Not many businesses currently look through the lens of south-east Asia however, given the intense focus we have on our largest trading partner, China.
"As the growth drivers for south-east Asia shift toward China, new opportunities are being created in our nearest neighbours."
Andrew Géczy, CEO International and Institutional Banking, ANZ
I would like to share three reasons why I believe we need to give more attention to south-east Asia.
First, as the growth drivers for south-east Asia shift away from the US and Europe toward China, new opportunities are being created in our nearest neighbours in resources, agriculture, infrastructure and in manufacturing.
Since 1995, trade between China and the ASEAN economies has grown at an average of almost 20 per cent a year, reaching around $400 billion in 2013. For example, around 25 per cent of China’s coal imports originate from Indonesia, more than from any other country.
This growing integration is leading to significant changes in the composition of trade and regional investment flows in Asia, which has important implications for Australian and New Zealand businesses.
Second, while China continues to be the engine for Asian growth, its growth pattern is shifting to a more moderate and sustainable level of around 7 per cent.
At the same time strong consumer confidence, domestic consumption, urbanisation and growing intra-regional trade is driving grow rates of 5 to 6 per cent in south-east Asia, which continues to create attractive opportunities.
For example, the largest country in south-east Asia, Indonesia, is the sixteenth largest economy in the world, with an emerging middle class of 45 million people.
By 2030 though, it is expected to be the seventh largest economy in the world with an emerging middle class of 135 million – this growth in middle income consumers is greater than any other country except China and India.
Many other countries in south-east Asia are also young, optimistic and growing fast. Vietnam is experiencing growth of 7 per cent a year, Malaysia 6 per cent and Thailand 5 per cent.
Within ASEAN, Gen Y accounts currently for over 27 per cent of the population, and by 2030 over half of its 650 million people will be under the age of 30.
And their rates of consumption are higher than those of Brazil, Russia, India and China, at 53 per cent of GDP.
Being a young demographic, they are also highly connected. Countries such as the Philippines and Indonesia feature in the top 10 countries worldwide in terms of internet and social media penetration.
The final reason I want to give you for paying more attention to south-east Asia is that its role in the world economy is at a watershed.
Recently, south-east Asia has been quietly working on a number of regional trade deals including the Regional Comprehensive Economic Partnership, the Trans-Pacific Partnership and the ASEAN Economic Community.
While these deals still have some way to go before they are finalised, for me, they highlight the more central role that ASEAN is playing in Asia’s economic integration.
The Regional Comprehensive Economic Partnership, for example, would represents 49 per cent of the world’s population and accountsfor 30 per cent of world GDP. It makes up 29 per cent of world trade and 26 per cent of world FDI inflows.
Anticipation of the ASEAN economic community alone is creating business activity, with many companies in the region engaging in acquisitions to improve their market position.
It is significant to note that Australia and New Zealand are working hard on this opportunity together. The agreement establishing the ASEAN-Australia-New Zealand Free Trade Area is the first time Australia and New Zealand have been involved jointly in negotiating an FTA with third countries.
It is also the first time ASEAN has embarked on free trade negotiations covering all sectors including goods, services, investment and intellectual property simultaneously.
This agreement creates an improved environment for Australian and New Zealand exporters and investors through tariff reduction and elimination commitments, and through certain legal protections for investment in ASEAN territories.
So there is much to do to broaden our horizon and to take advantage of the south-east Asian century. Opportunities like this are rare, and even rarer to find them on our doorstep.
As a nation and within our businesses, I believe we need to look beyond China and tap more broadly into the many individual growth markets that exist in Asia – and in particular to the opportunity in south-east Asia.
This is an edited version of a speech delivered by Andrew Geczy to the Trans Tasman Business Council on 9 September, 2014