ASEAN’s GDP is forecasted to increase from $2.4 trillion in 2015 to $5.2 trillion in 2025. Meanwhile, ASEAN’s Foreign Direct Investment is predicted to double from $1.8 trillion in 2015 to $3.6 trillion in 2025.
This being said, it is imperative that businesses and organizations with interests in the region equip themselves fully with knowledge on the present landscape and forecast changes, particularly as a result of the ongoing regional economic integration initiatives
- ASEAN’s trade will contribute to 7.6% of global trade by 2025 with Indonesia as its largest economy
- The 697-Million-strong population will increase consumption and boost the growth of various markets with total consumer expenditure in ASEAN predicted to rise to $3.3 Trillion by 2025.
- The ASEAN total FDI stock is predicted to double (collectively) from $1.8 Trillion in 2015 to reach $3.6 Trillion by 2025.
According to Hazmi Yusof, MD ASEAN at Frost & Sullivan – The main driver of economic growth in the ASEAN region towards 2025 will be regional integration through the ASEAN Economic Community (AEC).
The AEC and its 4 major components: Single Market base, competitive economic region, equitable economic Development & integration into Global Economy will boost economic activity in the region and increase revenues through its single market policies and removal of trade barriers between ASEAN countries.
The AEC’s main goal is to transform the 10 nations in the ASEAN region into a single market and production base with a highly competitive advantage as a stable and prosperous region.
Hazmi further adds – The five aspects of the AEC: free flow of goods, services, investment, capital and skilled labor, will be a binding agreement between ASEAN member countries towards growing the economy of the region.
Each nation will be participating in different stages to open up sectors which lack competitive strength, enabling their markets to compete within ASEAN. Compliance of the AEC is expected to be non-uniformly achieved across ASEAN with potential outliers being Laos and Cambodia.
Speaking about how AEC will impact suplly chain in the region, Hazmi elaborates – ASEAN’s strategic location is highly appealing to manufacturers as it fulfils need to build supply chains closer to end markets. It enables the manufacturing processes to be sliced finely and allocated to different countries within ASEAN, based on their demands and offerings. The AEC, which has set a deadline in 2018 for the removal of non-tariff barriers within ASEAN, is expected to further boost the development of this fragmented supply chain.
A greater effect of the China plus one policy adopted by several large manufacturers, whereby a manufacturing presence is established in ASEAN in addition or supplemental to existing manufacturing capabilities in China, is also expected.
The ASEAN region will benefit greatly from the full implementation of the AEC. The establishment of the ASEAN Free Trade Area in particular will boost trade convergence and uniformity throughout the region, helping to reduce the economic disparities among ASEAN regions.
Hazmi Yusof MD ASEAN for Frost & Sullivan. Hazmi is based out of Kuala Lumpur Malaysia and can be reached at firstname.lastname@example.org
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at email@example.com | +603 6204 5830