What’s driving growth in Southeast Asia

Southeast Asian countries are working to integrate their economies with one another and attract foreign investment through ASEAN. The countries’ rapid growth is propelled by a handful of forces including a fast-rising population and a global shift toward supply chain diversity.

An untapped consumer market: Southeast Asia will add about 140 million new consumers by 2030, according to a World Economic Forum report on ASEAN. By that time, about 1 in 6 consuming households globally will be in Southeast Asia.

• Proximity to China: Southeast Asia has grown in popularity as multinationals seek to diversify their supply chains and take advantage of low-cost labour. Thanks to their population growth and proximity to China, Southeast Asian countries are a convenient location for companies looking to expand their Asia-Pacific operations.
• A digital moment: Across Vietnam, Thailand, the Philippines, Malaysia, Singapore and Indonesia, the internet economy—including e-commerce, food delivery and financial services—is expected to approach $360 billion in gross manufactured value by 2025, according to research by Google, Temasek and Bain & Co.

A trade partner: Southeast Asian countries have worked to reduce trade barriers within the region and across the globe. In 2022, the region’s countries ratified the Regional Comprehensive Economic Partnership (RCEP) a free-trade agreement with Australia, China, Japan, New Zealand and South Korea. RCEP created the world’s largest free-trade area covering 30% of the world’s population.

A favourable business environment: Building on centuries as a strategic shipping hub, Singapore is now a valuable digital hub as well. Businesses are drawn to Singapore’s independent government, strong legal system, sophisticated digital infrastructure and deep talent pool. 

Challenges in Southeast Asia

Even with the upside of a growing population and positive economic momentum, Southeast Asia still faces challenges in creating a frictionless political economic union. Across ASEAN’s 10 countries, for example, there’s no shared currency and no open borders as in the European Union. Each country maintains its own financial regulations, complicating the movement of funds. At one end of the spectrum is Singapore and its minimal regulations. On the other, Vietnam is highly regulated. In between, Indonesia, Malaysia, the Philippines and Thailand are moderately regulated.