The ASEAN opportunity continues to excel

The bloc’s potential is supported by a thriving young population, growing middle class and rising demand growth across various sectors - yet the scale of the ASEAN opportunity is still often underestimated by Australian business. 

" ASEAN provides a solid consumption base for Australia’s goods and services and is slowly developing into a region with a skilled workforce in which to invest.”ASEAN and Australia share a dynamic and complementary relationship. ASEAN as a grouping is Australia’s third-biggest trading partner after China and Europe. With strong demand growth, rising standards of living and a sizable infrastructure deficit, the potential for Australia-ASEAN trade and investment is expected to exceed $US210 billion by 2025.

Why ASEAN stands out

ASEAN is set to become the fourth-largest market after the EU, US and China by 2030. Its population, currently 650 million, is growing by seven million a year and nominal GDP has reached $US2.7 trillion - a near doubling in the past decade.

The median age of ASEAN’s population is well below other bigger economies like China and Korea, which are increasingly grappling with an older population. Among the developing Asian economies, ASEAN’s median age comes close to India’s – a country well recognised as having a substantial ‘demographic dividend’.

A growing urban population and a thriving middle class can feed through into higher economic growth. With ASEAN contributing to Asia’s growing middle class, there will likely be assimilation of new skills, better technology and a growing need for new investment.

ASEAN provides a solid consumption base for Australia’s goods and services and is slowly developing into a region with a skilled workforce in which to invest.

Opportunities

While current trade in goods and services is strong, much of it is concentrated in four of the 10 ASEAN countries. ASEAN’s share of total trade with Australia has largely been stagnant in recent years and the two-way flow of investments between ASEAN and Australia is heavily concentrated within Singapore.

For trade in services, ASEAN’s share, at 16 per cent in the 2017 financial year for Australia’s services exports, is much higher than the goods share of 10 per cent.

The largest services export earner for Australia from ASEAN is from international students, followed by tourism. Australia’s excellent reputation for top-quality education, along with its proximity to Asia, helped drive export earnings from the education sector to a record $US31 billion in 2017.

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Infrastructure

ASEAN’s increasing infrastructure gap driven by rapid urbanisation and increasing middle class population creates immense opportunities. Countries like Indonesia and Malaysia have some of the fastest urbanisation rates in ASEAN.

Apart from transport infrastructure, Australian companies can support such infrastructure priorities across services including e-government, traffic management, education and healthcare.

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Khoon Goh is Head of Asia Research at ANZ