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ASEAN is the next world factory

posted Oct 15, 2015, 8:58 PM by Brook Ross
Abridged from The Jakarta Post, September 26 2015

When the Asean Economic Community (AEC) comes into being at the end of this year, such growth potential is expected to accelerate in a market of more than 600 million people with a combined GDP of more than $2.4 trillion. At the World Economic Forum in Jakarta, Indonesia, earlier this year, delegates were told Asean could expect to grow around 5 per cent annually over the next decade. The European Union, on the other hand, projects growth of around 2 per cent and the United States at 3 per cent. Asean already accounts for 5 per cent of global manufacturing with dominant shares in such sectors as chemicals, food and beverage, metals and motor vehicles.

Sandra Seno-Alday, a lecturer at the University of Sydney Business School and the Sydney Southeast Asia Center, said one of the key factors that have contributed to the rise of Aseab as a manufacturing hub is wages. China has priced itself out of many sectors a long time ago, she added. Nations including Singapore, Malaysia, Thailand, Indonesia and the Philippines have developed their infrastructure to support international businesses. Such infrastructure covers export-processing zones, training and education systems and an investment-friendly regulatory climate. Singapore has been the destination of choice for the regional operating hubs of many international companies, Seno-Alday said. 

According to Glenn Maguire, chief economist with ANZ Bank for South Asia, Asean and Pacific, the full potential of Asean is “massively underappreciated”. He sees ASEAN as a manufacturing hub becoming just as important as China. “Workers are not only growing older in North Asia, they are becoming more expensive,” he said in a commentary earlier this year. Maguire added that the migration of manufacturing platforms south into the “youthful and cheaper Southeast Asian economies seems all but inevitable”. “More importantly, the commencement of the Asean Economic Community from December (2015) will be an important multilateral enabler of the drift of factories in Asia to the south.”

A large, youthful work force and strategic location are just some of Asean’s many advantages, which should draw more companies to establish production bases in the region, according to analysts.