SE Asia to Power Asian Growth for Next Two Decades

Bank employees transport millions of Indonesian rupiah notes at a national bank outlet in Jakarta, Indonesia. (European Pressphoto Association)

August 3, 2012
By Eric Bellman
The Wall Street Journal

JAKARTA – While Southeast Asia contains a diverse and often confusing patchwork of economies, it is on the way to becoming the next big growth engine in Asia, helping lift incomes and living standards across the region, according to a new report.

For the last decade Southeast Asian countries have been outshined by their giant neighbors India and China. But the ten countries that make up the Association of Southeast Asian Nations now have a combined gross domestic product which already eclipses India’s and could be bigger than Japan’s in 16 years, said Rajiv Biswas, chief Asia economist at IHS Global Insights in the report.

Thanks in part to their trade with China, the combined economies of the bloc have grown from around $600 billion in 2000 to $2.3 trillion this year and should continue to grow to $4.7 trillion by 2020 and close to $10 trillion by 2030, the report said.

The continued climb of the top economies, including Indonesia, Thailand, Malaysia and the Philippines, is also expected to bring more jobs, investment and big global brands to the region.

“Asean has become the third growth engine within emerging Asia,” said Mr. Biswas. “The rapidly growing size of consumer expenditure in Asean projected over the next 20 years will increasingly result in a major transformation of the structure of global multinational corporations as United States and European multinationals dramatically transform their corporate strategies towards the Asia-Pacific region.”

While its economy has been showing signs of slipping recently, Indonesia will lead the way, said Mr. Biswas. With a population of close to 250 million people, it is the world’s fourth largest country after China, India and the United States and is seeing a larger and larger slice of its citizens joining the consumer class.

“A key factor driving Asean’s ascendancy will be the sustained economic growth of Indonesia, which is forecast to become a $4 trillion economy by 2030, larger than South Korea and Australia in terms of GDP size,” he said.

Mr. Biswas is not alone in his bullishness for Southeast Asia’s largest economy, despite its struggles with corruption, overburdened infrastructure, and regulatory confusion. United States-based financial author Edgar Perez says he is wrapping up a book outlining why Indonesia is one of the world’s “sexiest destinations,” for investment.

The working title for the book is “Beyond China and India: The Remarkable Indonesia Story,” said Mr. Perez. He is finishing his last interviews with Indonesian leaders and hopes to have the book published by the end of this year.

With most developed countries struggling and China and India showing signs of slowdown, Indonesia and Southeast Asia could become an important life vest to help keep the global economy afloat.

“This is particularly important at a time when the medium-term growth outlook for two of the G3 economies – the EU and Japan – is for protracted weakness due to high government debt levels and fiscal consolidation,” said Mr. Biswas.