CEO of Smartlink Communications. Global analyst, consultant and trainer, passionate about leadership, global communications and competition.
One doubts that many business leaders feel there is a scarcity of bad news these days: rising inflation and interest rates, German de-industrialization, a Chinese slowdown, tentative recessions and supply chain disruptions.
In other words, what will be euphemistically called business mentors have their sofas booked well in advance. But when not nodding and attentively scribbling, the aforementioned might wish to mention the brighter side of life: ASEAN.
A primarily economic union of ten South East Asian states that covers over 600 million people and boasts a combined GDP of over $3.2 trillion, ASEAN represents an enduring center of growth that is going from strength to strength. While already growing at well over 4.5%, it may benefit from supply chain re-optimization toward ‘Alt-Asia’ as its demographic dividend comes to the fore.
Furthermore, the organization itself can claim such rising giants as Indonesia—possibly the world’s fourth largest economy by 2050 according to PwC—and Vietnam, expected to go from being the world’s 32nd largest economy to the 20th largest economy while serving as a role model of best practices for developing countries.
Location, Location, Location
At the heart of ASEAN’s economic development lies intra-regional trade integration. Established to create a single market and production base, ASEAN has played a pivotal role in facilitating the free flow of goods, services and skilled labor within the region.
Several ASEAN nations, perhaps notably Vietnam, Thailand, Malaysia—and the world’s perennial top student, Singapore—which tend to be grouped as the ASEAN-6, have ascended to the arguable status of manufacturing powerhouses.
They have attracted multinational corporations seeking to establish production facilities due to their skilled workforces, competitive labor costs and locations. These countries now serve as key nodes in global supply chains, particularly in sectors such as electronics, automotive manufacturing and textiles. The strategic geographic location of ASEAN countries is a cornerstone of their attractiveness to businesses seeking global expansion.
Not only does their proximity to economic giants such as China and India afford them a unique advantage, allowing for efficient access to vast consumer markets, but integrating into global supply chains spanning the aforementioned delivers the sort of economic growth at a scale many emerging markets could otherwise only hope for: manufacturing jobs, R&D centers and trade—as opposed to commodity exports. As a result, ASEAN has become an indispensable link in the global supply chain network, providing businesses with the reach they need to serve an increasingly interconnected world.
Infrastructure development has been another core point of ASEAN’s economic growth strategy. While this sometimes makes the news for the wrong reasons, considerable investments in transportation networks, ports and logistics facilities have significantly improved connectivity both within the region and with the rest of the world. This has not only reduced transportation costs but also enhanced the overall efficiency of supply chain operations, making ASEAN an even more appealing destination for businesses.
A Two-Way Street
Speaking from Eastern Europe, I believe we hold a cautionary lesson for many ASEAN businesses—and particularly ASEAN family businesses which might hope to take their place among the global elite one day: Accepting investment, accepting partnership and enjoying a period of spectacular growth are just part of it—as Eastern Europe has come to realize in recent times.
Much of Eastern Europe has actually enjoyed spectacular growth for the better part of two decades but, as McKinsey observed, it hasn’t fully harnessed the engines of growth because that growth hasn’t fully translated into endogenous intensive growth. Indeed, by most accounts and despite the growth rates, much of Eastern Europe may not fully achieve the nearly 75% of Western Europe’s income levels by 2050, as currently predicted.
Instead, I would wholeheartedly recommend to each business leader with their eyes on the future to look at joining the fast-growing markets of the Global South—be it next door, in South America or Sub-Saharan Africa—with a view toward exports and establishing a market presence.
Location, good timing and ample opportunity are brilliant to have, but the way to fully seize the moment is to seek to establish oneself as a global participant, utilizing globalization as a two-way street. For example, Africa is an often ignored $1.4 trillion consumer market. And by Brookings’ estimates, it is expected to reach $2.1 trillion by 2025—indeed, Nigeria alone is expected to have a consumer spending of almost half a trillion dollars by 2025.
ASEAN countries hold precisely the sort of industries that emerging, price conscious, middle classes most clamor for, and it would be quite a loss if price competitiveness along global value chains isn’t further translated into brand success for domestic companies.
Thus, if business leaders focus on exports, ASEAN countries can become full global participants rather than passive participants to globalization. Key to this, based on my experience working alongside emerging market businesspeople, is identifying and prioritizing market segments in developing countries that are price conscious first adopters: The first generation to have middle class amenities, be they washing machines or low-cost cars, are often trend-setters in their respective communities as well as informal brand ambassadors.
Takeaway
ASEAN represents one of the world’s fast-growing regions, even as economic problems beset businesses elsewhere. ASEAN countries have made remarkable strides in economic development, solidifying their positions as key players in the global supply chain landscape.
Their strategic locations, infrastructure investments, active trade agreements and commitment to sustainability make them highly attractive destinations for businesses seeking to expand their global supply chains.
However, I would personally stress the need to fully seize this moment and use it to not only grow but chart the course for future growth by establishing a presence in the world’s future economic hotspots.
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