Don’t
underestimate the Asean consumer.
Yes,
there are only about half as many of them as there are in China or India. And
the typical shopper in the ten-member Association of South East Asian Nationsis
not as wealthy as Mr. or Ms. Europe.
But as a
whole, Asean’s 620m-plus inhabitants are an increasingly powerful source of
global demand, and a potential game-changer for companies that are looking for
growth in a tough and uncertain global environment.
Mr. and
Ms.Asean have come a long way in a short time.
Spanning
countries as diverse as Singapore, Vietnam and the Philippines, the region has
gone from being primarily a hub for manufacturing cars, electronics and other
goods to being a market for those very goods. Much like “Made in China” became
“Made for China,” “Made in Asean” is rapidly becoming “Sold in ASEAN.”
Visit the
airports in Bangkok, Manila and Jakarta nowadays, and you’ll find them bustling
with Malaysians, Indonesians, Thais and Filipinos who just a decade or two ago
could not have dreamed of enjoying an international holiday.
There are
three Louis Vuitton stores in Kuala Lumpur alone, and one each in Ho Chi Minh
City, Hanoi, Manila and Surabaya.
GDP per
capita, which as recently as 2007 was little more than $2,300, has grown by
about 78 per cent and now tops $4,100.[Clearly that remains well below the
$55,000 in the United States, or the nearly $48,000 in Germany, but it compares
favourably to India ($1,580) and approaches China ($7,590). Three Asean
countries already have a per-capita GDP exceeding China’s.
ASEAN is
not an easy market to tap. Companies need to adapt their business models to
breathtaking diversity: ASEAN spans a wide array of religions, cultures and
languages, multiple political systems, and vastly varying levels of economic
development. GDP per capita in Singapore,for example, is roughly 50 times that
of Cambodia, and 16 times that of Indonesia. Internet penetration in Singapore
is excellent; in Myanmar, it is almost non-existent. A one-size-fits-all
business approach is not a recipe for success.
At the
same time, the region is sprawling and physically disjointed: the 250m
inhabitants of Indonesia alone are spread out over thousands of islands.
Infrastructure links in many parts of South East Asia remain underdeveloped or
overloaded.
All this
means that ASEAN’s enormous potential – and Mr. and Ms. ASEAN’s consumption
power - is often still not fully appreciated.
Yet the
region’seconomy – $2.6tn in total -- is already the seventh-largest in the
world; by 2050, it could be the fourth-largest.[7Accenture estimates that
annual consumer spending will rise to $2.3tn by 2020, roughly 80 per cent more
than the 2012 level.[The number of middle class households in Asean will top
120m by 2025, roughly doubling compared to 2010. This will help boost spending
on anything from white and brown goods, to travel and entertainment,to
insurance and education.
A number
of factors support ASEAN’s growth prospects.
Infrastructure
links are improving. China’s Belt and Road initiative, for one, is expected to
inject political momentum and financing into many projects in the coming years.
The
recently-formed Asean Economic Community is gradually liberalizing the flow of
goods, services and capital, smoothing cross-border activities for companies
doing business within this dynamic region. Full implementation of the
liberalisation reforms envisaged under the AEC could lift regional GDP by 5 per
cent by 2030, by our estimates. [10]
Meanwhile,
Mr. and Ms. Asean are not just growing in numbers, but also becoming
moreurbanised and wired. Some 100m more people are forecast to migrate from the
countryside to cities across South East Asia over the next 15 years, while the
number of internet users is expected to soar from 260m now to 480m by 2020 –
meaning 3.8m new users per month — according to recent research by Google and
Temasek.
This
increasing connectivity is making it possible for large swathes of South East
Asia’s population to access goods and services that were once beyond their
financial and physical grasp.
Take
financial services. The World Bank estimates that about two-thirds of people in
Indonesia, the Philippines and Vietnam, and about 20 per cent of those in
Malaysia and Thailand, currently have no banking relationships. Improving
internet connectivity and the introduction of digital banking technologies
(mobile banking, virtual teller machines, voice biometrics, thumbprint
identification etc) will in coming years allow tens of millions people to
access savings, loans, investment and insurance services for the first time –
enabling consumption, and putting a vast consumer base within the e-commerce
reach of companies around the world.
Asean is
not an easy market, and like many economies in the world right now, itsmore
immediate economic outlook is challenged by slowing growth in China, Brexit and
general uncertainty in Europe, and volatility in the commodities markets. But
Mr. and Ms. Asean and their physical and virtual wallets represent a rare
bright spot in the global economy – and a prize worth going for.
Kevin
Martin
Kevin Martin is Head of Retail Banking and
Wealth Management Asia-Pacific, HSBC
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