Southeast Asia is on the cusp of a golden age. The economic gravity will shift to Southeast Asia. And yet most global investors are still under-invested in the region.
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The Rise of the ASEAN Tiger

James Cheo, Southeast Asia Chief Investment Officer, Global Private Banking and Wealth, HSBC recently gave some comments and predictions about the chances of investment in the South East Asia.

Southeast Asia is on the cusp of a golden age. The economic gravity will shift to Southeast Asia. And yet most global investors are still under-invested in the region. The 10-member Association of Southeast Asian Nations (ASEAN) economies may be diverse, but the opportunity set is exciting in the coming years ahead.

ASEAN growth story intact

In 2022, ASEAN was powered by robust consumption, investment spending and exports, this resilience will continue however, some of these tailwinds will start to fade with slowing global growth in 2023.

The good news with slowing growth is that inflation should peak and therefore tight monetary policy should also peak for the region. The peaking of rates as well as the weakening of the USD will offer some reprieve for ASEAN.

ASEAN’s economy was very resilient last year even with China’s economy closed. This year, with China’s reopening, ASEAN will get a big boost.

Thailand is going to be a key beneficiary from China’s reopening with the return of Chinese tourists. Thailand is one of the few economies in the world to likely experience a growth acceleration in 2023. We expect Thailand to see growth acceleration to 3.8% in 2023 from 3.2% in 2022

Indonesia is another economy to watch this year. China’s reopening will also benefit from Indonesia from the higher demand for commodities. Indonesia with a larger exposure to the domestic consumption will be more resilient to a global slowdown. More importantly, Indonesia is experiencing its own industrial renaissance, with an abundance of nickel and with an upgrading of its manufacturing capabilities, Indonesia can become a key producer of electric vehicle batteries.

Thanks to the growing manufacturing sector and convenient exports, Vietnam is one of top FDI receivers in the region and a good FDI success story. The country’s government has turned Vietnam into an attractive investment destination by providing a number of favorable incentives for FDIs, as well as its dynamism in participating in about 15 FTAs with many countries and economic blocs in the world. While Korea has chosen to invest in Vietnam as its major global production hub for smartphones, China, after its re-opening, is pushing its investment into the country’s manufacturing.

ASEAN’s economic development is moving in the right direction. Trade between ASEAN countries and mainland China has grown from US $40 billion two decades ago to US $850 billion presently. The reason for the region’s strength is because over the past decade, ASEAN economies have undergone a healthy reset as they have deleveraged and continued to invest in infrastructure. As a result, ASEAN companies have developed resilient fundamental strengths and stronger balance sheets to withstand global uncertainty.

Rise of the ASEAN T-I-G-E-R

However, ASEAN growth prospect is going to accelerate in the next decade, because several factors that were not as strong decades ago, are now present stronger than ever. The growth factors of the region can be illustrated by the acronym – TIGER.

T for technology or the digital economy, I for rising income of the middle class, G for the green transformation, E for energy infrastructure and R for RCEP.

T – Technology or the Digital Economy

The pandemic has accelerated ASEAN’s internet economy with digital adoption becoming mainstream. The region’s digital economy is expected to accelerate and grow to $330 billion by 2025. This growth is not by accident. ASEAN is home to more than 10 million online merchants, and e-commerce sales is surging with the sales projected to rise to $150 billion by 2025. Digital platforms – a combination of technical innovation, new business models, and value proposition - offer a range of new products and services via digital channels for the huge population. Southeast Asia continues to see growth in the number of internet users — with 20 million new users added in 2022, raising the total number of users to 460 million. The use of digital technology is raising the productivity of the ASEAN economy, and sets the stage of the next era of growth.

I Rising income of the middle Class

With a population of 680 million, ASEAN is the third-most populous market after China and India, and comprises nearly 9% of the world’s population. The region enjoys favourable demographics, with a relatively young and growing working population.

The young people in ASEAN have come of age. Almost half of its people are below 30 years of age and its sizeable labour force is estimated to peak only in 2045, some three decades after China.

This young, digitally savvy, productive and growing work force provides a long runway for growth as the region propels forward. The rise of ASEAN’s middle class is one of the largest economic locomotive in the world and its consumer spending is expected to double to $4 trillion in the next decade.

G - Green Transformation

ASEAN’s green transformation can account to more $1 trillion in annual economic opportunities Resource extraction and energy generation are still very much coal-reliant and inefficient in the region, and must be decarbonised in a sustainable manner. ASEAN has set a target of 23% share of renewable energy in primary energy supply by 2025.

It is not realistic to suddenly replace fossil fuels with renewables. However, the transition to natural gas is one low-hanging fruit. The advancement of green hydrogen technology can possibly be a solution but solar and wind has the potential to grow significantly due to substantial land mass for the region.

Furthermore, resource-rich locations in ASEAN could be important beneficiaries of the decarbonisation megatrend as global demand for nickel – critical in electric vehicles (EV) battery production – accelerates. Indonesia is the key beneficiary as the country has the world’s largest nickel ore reserves, accounting for a quarter of global production.

E – Energy infrastructure

ASEAN is expecting a population surge of 90 million in the next decade, which will put more stress on existing infrastructure. Cities are a key contributor to climate change responsible for 75% of carbon emissions, with transport and buildings being the largest emitters. Smart building solutions can unlock cost savings by adopting efficient energy usage.

However, to solve climate change, the future of transport has to be electric, which is insignificant at under 1% of market penetration globally. Indonesia has an ambitious target of producing 20% of electric vehicles of their total production in the next five years.

Globally, electric vehicles are expected to grow by 36% annually, reaching 245 million vehicles in 2030 – more than 30 times above today’s level. ASEAN coming from a low base, is expected to see bigger exponential expansion. In the region, electric two and three-wheelers will represent the lion’s share of the total electric vehicle fleet, as this category is most suited to rapid transition to electric drive.

With such goals, there will be immense improvements in electric vehicle infrastructure. For example, Singapore is aiming to deploy 60,000 charging points and require all newly-registered cars to be cleaner-energy models by 2030 and phase out internal combustion engines by 2040.


The implementation of the Regional Comprehensive Economic Partnerships (RCEP) – the world’s largest free trade agreement will further integrate trade and accelerate investments for the region. The RCEP will allow a standardisation of cross-border regulations, which will promote trade efficiencies across the region.

The region is well-positioned for foreign direct investments due to the meaningful improvements in the ease of doing business and favourable demographic profiles. This is especially important as companies look for new locations to diversify supply chains.

Looking ahead, ASEAN as a region has complementary strengths. Indonesia with its natural resources, Singapore is a key financial center, Malaysia and Vietnam for their prowess in electronics manufacturing; and the strong automotive sector in Thailand.

Combining as a region through the free trade agreement, ASEAN has the potential to become a leading manufacturing hub of the future, one built on automation, robotics, and AI.

Diep Nguyen