As the region seeks to deepen its ties and capture an even greater share of global trade, its economic profile is rising—and it is crucial for those outside the region to understand its complexities and contradictions. It is projected to rank as the fourth-largest economy by Based on forecasts by IHS. Home to more than million people, it has a larger population than the European Union or North America.
ASEAN has the third-largest labor force in the world, behind China and India; its youthful population is producing a demographic dividend. Perhaps most important, almost 60 percent of total growth since has come from productivity gains, as sectors such as manufacturing, retail, telecommunications, and transportation grow more efficient. To capitalize on these trends, however, the region must develop its human capital and workforce skills.
In Indonesia and Myanmar alone, we project an undersupply of 9 million skilled and 13 million semiskilled workers by ASEAN is a diverse group. GDP per capita in Singapore, for instance, is more than 30 times higher than in Laos and more than 50 times higher than in Cambodia and Myanmar; in fact, it even surpasses that of mature economies such as Canada and the United States. That diversity extends to culture, language, and religion. Indonesia, for example, is almost 90 percent Muslim, while the Philippines is more than 80 percent Roman Catholic, and Thailand is more than 95 percent Buddhist.
Although ASEAN is becoming more integrated, investors should be aware of local preferences and cultural sensitivities; they cannot rely on a one-size-fits-all strategy across such widely varying markets. Memories of the Asian financial crisis linger, leading many outsiders to expect that volatility comes with the territory. But the region proved to be remarkably resilient in the aftermath of the global financial crisis, and today it is in a much stronger fiscal position: government debt is under 50 percent of GDP—far lower than the 90 percent share in the United Kingdom or percent in the United States.
Most of the region has held steady so far, despite concern about the effect on emerging markets of the potential end of quantitative easing by the US Federal Reserve. Savings levels have also remained fairly steady since , at about a third of GDP, albeit with large differences between high-saving economies, such as Brunei, Malaysia, and Singapore, and low-saving economies, such as Cambodia, Laos, and the Philippines.
Income growth has remained strong since , with average annual real gains of more than 5 percent. Extreme poverty is rapidly receding. That number could almost double to million households by , making ASEAN a pivotal consumer market of the future. There is no typical ASEAN consumer, but some broad trends have emerged: a greater focus on leisure activities, a growing preference for modern retail formats, and increasing brand awareness Indonesian consumers, for example, are exceptionally loyal to their favorite brands. Arief Budiman et al.
An additional 54 million people are expected to move to cities by ASEAN consumers are increasingly moving online, with mobile penetration of percent and Internet penetration of 25 percent across the region. But there are vast differences in adoption. Hyperconnected Singapore has the fourth-highest smartphone penetration in the world, and almost 75 percent of its population is online.
By contrast, only 1 percent of Myanmar has access to the Internet. It accounts for 7 percent of global exports—and as its member states have developed more sophisticated manufacturing capabilities, their exports have diversified. Vietnam specializes in textiles and apparel, while Singapore and Malaysia are leading exporters of electronics. Thailand has joined the ranks of leading vehicle and automotive-parts exporters.
7 key challenges for the future of ASEAN - and how to solve them
While Myanmar is just beginning to open its economy, it has large reserves of oil, gas, and precious minerals. In addition to exporting manufactured and agricultural products, the Philippines has established a thriving business-process-outsourcing industry. China, a competitor, has become a customer. In fact, it is now the most important export market for Malaysia and Singapore. But demand from the United States, Europe, and Japan continues to propel growth. The US Chamber of Commerce has highlighted widespread concern that the much-anticipated AEC could not be launched by the deadline.
Severino, wrote: "while ASEAN should not be condemned for its members' failure to make good on their commitments, any failure to deliver will likely lead to a loss of credibility and could mean that member states fall further behind in the global competition for export markets and foreign direct investment FDI ". In , the commencement of the AEC was postponed to 31 December from the original plan of 1 January. An article published by Vietnam News echoed some of the challenges and opportunities that Vietnam faces in preparation for the AEC.
The article also noted that the general secretary of the Vietnam Steel Association, Chu Duc Khai, said that most of the local steel making enterprises lack information about doing business in the ASEAN market; they have not had a chance to study it, and have only exported small amounts of steel to ASEAN countries. Another challenge is the need to compete with other countries in the ASEAN market to export raw products since the country had mainly exported raw products. The leading economist of ADB, Jayant Menon, said that Cambodia needs to speed up its customs reform and to press ahead with automating processes to reduce trade costs and minimise the opportunities for corruption and be ready for the implementation of its National Single Window by The report stated that the goals of the AEC would not be accomplished if ASEAN fails to address the issues of non-tariff measures and eliminate non-tariff barriers in the region.
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