The US-ASEAN corridor: Opportunities aplenty as the bloc moves ahead
Steven Cranwell Chief Executive Officer, US and Americas
24 May 2023
During my recent visit to the ASEAN region to meet with clients and colleagues, I was again reminded of the bloc’s rapid evolution and incredible potential, which is nothing short of impressive.
This dramatic evolution is consistent with the pace at which Foreign Direct Investment (FDI) from the US has increased. In the first half of 2022, US FDI to ASEAN was greater than the US investments in China, Japan, South Korea, and India combined1.
And while investment into ASEAN was well underway before the pandemic, it’s undoubtedly accelerated, not least as US firms diversify their supply chains as they shift from a “just in time” to a “just in case” approach.
ASEAN leads for US firms
In a recent Standard Chartered survey2, over 90 per cent of US companies expect to see an increase in revenue in ASEAN from their business.
The positivity towards the bloc is understandable. ASEAN is the world’s fifth-largest economy and a dynamic economic engine whose cumulative GDP is projected to reach USD5.2trn in 2027 (from USD3.1trn in 2020)3. Underpinning this is its 660m-strong population4, which is relatively young, highly educated, tech-savvy, and growing in wealth.
ASEAN aspires to be at the leading edge of growth and emerging global trends – something that the region’s educated workforce, business-friendly environment and geographic location will ensure it is well positioned to achieve. This presents a compelling opportunity for US firms seeking growth.
From tech to trainers: ASEAN’s growth sectors
Numerous industries are attracting a significant amount of investment. They include technology, semiconductor manufacturing, pharmaceuticals, and healthcare. Also notable is the interest from consumer brands targeting high-end and mid-market retail as disposable income increases and brands pivot their focus to Asia.
We are also seeing rising demand for data centres, fuelled by industry and consumer demand and propelled by national data protection laws that require providers to process and store that data locally.
A personal highlight of mine is the opportunity for the region to lead in the sustainability and clean technology space — both of which tie into Standard Chartered’s commitment to supporting companies in their environmental, social and governance (ESG) ambitions.
And while growth in renewable energy isn’t specific to ASEAN, its desire to be at the leading edge of global trends is apparent in how ASEAN firms are already working with US peers to accelerate their net-zero agenda. A case in point is how Vietnam plans to deliver on its ambitious Net Zero 2050 goal through the Just Energy Transition Partnership.
Opportunity knocks: Now what?
For US firms, two questions stand out: what should they do to prosper in ASEAN? And what challenges do they need to overcome?
Several factors should be considered. First, ASEAN is a grouping of 10 sovereign nations, each with their own laws and regulations. This has important implications. At a fundamental level, US firms looking to invest need guidance and advice on the necessary business and licensing approvals, government industry schemes, taxation, and the most effective and optimal approach to injecting capital.
There are also FX considerations and the nuances of local currency laws — particularly important when it comes to managing risks, repatriating profits, and paying dividends to shareholders. Knowing which rules apply to one’s firm and industry is crucial to ensure firms do not run afoul of local regulators.
Political stability, governance and transparency are other areas of consideration. Typically, US firms have invested more into markets with a stable and transparent political system and with a strong rule of law.
Open for business
While firms looking to invest in ASEAN can do so alone, surmounting these obstacles is best done through a reliable partner that has a footprint across the region. Standard Chartered, for instance, is the only international bank with presence in every ASEAN nation – and we’ve been operating for well over a century in many of them.
The depth of our presence and commitment in the region gives us a competitive advantage where clients can leverage our unparalleled local knowledge and on-the-ground expertise – much of which is provided via our Singapore office, the largest Standard Chartered hub in the world.
ASEAN is a powerhouse. And as my recent visit has reminded me, it is open for business and US firms should take note of the numerous opportunities to tap into.
The author is CEO and Head of Client Coverage, Americas at Standard Chartered.
1 https://asean.org/book/investing-in-asean-2023/
2 Standard Chartered press release
3 https://www.imf.org/en/Publications/WEO/weo-database/2022/October/weo-report
4 https://asean.org/book/investing-in-asean-2023/