Strong fundamentals and innovative growth strategies drive ASEAN’s investment appeal 

ASEAN’s rise as a growth and neutrality hub, driven by trade and digitalization, is the result of decades of effort, creating lasting opportunities.

September 26, 2024

7 mins

Corporate & investment banking

Focused on investment prospects across a vast and dynamic region, the ‘Spotlight on ASEAN Business: Charting New Frontiers’ forum hosted by Bloomberg and Standard Chartered, carried a distinct air of long-term optimism. While current investor interest in the Association of Southeast Asian Nations (ASEAN) is undeniable, speakers further affirmed that the region’s reputation for growth, innovation and shared purpose bodes well for its long-term economic future.

At a moment when global uncertainties and trade tensions dominate the landscape for many business leaders, ASEAN is a welcoming port for international investors. In his introduction remarks, Benjamin Hung, President, International for Standard Chartered, observed that with markets expected to continue at an average growth of over four per cent in 2025, ASEAN is a reservoir of optimism amid an anaemic global growth picture. 

“The rise in protectionism and fragmentation is seeing one of the world’s biggest rewiring of supply chains – and I think ASEAN will be the biggest beneficiary,” he noted. As digitalisation serves as a catalyst for integration across the region, Hung said ASEAN can use this uplift to drive investment into all corners of the region. “I don’t think I can find another economic bloc that everyone is so attracted to.”

Positive investment climate

In a pivotal moment for the region, ASEAN for the first time attracted more foreign direct investment (FDI) than China in 2023, as FDI in Southeast Asia’s top six economies reached USD206 billion, compared with USD43 billion for China.

As the move towards diversifying both investment strategies and supply chains benefits ASEAN, Bill Winters, Group Chief Executive, Standard Chartered, said that investors are reaffirming the bloc’s strong fundamentals. “There’s a tremendous confluence of trends which are making ASEAN an extremely attractive place to invest,” noted Winters. 

These spurs include economic and political reforms, excellent policy reform and platforms, as well as an experienced and relatively cost-competitive workforce. “This region is where the action is, certainly for Standard Chartered. And I think it’s where the action is in the world, to a very substantial degree.” 

Sweet spot for peace and neutrality

Aside from providing a neutral harbour during a time of trade tensions, ASEAN has the opportunity to further demonstrate its competitive strengths. For instance, Malaysia already has a 40 per cent share of total exports within the Electrical and Electronics (E&E) sector, which in 2023 was worth MYR575 billion (USD123 billion), including a global market share of around 6 per cent of global semi-conductor trade. Indeed, the country is now seeking to move from the back-end of the semiconductor production chain, to higher value front-end functions.

“We have a slight advantage given the track record we have, and also the ecosystem that’s been built,” says Tengku Zafrul Abdul Aziz, Minister of Investment, Trade and Industry of Malaysia. 

The Malaysian Investment Development Authority (MIDA) has announced that in the first six months of 2024, Malaysia attracted MYR160 billion (USD37 billion) worth of approved investments into services, manufacturing, and primary sectors – an 18 per cent increase on the same period last year. MIDA estimates that 79,187 new jobs will be created from 2,948 approved projects.

“Companies are realigning their supply chain to make them more resilient and secure. They’ve seen ASEAN as a sweet spot that is neutral, stable and peaceful. And the region has been a net beneficiary.”

ASEAN as a centre for AI excellence

Among the most exciting and discussed of these emergent technologies is Artificial Intelligence (AI). As an established hub for enterprise technology within ASEAN, Singapore hopes to play a facilitating role as a venue for investment, dialogue and R&D into the region’s advanced technologies ecosystem.

One of those leading this charge is Josephine Teo, Minister for Digital Development and Information, and Minister-in-charge of Smart Nation and Cybersecurity. With the AI opportunity at kick-off stage, now is a good time for ASEAN to harness and localise its rich potential, she asserts. A foundational step is the release of SEA-LION, or ‘Southeast Asian Languages in One Network’, a family of large language models (LLMs) which can specifically help companies speak the diverse languages of the region. 

Companies such as Indonesia’s Tokopedia have already used the model to generate product descriptions in other Southeast Asian languages. The minister hopes SEA-LION can act as a “local guide” for those interacting with ASEAN, a region of 650 million people and around 1,200 languages. “It is built using data specific to our region and is reflective of our language and cultural diversity.”

As part of its National AI Strategy 2.0, Singapore is helping to lead the conversation around safety and regulation within the AI space, facilitating an ecosystem with sufficient talent, data and models to flourish. Creating a centre of excellence for AI meant expanding data centre capacity and proliferating the responsible use of data, while developing a talent pool of AI practitioners to 15,000 people over five years, in tandem with companies like Microsoft, Oracle, Salesforce and Google. 

“There are already companies here that are at the cutting edge and want to grow further. To the extent that using AI helps them open up new markets and create new competitive advantages, that’s what we want to see,” she explained. 

Demographic edge paints an optimistic future

Savvy investors eyeing the region for its growth prospects can benefit from the fact that within the bloc, there are differing levels of economic maturity. “Because of the different stages of growth for the countries within ASEAN, if you are an investor, whether it’s in manufacturing or in financial assets, you can have a full value chain of countries to look at,” says Loh Boon Chye, CEO of Singapore Exchange (SGX). “I’m optimistic that the cycle across the whole of ASEAN for capital raising will remain favourable.”

Within the fast-growing startup ecosystem, adoption of new technology and leveraging of the burgeoning internet economy is on target to be worth USD295 billion by 2025. Many of these companies are enjoying the benefits of a young and dynamic age profile, as the region’s young consumers come of age in a technology-centric environment. 

“We’ve got countries that have a median age of between 20 and 30 years old. And that’s not just building a cadre or cohort, but also bringing forth a generation of people who are digital natives – and see themselves as citizens of the world,” says Minette Navarrete, Co-founder and President, Kickstart Ventures. 

The ability of ASEAN to build young businesses that leverage new technologies also promises a bright and potentially sustainable economic future for a region with a palpable level of excitement about the future. “There is an openness to looking at innovation, and looking at very young companies,” affirms Navarrete. 

Winters agrees that the region has arrived at an exciting point. He believes its current success, coming off two decades of structural reform and global trade configuration, bodes well for the future. “This is a very special time for ASEAN,” says Winters. “This is the region’s time, in a very enduring way – because the foundations here are strong.”