3 "Key" Industries to Watch Out for Growth in Southeast Asia in 2023
One of the world's regions with the quickest growth rates is Southeast Asia, sometimes known as the ASEAN (Association of Southeast Asian Nations) region. The Asian Development Bank (ADB) projects that Southeast Asia's economy will rise by 5.5 percent in 2022.
Despite the current depressing economic climate, Southeast Asia continues to be particularly attractive for foreign direct investment (FDI), and a number of industries appear to be on the upswing in 2023.
While China's "reopening" will provide a much-needed boost for tourism and travel starting in the second quarter, trends of capital inflow into important sectors, including as IT, manufacturing, and infrastructure development, are expected to persist (Q2 2023).
By 2030, the region is expected to have the greatest single market in the entire world. The investment flows, which have remained strong in recent years, are evidence of this. As impediments to intra- and inter-regional trade and investment have been gradually reduced, ASEAN member nations are becoming more accessible to global trade.
Due to the sheer scale of the workforce and population in the region, the development of the local economies in Southeast Asia also provides a favorable environment for foreign firms. A total of 662 million people call the ASEAN countries home, and their combined GDP is $3.2 trillion.
As economies and employment arrangements become more organized and more young people enter the job market, growth patterns will be increased. Southeast Asia's median age is 30.2 years, which is significantly younger than China's (38.1) and Europe's (38.1). (44.1).
Last but not least, the ASEAN area has benefited from and probably will continue to benefit from a favorable geopolitical position. Superpowers China and the US have stepped up their relations with the region as a result of their growing competition.
An important sector of the local economy is manufacturing. This reliance on manufacturing is more prominent in certain nations than others; in Vietnam, it serves as the engine of the economy, and in Thailand, it contributed 27% of GDP in 2021.
However, there are a number of reasons to think that investment in the region's industry will continue in 2023. One reason for this trend is that products created in ASEAN are typically seen as being more affordable than those made in China, partly because of considerations like labor costs.
Due to the US-China trade war and reduced labor costs, several manufacturers with operations in China have been forced to relocate parts or all of their supply chains to Southeast Asia.
The ASEAN governments have implemented enabling laws and preferential incentives to take advantage of this change in regional supply chains as part of the "China Plus One" or "China Plus Many" strategy. This involves lowering taxes, making it easier to do business, increasing infrastructure spending, and providing incentives in free trade and special economic zone locations.
Vietnam has benefited greatly from the China Plus One approach in recent years, with the manufacturing sector alone bringing in almost 58 percent of all FDI in 2020.
In all ASEAN member states, the tourism industry has experienced difficulties since the pandemic began. It is one of the main sectors of ASEAN cooperation since the formation of the association and plays a significant role in numerous of the regional economies.
With approximately 40 million visitors, Thailand was the most visited ASEAN nation in 2019. With its Phuket Sandbox initiative, it was the first nation in the Asia Pacific to start the reopening to foreign visitors in July 2021.
The statistics for 2022 has not yet been finished, but visitor numbers are still much lower than they were before the pandemic. According to estimates, 10 million tourists will travel to Thailand in 2022.
However, there are a number of reasons to believe 2023 will be a better year for the industry. The first of these is the'reopening' of China to travel. The Chinese immigration administration recently declared that starting January 8, it would start providing visas for residents of the mainland to travel abroad. In most ASEAN countries, a dearth of Chinese tourists had been viewed as the industry's main obstacle.
Returning tourist demand from other parts of the world is another factor. According to information provided by CNBC, US households are continuing to release demand that has been bottled up for two or three years as concerns around COVID-19 subside. The Asia Pacific region is among the most well-liked travel regions.
Additionally, ASEAN nations have created initiatives to draw in immigrants, such as Malaysia's program for digital nomads and Indonesia's second home visa program. 7.4 million foreign tourists, nearly twice as many as in 2022, are Indonesia's ambitious goal for 2023.
According to a survey from Google, Temasek, and Bain & Company, the digital economy in the "ASEAN-6" (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) is predicted to achieve a gross merchandise value (GMV) of US$200 billion by the end of 2022. By 2025, this is anticipated to have a GMV of US$330 billion.
100 million additional internet users have emerged in the region over the last three years. The epidemic accelerated the adoption of the internet in many nations since it restricted public interaction and offline activities like shopping and leisure.
The thriving start-up ecosystem in Southeast Asia is well-represented by tech start-ups. In ASEAN, the number of startups that have raised more than US$1 million in funding nearly tripled to 1,920 between 2015 and 2021, according to a recent UNCTAD research. The growth rate is 85% higher than that of Europe and 65% quicker than that of the US.
The region's investment and growth are still heavily influenced by the ambition for digital transformation. Additionally, the growing digital economy presents enormous potential for growth in the field of digital financial services.
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