Asia’s growth story : How geoeconomic competition is challenging ASEAN to chart a new path towards economic development
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A renewed spotlight on ASEAN
Asia’s growth story has captivated the world for over the last half-century, from Japan’s economic renaissance during the “East Asian Miracle” to China’s emergence as an economic superpower in the last few decades. More recently, the economies in the Association of Southeast Asian Nations (ASEAN) have garnered renewed attention as they navigate a new geoeconomic order shaped by rising trade barriers and rapid technological advancements. The region has attracted large investments as companies realign their global supply chains, not only to reroute trade between the United States and China but also secure strategic resources which enable advanced technologies. This shows that ASEAN’s cultural and economic diversity can be seen as a strength that can help companies to pursue both efficiency and resiliency in an increasingly uncertain market.
Challenges for economic growth in ASEAN
ASEAN has seen relatively stable economic growth since 2000. A large driver behind this growth was foreign direct investment (FDI) inflows from Japan and other countries, which led to the expansion of export-oriented manufacturing industries. In recent years, however, ASEAN countries have been increasingly challenged to pursue not only lower costs but also higher value-added. Such a recalibration is necessary as geopolitical events put pressure on the global market while emerging technologies accelerate industrial restructuring. Critical to this effort will be increasing research and development (R&D) expenditures, a strategy that helped Japan, South Korea, and China successfully build economic prowess in the past.
Keys to unlock ASEAN’s growth potential
As ASEAN pivots towards a strategy that balances qualitative with quantitative growth, three key agendas could be pursued by governments and companies in the region:
- Enhancing the competitiveness of local manufacturing companies
- Adopting new technologies to diversify the digital industry
- Taking a long-term view in building energy supply chain
In this context, three opportunities emerge for multinational corporations – especially Japanese companies with a strong footprint in the region – to continue making new investments and positively influence ASEAN’s development:
- Diversify collaboration amongst companies across various countries and sectors
- Make broad-based investments in the digital economy
- Enhance clean energy investments that leverage leading foreign technologies
ASEAN can no longer be considered merely as a large market or a low-cost production hub. The ability of multinational corporations from Japan and around the world to uncover business opportunities in an economy shaped by rapid technological progress and geoeconomic competition will no doubt play a big role in steering the course for ASEAN’s future economic growth.
Authors
Deloitte Tohmatsu Consulting LLC
Director, Monitor Deloitte
Soichiro Shibata
Deloitte Tohmatsu Risk Advisory LLC
Senior Manager, Center for Risk Management Strategy
Yusuke Ichikawa
*Reflects affiliation at the time of publishing
