonesia, Thailand, Malaysia, Singapore, the Philippines, and Vietnam were equivalent to over three times the UK’s exports to Brazil, twice India’s, and 50% more than Japan’s. UK goods exports to ASEAN are rising more rapidly than British exports globally and UK services exports to ASEAN exceed those to either mainland China or Japan. Both are much larger economies than ASEAN.
With a forecasted 7% economic growth per year for the next five years in Cambodia and 7.8% growth forecasted for Myanmar in 2014/15, these new and rapidly growing ASEAN markets offer untapped and exciting opportunities for potential exporters. Key sectors in Myanmar are education and vocational training, energy, professional services, manufacturing, infrastructure and engineering. And if all these facts have not whetted the investment appetite – ASEAN Facebook users make it the world’s 2nd largest Facebook community!
Although a region of 10 diverse markets there is a roadmap towards economic integration – the ASEAN Economic Community (AEC) that will emerge at the end of 2015. There are five core elements to the integration – free flow of: goods, services, investment, capital and skilled labour. The AEC will create opportunities for even greater trade and investment to the benefit of both ASEAN and the UK. The UK is also playing a key role in building 21st century networks by shaping the next generation of global trade through EU Free Trade Agreements with ASEAN member states, the first of which has been signed with Singapore. These agreements are important to help drive UK exports and also encourage foreign direct investment into the UK from Southeast Asia.
The UK is well placed to play a key role in what is being dubbed the ‘Asian Century’. It has a strong trading relationship with ASEAN, but more UK companies need to position themselves now to take advantage of the predicted increase in the level of opportunities in ASEAN over the coming decades.
The UK-ASEAN Business Council’s (UKABC) key role is to bang the drum about ASEAN and encourage UK companies to consider, explore and then invest in ASEAN’s 10 incredibly diverse, high growth markets. Through the UKABC’s signposting of in-depth information, relevant events, visits to the markets and local deliver partners, UK companies are in a better position to make informed choices about their investment/export strategies in this region.