ASEAN – 50 years on

ASEAN, also known as the Association of Southeast Asian Nations, formed in 1967 as a security arrangement among five states (Indonesia, Malaysia, the Philippines, Singapore, and Thailand), to preserve regional peace, has morphed into an ambitious integration project taking in 10 nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam).

Back in 1991, the Asean bloc accounted for just 1.7 per cent of the global economy. Today, they have doubled that share to 3.5 per cent, or 6.1 per cent if measured using purchasing power parity. Over the same period, Asean’s share of the global population also increased, but by much less, from 8.3 per cent to 8.6 per cent. This process of economic catch-up is steadily bringing Asean’s economic weight into line with its demographic weight.

Of course, the region’s change and development can be measured in countless other ways. Consider urbanisation. Back in 1991, the region’s urban population stood at 143 million (just under a third). Today, Asean has 306 million urban dwellers (nearly half the population). Or, look at technology, Internet penetration has risen from zero to 250 million users, and continues to climb, with another 100 million users expected to connect in the next three years.

The Economies

The Asian narrative is usually bookended by its two largest economies, India and China. Often overlooked is the middle region, the 600 million people of South-east Asia, or Asean.

Because of its relatively fragmented markets, its linguistic, cultural and religious diversity, as well as geographic dispersion across both landlocked and archipelagic nations, many investors have tended to bypass investment opportunities in Asean companies.

What they may not realise is that precisely for these reasons, there is more likely to be an overvaluation of large Indian and Chinese corporates, and underestimation of the oligarchic and opaque governance in these economies.

Economic growth in the Asean 5 – Indonesia, Malaysia, the Philippines, Thailand and Vietnam – will exceed 5 per cent for the next decade, compared with 3 per cent in North Asia. South-east Asia’s entire workforce is still growing, while that of North Asia is already contracting.

Asean medium-sized corporates that have become successful regionally have done so with little support from their governments. Asean medium-caps are therefore very competitive, lean and able to manoeuvre deftly in the Asian landscape.

With economic integration across the South-east Asian economies rapidly growing, not due to (rather ineffective) Asean intergovernmental cooperation but because of their own business communities, the potential for Asean corporate growth is more underestimated than in its two larger neighbours.

The Challenges

Human Capital

While the good news is that the economies within ASEAN might see a bonanza of new jobs, the challenge remains that without bold reforms, people will lack the skills to fill these positions.

The World Economic Forum’s Human Capital Index reveals how effectively countries are developing and deploying their human capital. Among the indicators used is a survey that asks CEOs to assess the ease of finding skilled employees in their economy. Business leaders in Myanmar, Cambodia, Laos, Thailand and Vietnam all report acute talent shortages, ranking in the bottom half of the 124 countries surveyed. Indonesia, Philippines and Singapore rank 37th, 35th and 20th, respectively. Malaysia, in fourth place, ranks highest on this indicator among the ASEAN countries.


Another challenge is that the very successful model of export-led, labour-intensive and natural resource-dependent growth, which propelled South-east Asian from poverty to wealth in a few decades, will be threatened by what the World Economic Forum calls Revolution 4.0, or what others call the Fourth Industrial Revolution. This disruptive change will be marked by revolutions in genetic engineering, robotics and artificial intelligence, nanotechnology and biotechnology. Computers and the Internet age will be ancient history.

One example of this disruptive change: The International Labour Organisation predicts that robots will replace 85 per cent of the workers in the Vietnamese textile and garment industry over the next two decades. That may seem like a long time, but possibly not nearly long enough for an entire industry and country to transform itself and its economic models.

Asean business leaders are well aware of possibly falling into what has been dubbed “premature deindustrialisation”, where economies just on the verge of large-scale industrialisation – Indonesia and Vietnam, for example – are overtaken by post-industrial robotics which are so inexpensive and productive that they can even replace a workforce which is still cheap by developed-world standards, but already expensive and inefficient by robot standards.

To overcome this, Asean economies need to innovate with even newer ways of producing and marketing, as well as creating new “things” for consumers. But it is not happening fast enough.

As for Singapore, it is an economy in transition, somewhat of a hybrid between a quite competitive, productive and sophisticated export platform and a somewhat low-skilled and low-cost domestic economy. Singapore is also a hybrid – being one of the most open and free-market economies in the world, but led by government-dominated corporates and guided by carefully planned and executed road maps for strategic industrial clusters.

Having attained developed economy and high labour cost status many years ago, Singapore’s economic future depends on relentless innovation at the corporate level and reinvention at the national level.


Traditional development paths for countries are changing, from export-based manufacturing to providing digital services, with big implications for the future of jobs. Education will have to become digital focused, in order to equip the young with the skills they need in a modern economy.

After several centuries of civilisational decline, Asia is ascendant. It will be a long cycle, punctuated by periodic bursting asset bubbles and economic cycles, but the trend is sustainable and palpable. Long overlooked by its larger and more homogeneous neighbours, South-east Asia is uniquely placed to benefit disproportionately from these trends. But the dangers are equally apparent as disruptive change can unexpectedly stall its rise. South-east Asian thought leaders must rise to both the opportunities as well as the challenges.


Keynote Speech: Ho Kwon Ping, Executive chairman of Banyan Tree Holdings, 2017

New Straits Times, Justin Wood, 2016

TIME, Saadia Zahidi, 2016

Jonathan Khoo, Managing Partner Singapore

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