Asean a global economic powerhouse in the making, says BCG

Back in 2016, Jones Lang LaSalle Singapore and South-East Asia managing director Christopher Fossick noted that establishing the ASEAN Economic Community (in 2015) would eventually lead to South-East Asian nations ultimately becoming global economic powerhouses.

Fast forward 10 years later, that rings true as the bloc is even more focused on advancing economic integration while addressing challenges and external pressures successfully.

However, as countries brace for threats of tariffs and trade wars particularly from the United States and China, Asean has the scale and resilience to thrive amid shifting geopolitical conditions.

Boston Consulting Group (BCG) global advantage practice managing director, partner and global leader Aparna Bharadwaj told StarBiz that ASEAN’s growth so far has been underpinned by robust domestic demand and advancements in physical and digital infrastructure, positioning it as a self-reliant economic bloc.

She said the bloc has many strengths, including in terms of trading.

“ASEAN countries have clear growing capacities in trade and development.

Total Asean trade is expected to grow by 3.7% annually or more than US$1.5 trillion by 2033, while trade between Asean countries with China is expected to grow even faster at 5.6% annually or US$558bil,” she said.

This, Aparna said, was faster than global trade, which is expected to grow at only 2.9% in the same 10-year period.

She added that domestic consumption in the region is expected to reach US$4 trillion by 2031, driven by a surge in middle and high-income households, projected to make up 84% of all households.

“With gross domestic product growing 5% annually over the past decade, the region’s strong economic momentum and expanding consumer base create attractive opportunities for businesses,” she said.

Furthermore, the region has proactively expanded and modernised various infrastructure in energy, transport and digital networks.

Aparna said initiatives like the Asean Broadband Corridor, Asean roll-on/roll-off shipping network and Trans-Asean gas pipeline have significantly spurred growth in the region by enhancing connectivity, facilitating trade and promoting economic integration.

“Other efforts like the ASEAN highway network, Singapore-Kunming rail project and Indonesia-Malaysia-Thailand growth triangle reflect the region’s collective drive toward integrated and seamless connectivity,” she added.

On the digital front, Aparna said ASEAN countries negotiated a first-of-its-kind Digital Economy Framework Agreement that encompasses nine essential areas.

Launched in December 2023 to conclude at the end of this year, the agreement became a landmark initiative aimed at transforming the region into a leading digital economy.

With that, Aparna said many are optimistic about Asean and the potential it has today compared to the past.

She noted BCG believes the true opportunity for Asean lies in how these countries work with each other and with the rest of the world – through trade, talent flows, investments flows and so on.

Despite being smaller than India and China individually, she said being a block of more than 650 million people collectively has these nations punching above their weight, economically.

“Therefore, for me, there are two aspects to the Asian opportunity. How ASEAN stands on its strength, but also how nations collaborate with others around the world to maximise opportunities.

“For example, over time, ASEAN has navigated well between Eastern and Western superpowers – continuing to work well with the United States and the European Union (EU), but also deepening relationships with China, India and Australia.”

Meanwhile, in BCG’s article titled Great Powers, Geopolitics, and the Future of Trade, Aparna, alongside a host of other authors, said Asean is likely to face some challenges over the coming decade.

“We project that trade growth with Europe will flatten to only around 1% a year, as the EU implements a carbon-pricing system on imports, which will particularly affect ASEAN sectors like metals, cement and chemicals,” the article said.

Lydia Nathan

The Star

Asia News Network