After experiencing years of growth plateau, the Southeast Asian region is arriving at a critical turning point, as there are three major favorable development opportunities looming ahead, though accompanied by some challenges, according to Digitimes Research.
First, the United Nations has projected the annual global trade growth at 3.3% for 2018, exceeding global economic expansion rate for the year. This will be a crucial transformation juncture for the import-reliant Southeast Asia, where younger people with strong spending power command a significant portion of its near-600 million population, as foreign investors are expected to step up injecting capital funds and technologies into the region, Digitimes Research believes.
Second, despite the US withdrawing from the Trans-Pacific Partnership (TPP), another 11 original target member states have decided to carry on the pact under the name of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), while the Regional Comprehensive Economic Partnership (RCEP) orchestrated by China is slated to complete all related talks between 10 ASEAN member states and six trading partners by the end of 2018. The consequent regional market integration is highly conducive to the development of Southeast Asian countries.
Third, regional countries are actively proceeding with a spate of economic reforms and forward-looking development projects, such as Thailand's 4.0 project and Singapore's Smart Nation program. This, coupled with the emerging digital economy, will serve as the major diver of the region's economic growth.
ICT as growth enabler
Meanwhile, the Organization for Economic Cooperation and Development (OECD) recently also reported that the information and communications technology (ICT) industries will become the "enabler" for economic growth in Southeast Asia, saying that the combination of the ICT and service sectors will drastically alter trade, production and retail activities in the region. The report forecast Vietnam and the Philippines to enjoy a robust average annual economic growth of 6.2-6.4% during 2018-2022, and Indonesia 5.4%.
A Google-Temasek report also indicates that Southeast Asia's network economy is estimated at US$50 billion in 2017, and is expected to surge to US$200 billion earlier than the original schedule in 2025, with ride-hailing, online media, online travel and e-commerce being the four major sectors boasting the largest growth potentials. The network user numbers in the region is projected to grow at CAGR of 14% during 2015-2020.
With the bright business prospects, the report continues, Southeast Asia has become a new golden investment outlet for tech investors. Since 2015, venture capitalists have funneled US$13 billion into the region, having nurtured seven tech unicorns, including Grab, SEA, RAZER and Go-Jek.
Nevertheless, some new challenges are emerging to undermine possible capital injection into the area, including the US recent passage of Tax Cuts and Jobs Act (TCJA) and Fed's plans to hike key interest rates for three times in 2018, as well as parliamentary and presidential elections in the regional countries in 2018-2019.
