ASEAN next to lead Asian story – Citi exec
Citi head of ASEAN and Singapore treasury and trade solutions Melvyn Low
IT’S bound to be an “evolution” than a “revolution” but the newly-created ASEAN Economic Community (AEC) may become the “center of the universe” and replace what used to be a China-dominated Asian narrative, said a regional executive of American banking giant Citibank.
Singapore-based Melvyn Low, Citi head for treasury and trade solutions for ASEAN and Singapore, said in a press chat yesterday that ASEAN would likely be the next major growth hub in three to seven years.
He noted that consumer-focused multinational corporations (MNCs) -from healthcare and pharmaceutical to connectivity support sectors like telecom, airlines and infrastructure companies – were scrambling to have a piece of the action in ASEAN, or the 10-member Association of Southeast Asian Nations (ASEAN) which recently formalized the creation of a unified economic bloc called AEC.
The Philippines, with its competitive advantage in the services sector and particularly in business process outsourcing (BPO) industry, is standing out as a potential growth market and thereby has a big opportunity now that the Asian narrative has shifted to ASEAN, Low said.
Low said ASEAN would surely figure out a way to work with both the US and China, the world’s two biggest economic powerhouses.
“It’s also very clear that the center of the universe suddenly becomes us – amongst all other areas – not Africa, not Latin America, not Europe, not US – they’ve got their own issues – it’s Southeast Asia,” Low said. “This is why I feel so positive and encouraged by the medium-term prospects of ASEAN.”
“We do have our challenges; I don’t say that we don’t. When you read about AEC, it’s more evolution than revolution. But if we start collectively looking at ASEAN, with our own countries at heart as well, this would be the growth area in the next three to seven years,” Low said.
Historically, global MNCs looked at Asia as a whole and within Asia, typically looked at Hong Kong and Singapore as headquarter base, Low said. Then China became prominent in the 2000s, dominating the Asian storyline since then. With its economic slowdown in recent years, Low said MNCs started to look elsewhere in the region, looking at India and then Southeast Asia.
As ASEAN ramped up efforts and formalized the creation of the AEC, he said global MNCs have started noticing the regional bloc.
“We’re seeing our clients create an ASEAN strategy for themselves – different from the past when they created only (holistic) Asian strategy,” Low said.
And as MNCs enter new markets or expand existing markets in ASEAN, this has translated to greater intra-ASEAN flows. In 2014, such flows grew by 38 percent or far more than the increments in recent years, Low said.
The region is also seen at the centerstage of the US-backed Trans Pacific Partnership
(TPP), an economic grouping of nations intending to boost trade and investments by dismantling trade barriers. In ASEAN, only Singapore and Vietnam have so far signed up but the Philippines has expressed interest to join as well.
Meanwhile, Low said China’s “one belt, one road” strategy of building land and maritime connectivity to Europe – cutting right through ASEAN – would also boost the region’s involvement in the global supply chain. At the same, he said China was heavily investing in the whole stretch of the route.
He said ASEAN had a big opportunity to harness opportunities from both TPP and China’s connectivity-boosting strategy.
ASEAN includes countries with higher per capita income like Singapore and Brunei and the middle-income economies like Indonesia, Thailand, Malaysia, the Philippines and Vietnam. There are the also the new frontiers like Myanmar, Laos and Cambodia.
As a unified economy, ASEAN will be the seventh largest in the world with a combined gross domestic product of $2.4 trillion. With over 600 million mostly young people, it will be the world’s third most populous region next to China and India.
AEC’s four basic initiatives are: creating a single market and production base; increasing competitiveness; promoting equitable economic development; and further integrating ASEAN with the global economy.
