The ASEAN region is the world’s economic dark horse. Here’s why

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Arsjad Rasjid, Chair, ASEAN Business Advisory Council

• ASEAN is on track to emerge as a global centre of growth.
• To achieve its vast economic potential, ASEAN is leveraging its demographic strength and promoting inclusivity as a catalyst for innovation.
• To ensure regional integration, ASEAN’s innovation efforts are focused on sustainable development, enhancing trade facilitation, and cross-ASEAN talent exchange.

When looking at drivers of economic growth, ASEAN is a region sometimes overlooked for its potential and overshadowed by economic powerhouses such as China and the United States. Yet in recent years, ASEAN has emerged as a dynamic and rapidly evolving economic hub, displaying resilience in the face of unprecedented challenges, including the COVID-19 pandemic.

According to the Asian Development Bank, South-East Asia’s GDP growth for July 2023 was projected at a robust 4.6%, compared to the slower rates of 1.1% for the United States, 0.5% for the Euro area, and 0.6% for Japan. The region’s strength resides in its diversity of languages, cultures, economies and, most critically, its vibrant and increasingly tech-savvy young population. In its journey to fast-track through the traditional stages of development and fulfil its potential as a global economic centre, ASEAN is strategically embracing and fostering two main drivers of growth: innovation and inclusivity.

Inclusivity: harnessing ASEAN’s demographic power

With a combined population exceeding 650 million, ASEAN’s demographic power stands as a formidable driver of its economy. The demographic dividend, with a youthful population, creates a favourable context for accelerated economic growth and development. An economy can only be as strong as the people that contribute to its growth, and this demographic advantage underscores the importance of ensuring that all segments of the population contribute and benefit. As such, ASEAN’s priority is to address disparities across and within member states by promoting digital transformation and human welfare.

Digital transformation

While technologically advanced nations like Singapore and Thailand lead the way, disparities still exist between member states with a notable portion of homes not having access to broadband internet. Inclusive digital transformation will provide equal access to economic opportunities, thereby reducing social disparity. By empowering populations to use digital tools and services such as cross-border payment systems, ASEAN is also able to ramp up the efficiency of the regional economy, facilitate economic integration, and support micro, small and medium-sized enterprises (MSMEs). Legacy programmes being led by the ASEAN Business Advisory Council (ASEAN-BAC), including the marketplace lending platform, ASEAN’s QR code and Wiki entrepreneur, all seek to connect and strengthen regional economic actors.

Human welfare

The COVID-19 pandemic revealed wide gaps among ASEAN members’ healthcare systems and the region’s dependence on external sources for the research, development and manufacturing of critical vaccines. We must work to enhance the region’s health resilience and security, and extend it to all to ensure a strong population able to access the care it deserves.

To catch up with healthcare markets in developed countries, ASEAN-BAC is working to establish a unified and accessible regional healthcare framework through programmes such as the One-Shot Campaign, which will expand the scope of regular vaccination by building capacity, capability and regulatory environments to facilitate regional harmonization. We are also looking to promote innovative investments in high-technology sectors such as genomics, mRNA, and biologics through regional programmes. Healthtech is but one sector driven by innovation; regional governments have taken proactive measures to develop robust ecosystems for research and development of new technologies.

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Innovation: a booming regional landscape

Innovation, the second driver of ASEAN development, serves as the engine to propel ASEAN’s economy forward and is a powerful catalyst for change, especially in such a fast-paced world. In the past decade, ASEAN has consistently ramped up its spending on research and development (R&D), reaching approximately $34 billion in 2020, a substantial rise from $21 billion in 2010, demonstrating a staunch commitment to innovation-driven growth.

Sustainable development

If innovation and development are crucial to economic growth, they should not be rushed through to the detriment of the planet and its future. ASEAN, being one of the world’s most climate-vulnerable regions, recognizes the imperative of pursuing development that follows the principles of environmental sustainability. According to the UN, developing countries will need up to $6 trillion by 2030 to finance not even half of their climate action goals. To ensure sufficient financing and to drive the transformation needed to address the climate crisis, the ASEAN Carbon Center of Excellence has created the ASEAN Alliance on Carbon Market (AACM). By building a regional carbon market, ASEAN-BAC endeavours to generate funds that can drive industry decarbonization and regional climate collaboration.

Simultaneously, we are fostering an environment of knowledge-sharing through platforms like the Net Zero Hub, facilitating collaborative efforts across governments, businesses and civil society towards the shared goal of decarbonization. All of this complements efforts to rapidly accelerate the development and deployment of cleaner, greener and low-carbon transportation – in particular, electric vehicles (EVs). South-East Asia’s electromobility ecosystem, driven by public-private partnerships, will play a significant role in the region’s energy transition and realization of ambitious net-zero targets. While visiting all ASEAN countries in recent months, the view is consistent that ASEAN can be the next China for the EV manufacturing ecosystem.

Trade & investment facilitation

All of these initiatives can only be amplified if ASEAN’s economic stakeholders are fully incorporated within the regional landscape. By streamlining cross-border trade procedures, reducing barriers and harmonizing regulations, ASEAN members are able to enjoy a more interlinked business environment and expand their operations. ASEAN’s commitment to fostering an open and conducive trade framework has been a key driver of its economic growth: Initiatives such as the ASEAN Business Entity and the ASEAN Business & Investment Summit are vital in promoting intra-regional investments and showcasing the region’s growth potential and global economic interconnectedness.

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How is the World Economic Forum ensuring sustainable global markets?

The World Economic Forum’s Platform for Shaping the Future of Trade and Investment informs business and policy action on critical international trade and investment choices, driving inclusive growth and development by working with companies, governments, and civil society.

• The Global Alliance for Trade Facilitation is cutting trade costs by delivering trade facilitation projects in 30 countries in Latin America, Africa and Asia.
• The Forum piloted sustainable investment facilitation in Cambodia, Ghana and Kenya to unlock foreign direct investment for development.
• The Forum’s Digital Trade work drives coherence and interoperability in TradeTech and Digital Economy Agreements.
• The Forum’s Green Trade and Supply Chain Sustainability community identified 25 technologies to cut global emissions.

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ASEAN’s journey toward becoming the epicentre of economic growth paves the way for an unprecedented era of sustainable prosperity. By leveraging innovation and embracing inclusivity, ASEAN has transformed into a dynamic economic powerhouse, and the region must sustain this momentum by continuing to prioritize innovation, invest in human capital and plan for a sustainable future through regional integration and cooperation. In doing so, ASEAN has become a region that bears many promises and paves the way for strengthened dialogue, negotiation and cooperation on a broader international scale.