The Association of Southeast Asian Nations celebrated its 50th anniversary this year. The regional cooperative more commonly known as Asean was established in 1967, with Thailand, Indonesia, Malaysia, Philippines and Singapore as founding members. Brunei Darussalam, Vietnam, Lao PDR, Myanmar and Cambodia later joined.
Back in 1967, the region was filled with strife, and the association was established to help bring peace, stability and prosperity. The spirit of peaceful cooperation has been dubbed the “Asean Way” and has been accompanied by impressive growth over the past 50 years.
Asean today represents the world’s seventh-largest market with the third-largest labour force (behind China and India), and there are projections it will become the fourth-largest economic bloc by 2030.
Since its founding, there has been a great deal more cooperation between countries in Asean and more travel interchange, even among those which had historically been enemies.
Given all the challenges, Asean has made significant progress towards gradual introduction of various cooperation measures. Its members have been successful in cooperating to improve regional trade and investment, as well as tourism.
Gross domestic product growth has also achieved high marks, with this year’s projections for several of its members outpacing that of China.
A diverse group
While Asean represents a block of smaller countries banding together to create a more powerful global voice, these countries are quite different. When Asean was formed, its members largely held similar political systems but there are a variety of ideologies today, from communism to democracy to monarchy.
The wealth and development of its members also varies, with per capita GDP in Singapore and Brunei putting them in a much higher category of wealth than others. There are even some who make the case for Singapore to be considered a developed, as opposed to an emerging, market.
As investors, the diversity of the region is particularly exciting, with a number of opportunities in almost every endeavour of activity, from mining to consumer goods to technology. As trade and investment barriers come down, the Asean group will represent a huge market.
Rising growth rates have also created greater prosperity for people, and we have seen a new generation of consumers emerge since Asean was formed. By and large, these countries also boast youthful populations in their most productive years, which bodes well for their future.
Consumers are increasingly moving online, even in the newest and smallest markets. For example, since 2014, Myanmar has seen the number of internet users rise from some two million to more than 39 million. Meanwhile, the use of smartphones has skyrocketed to pass the 80 per cent penetration rate – higher than that of the US.
Myanmar represents an example of the type of technology leapfrogging we see taking place in many emerging markets, for example, with people moving straight to mobile phones, bypassing landlines altogether.
Challenges and opportunities
The biggest general risk to markets in the region comes from a possible black swan event. China is, of course, a very important market in Asia and any slowdown or derailment of its structural adjustment process could have short-term implications for investor sentiment toward Asean countries. On an even broader level, the world is still unbalanced and many countries have high debt levels.
Some also say the “Asean Way” has been a hindrance in many aspects, bogged down with more meetings and discussion than actual action. The region has not achieved the type of economic integration, or clout, that the European Union has. Certainly, Asean is much further away from the degree of integration the EU has achieved.
Asean economies are just too diverse culturally, economically and politically to rise to be a stronger, unified force, some critics say. In my view, the move toward a common currency and common banking system represents its next step.
For many years, the world’s engine of economic growth has not been in developed markets but in their emerging counterparts instead. And Southeast Asia is helping provide the power.
Asean will continue to see progress as its economies continue to grow and we welcome the chance to unlock investment opportunities there.
Mark Mobius is executive chairman of Templeton Emerging Markets Group