Southeast Asia

Southeast Asia

Outlook

Outlook

2024—34

2024—34

Over the next decade, Southeast Asia should outpace China in GDP growth and foreign direct investment. This report deep dives into the economic outcomes of the top six economies in the region, presents a forecast for the 10 years, and opportunities to accelerate that growth.

Email us at admin@angsanacouncil.org to engage further on the report.

Southeast Asia Outlook 2024-2034

Key Insights

Southeast Asia Outlook 2024-2034

Key Insights

1

Over the last 30 years, Southeast Asia has underachieved its potential. However, the seed of resurgence have been sown. Over the next decade, Southeast Asia will likely grow faster than the last decade, with higher GDP growth than China

1

Over the last 30 years, Southeast Asia has underachieved its potential. However, the seed of resurgence have been sown. Over the next decade, Southeast Asia will likely grow faster than the last decade, with higher GDP growth than China

2

The world has changed in fundamental ways; regional governments need to adjust

  • China manufacturing and innovation is now ultra-competitive and has driven premature de-industrialization of many developing countries

  • Low-cost labor, subsidized land, and tax holidays are no longer the main drivers of FDI

  • Climate change raises investment needs and changes priorities

  • Deep technology innovation is concentrating in the US and China; their rivalry is accelerating the pace of change

  • Developed economies are becoming more protectionist

2

The world has changed in fundamental ways; regional governments need to adjust

  • China manufacturing and innovation is now ultra-competitive and has driven premature de-industrialization of many developing countries

  • Low-cost labor, subsidized land, and tax holidays are no longer the main drivers of FDI

  • Climate change raises investment needs and changes priorities

  • Deep technology innovation is concentrating in the US and China; their rivalry is accelerating the pace of change

  • Developed economies are becoming more protectionist

3

Five “traditional” priorities stand out to raise Southeast Asia growth

  • Raise workforce skill levels/education (including foreign talent)

  • Increase physical and digital infrastructure spending

  • Attract more domestic and foreign investment

  • Raise competition in domestic markets

  • Strengthen government institutions

3

Five “traditional” priorities stand out to raise Southeast Asia growth

  • Raise workforce skill levels/education (including foreign talent)

  • Increase physical and digital infrastructure spending

  • Attract more domestic and foreign investment

  • Raise competition in domestic markets

  • Strengthen government institutions

4

Strategies to accelerate growth will require policy intervention include

  • Investing in emerging growth sectors

  • Fostering tech-enabled disruptors (TEDs)

  • Expanding capital markets’ breadth and depth

  • Accelerating green transition

  • Committing to growth-friendly multilateral initiatives

4

Strategies to accelerate growth will require policy intervention include

  • Investing in emerging growth sectors

  • Fostering tech-enabled disruptors (TEDs)

  • Expanding capital markets’ breadth and depth

  • Accelerating green transition

  • Committing to growth-friendly multilateral initiatives

5

Southeast Asia need not envision itself as a common market. Each country should commit to its own policy upgrades. Coordinated ASEAN initiatives can at most augment growth, but they cannot remedy country-specific fundamental weaknesses

5

Southeast Asia need not envision itself as a common market. Each country should commit to its own policy upgrades. Coordinated ASEAN initiatives can at most augment growth, but they cannot remedy country-specific fundamental weaknesses

Southeast Asia has enjoyed stable economic growth over the last 30 years, with Vietnam leading the region

Southeast Asia has enjoyed stable economic growth over the last 30 years, with Vietnam leading the region

Real GDP indexed to 1993
(1993–2023)

1995

1997 Asian

financial crisis

2000

2005

2008 Global

financial crisis

2010

2015

2020 Covid-19

crisis

2020

2023

12.5

10.0

7.5

5.0

2.5

0.0

Thailand

Indonesia

Philippines

Malaysia

Singapore

India

Vietnam

China

China

Vietnam

India

Singapore

Malaysia

Philippines

Indonesia

Thailand

2023 Real

GDP (USD B)

‘22–’23

Change (USD B)

‘93–’03

CAGR

‘03–’13

CAGR

‘13–’23

CAGR

‘93–’23

Multiple

Vietnam

420

~20

7.4%

9.0%

6.0%

8.7x

Singapore

501

~5

5.3%

6.7%

3.0%

4.3x

Malaysia

400

~14

5.4%

5.0%

4.0%

4.1x

Philippines

437

~23

3.9%

5.4%

4.7%

3.9x

Indonesia

1,371

~65

3.2%

5.7%

4.2%

3.6x

Thailand

515

~9

3.6%

4.0%

1.8%

2.5x

SEA-6

3,643

~138

4.1%

5.7%

3.9%

3.8x

China

17,795

~888

9.5%

9.5%

6.0%

11.0x

India

3,574

~231

6.1%

7.6%

5.7%

6.6x

Real GDP indexed to 1993
(1993–2023)

1995

1997 Asian

financial crisis

2000

2005

2008 Global

financial crisis

2010

2015

2020 Covid-19

crisis

2020

2023

12.5

10.0

7.5

5.0

2.5

0.0

Thailand

Indonesia

Philippines

Malaysia

Singapore

India

Vietnam

China

China

Vietnam

India

Singapore

Malaysia

Philippines

Indonesia

Thailand

2023 Real

GDP (USD B)

‘22–’23

Change (USD B)

‘93–’03

CAGR

‘03–’13

CAGR

‘13–’23

CAGR

‘93–’23

Multiple

VT

420

~20

7.4%

9.0%

6.0%

8.7x

SG

501

~5

5.3%

6.7%

3.0%

4.3x

MY

400

~14

5.4%

5.0%

4.0%

4.1x

PH

437

~23

3.9%

5.4%

4.7%

3.9x

ID

1,371

~65

3.2%

5.7%

4.2%

3.6x

TH

515

~9

3.6%

4.0%

1.8%

2.5x

SEA-6

3,643

~138

4.1%

5.7%

3.9%

3.8x

CH

17,795

~888

9.5%

9.5%

6.0%

11.0x

IN

3,574

~231

6.1%

7.6%

5.7%

6.6x

Understanding Southeast Asia Economic OUtcomes 1993-2023

The region's performance based on traditional growth drivers has been mixed, but sets the foundation for future growth

Understanding Southeast Asia Economic OUtcomes 1993-2023

The region's performance based on traditional growth drivers has been mixed, but sets the foundation for future growth

1
Growth drivers

Ease of Doing Business

1
Growth drivers

Ease of Doing Business

Indicator

Ease of Doing Business Score by World Bank (2020)

Unit

Score 0 – 100

70

ID

81

MY

63

PH

86

SG

80

TH

70

VN

Indicator

Ease of Doing Business Score by World Bank (2020)

Unit

Score 0 – 100

70

ID

81

MY

63

PH

86

SG

80

TH

70

VN

2
Growth drivers

Increase Competition

2
Growth drivers

Increase Competition

Indicator

Herfindahl-Hirschman Market Concentration Index (2021)

Unit

Score 0 – 1

0.09

ID

0.10

MY

0.10

PH

0.07

SG

0.07

TH

0.12

VN

Indicator

Herfindahl-Hirschman Market Concentration Index (2021)

Unit

Score 0 – 1

0.09

ID

0.10

MY

0.10

PH

0.07

SG

0.07

TH

0.12

VN

3
Growth drivers

Strengthen Institutions

3
Growth drivers

Strengthen Institutions

Indicator

Average of World Governance Indicator Scores by World Bank (2022)

Unit

-2.5 – 2.5

-0.1
-
+

ID

0.5
-
+

MY

-0.3
-
+

PH

1.9
-
+

SG

-0.1
-
+

TH

-0.1
-
+

VN

Indicator

Average of World Governance Indicator Scores by World Bank (2022)

Unit

-2.5 – 2.5

-0.1
-
+

ID

0.5
-
+

MY

-0.3
-
+

PH

1.9
-
+

SG

-0.1
-
+

TH

-0.1
-
+

VN

4
Growth drivers

Improve Workforce Quality and Availability

4
Growth drivers

Improve Workforce Quality and Availability

Indicator

Average Reading, Mathematics and Science PISA Scores (2022)

Unit

Score 0–600

369

ID

404

MY

353

PH

560

SG

394

TH

468

VN

Indicator

Average Reading, Mathematics and Science PISA Scores (2022)

Unit

Score 0–600

369

ID

404

MY

353

PH

560

SG

394

TH

468

VN

Indicator

Human Capital Index by World Bank (2020)

Unit

Score 0–1.0

0.54

ID

0.63

MY

0.55

PH

0.89

SG

0.62

TH

0.69

VN

Indicator

Human Capital Index by World Bank (2020)

Unit

Score 0–1.0

0.54

ID

0.63

MY

0.55

PH

0.89

SG

0.62

TH

0.69

VN

Indicator

Female Labor Force Participation Ratio (2023)

Unit

% total pop.

53%

ID

52%

MY

47%

PH

62%

SG

59%

TH

69%

VN

Indicator

Female Labor Force Participation Ratio (2023)

Unit

% total pop.

53%

ID

52%

MY

47%

PH

62%

SG

59%

TH

69%

VN

Indicator

Employment to Population Ratio (2023)

Unit

% total pop.

65%

ID

63%

MY

59%

PH

67%

SG

66%

TH

72%

VN

Indicator

Employment to Population Ratio (2023)

Unit

% total pop.

65%

ID

63%

MY

59%

PH

67%

SG

66%

TH

72%

VN

5
Growth drivers

Build Infrastructure

5
Growth drivers

Build Infrastructure

Indicator

Public Infrastructure Investments (2013–19)

Unit

% of GDP

3%

ID

8%

MY

3%

PH

5%

SG

5%

TH

5%

VN

Indicator

Public Infrastructure Investments (2013–19)

Unit

% of GDP

3%

ID

8%

MY

3%

PH

5%

SG

5%

TH

5%

VN

Indicator

Infrastructure Score, Logistics Performance Index by World Bank (2023)

Unit

Score 0–5

2.9

ID

3.6

MY

3.2

PH

4.6

SG

3.7

TH

3.2

VN

Indicator

Infrastructure Score, Logistics Performance Index by World Bank (2023)

Unit

Score 0–5

2.9

ID

3.6

MY

3.2

PH

4.6

SG

3.7

TH

3.2

VN

6
Growth drivers

Increase Stability

6
Growth drivers

Increase Stability

Indicator

Reserves to Gross External Financing (2022)

Unit

Ratio

2.5

ID

1.2

MY

2.2

PH

0.3

SG

1.8

TH

2.3

VN

Indicator

Reserves to Gross External Financing (2022)

Unit

Ratio

2.5

ID

1.2

MY

2.2

PH

0.3

SG

1.8

TH

2.3

VN

7
Growth drivers

Facilitate Investment

7
Growth drivers

Facilitate Investment

Indicator

Cumulative FDI as Percentage of Cumulative GNI (2018–22)

Unit

%

2.3%

ID

3.6%

MY

2.6%

PH

35.3%

SG

1.9%

TH

6.7%

VN

Indicator

Cumulative FDI as Percentage of Cumulative GNI (2018–22)

Unit

%

2.3%

ID

3.6%

MY

2.6%

PH

35.3%

SG

1.9%

TH

6.7%

VN

Indicator

Cumulative Gross Fixed Capital Formation as Percentage of Cumulative GNI (2018-2022)

Unit

%

38.5%

ID

24.6%

MY

25.3%

PH

27.9%

SG

28.4%

TH

45.3%

VN

Indicator

Cumulative Gross Fixed Capital Formation as Percentage of Cumulative GNI (2018-2022)

Unit

%

38.5%

ID

24.6%

MY

25.3%

PH

27.9%

SG

28.4%

TH

45.3%

VN

Lowest in SEA

Top in SEA

Growth drivers

Indicator

Unit

1

Ease doing business

Ease of doing business score by World Bank (2020)1

Score 0 – 100

70
81
63
86
80
70
2

Increase competition

Herfindahl-Hirschman market concentration index (2021)

Score 0 – 1.0

0.09
0.10
0.10
0.07
0.07
0.12
3

Strengthen institutions

Average of World Governance Indicator scores by World Bank (2022)

-2.5 – 2.5

-0.1
0.5
-0.3
1.9
-0.1
-0.1
4

Improve workforce quality and availability

Average reading, math, science PISA score (2022)

Score 0–600

369
404
353
560
394
468

Human Capital Index by World Bank (2020)

Score 0–1.0

0.54
0.63
0.55
0.89
0.62
0.69

Female labor force participation ratio (2023)

% total pop.

53%
52%
47%
62%
59%
69%

Employment to population ratio (2023)

% total pop.

65%
63%
59%
67%
66%
72%
5

Build infrastructure

Public infrastructure investments (2013–19)

% of GDP

3%
8%
3%
5%
5%
5%

Infrastructure score, Logistics Performance Index by World Bank (2023)

Score 0–5

2.9
3.6
3.2
4.6
3.7
3.2
6

Increase stability

Reserves to gross external financing (2022)

Ratio

2.5
1.2
2.2
0.3
1.8
2.3
7

Facilitate investment

Cumulative Foreign Direct Investment as percentage of cumulative GNI (2018–22)

%

2.3%
3.6%
2.6%
35.3%
1.9%
6.7%

Cumulative Gross Capital Formation as Percentage of Cumulative GNI (2018–22)

%

38.5%
24.6%
25.3%
27.9%
28.4%
45.3%

Southeast Asia can expect healthy growth in the next decade, with a growth rate that outpaces China

In the last decade, Southeast Asia lost out because it was out-invested, out-competed and sub-scale. To capture its full potential, Southeast Asian countries need to address gaps in traditional growth drivers, improve on labor and capital, and their productivity .

10 year growth forecast

Southeast Asia is expected to grow at around 5% annually over 2024-2034

10 year growth forecast

Southeast Asia is expected to grow at around 5% annually over 2024-2034

Vietnam

Historical average

Forecast

6.9%
6.6%
4.6%
6.6%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

6.9%
6.6%
4.6%
6.6%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Export-oriented economy well-positioned to capture “China + 1” opportunities

  • Highly diverse sources of FDI

  • Productive inter-provincial competition

  • High-quality workforce and education levels

Negative drivers

  • Collateral impact of anti-corruption campaign

  • Cyclical slowdown and credit weakness

  • Pace of infrastructure spend falling short

  • Energy and water shortages

  • Slow movement on green infrastructure

Philippines

Historical average

Forecast

4.5%
6.4%
2.3%
6.1%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

4.5%
6.4%
2.3%
6.1%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Pro-growth administration

  • Prioritized infrastructure investments, with renewable projects garnering interest from FDI investors

  • Growing population and workforce

Negative drivers

  • Traditional growth drivers lagging other SEA countries (education, infrastructure, government effectiveness)

  • Geopolitics, especially tensions with China, might escalate, disrupting recovery

Indonesia

Historical average

Forecast

5.3%
5.4%
3.0%
5.7%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

5.3%
5.4%
3.0%
5.7%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Booming base metal processing, mining, and infrastructure sectors

  • Increasing infrastructure spend

  • Leading in entrepreneurial, tech-enabled disruption

  • Growing population and workforce

Negative drivers

  • Low manufacturing value-added activity, beyond commodities

  • Declining commodity prices

  • Potentially more populist stance

  • May further embrace protectionist slant

Malaysia

Historical average

Forecast

4.7%
5.4%
2.5%
4.5%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

4.7%
5.4%
2.5%
4.5%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Shifting to pro-growth stance to attract FDI

  • Past success with electronics, semiconductors and data centers paying off

  • Willingness to pursue structural reforms, e.g., subsidy cuts

  • Potential benefits from cooperation with Singapore

Negative drivers

  • Shifting political coalitions, policy shifts and weak government mandates

  • Slow and steady talent drain

  • Fallout from not fulfilling long-term investment commitments (e.g. high-speed rail link)

Thailand

Historical average

Forecast

4.3%
3.6%
0.0%
2.8%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

4.3%
3.6%
0.0%
2.8%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Green shoots in tourism rebound

  • A key regional automotive hub with well connected infrastructure

  • Conglomerates (CP, Central, PTT, Siam Cement, Thai Union) are more regional than Southeast Asian peers

Negative drivers

  • Uncertain and turbulent political landscape

  • Concerning consolidation in key sectors (retail, telecommunications)

  • Demographic challenges

Singapore

Historical average

Forecast

5.4%
5.0%
2.7%
2.5%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

5.4%
5.0%
2.7%
2.5%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Open and diverse economy, with strengths in advanced manufacturing, services, and tourism

  • World-class talent from every major economy attracted to safe, stable environment

  • Well-funded government efforts to nurture growth

Negative drivers

  • Demographic challenges; immigration offset faces political hurdles

  • Land and labor constraints

  • High business costs vs. SEA-6 peers

SEA-6

Historical average

Forecast

5.1%
5.3%
2.6%
5.1%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Historical average

Forecast

5.1%
5.3%
2.6%
5.1%
‘00 - ‘09
‘10 - ‘19
‘20 - ‘23
‘24 - ‘34

Positive drivers

  • Benefitting from China + 1

  • Third largest global “market” with 600 million + consumers

  • Strong historical linkages with all major trading economies in the world

  • Geographic position in Asia, almost half of world population

Negative drivers

  • Needs to be approached as individual country markets

  • Increased protectionism in developed markets

  • Gradual deindustrialization due to changing drivers of competitiveness

Strategy Is About Redirecting Resources to Future Opportunities

Pursue Key Opportunities to Accelerate Next Decade Growth

Strategy Is About Redirecting Resources to Future Opportunities

Pursue Key Opportunities to Accelerate Next Decade Growth

Five Growth Drivers that Require Strategic Insight, Policy Change, Good Governance and Risk-taking

Five Growth Drivers that Require Strategic Insight, Policy Change, Good Governance and Risk-taking

With sustained policy change and a willingness to take risks, Southeast Asia can raise its forecasted growth rates by seizing opportunities from five areas. These require strategy insights, policy changes, good governance, redirection of resources and risk-taking.

Countries should look into developing strategies, as suitable to them, in the following

Countries should look into developing strategies, as suitable to them, in the following

Invest in Emerging Growth Sectors

Invest in Emerging Growth Sectors

  • Prioritize emerging sectors that fit with established clusters, workforce capabilities, and natural resources 

  • Stimulate sustained investment across multiple participants

  • Invest heavily in workforce skills and infrastructure

  • Develop government capabilities

Next

Foster Tech-Enabled Disruptors (TEDs)

Southeast Asian countries are competing for next-generation sectors; a few winners are emerging

Cumulative FDI value committed to SEA for key growth sectors

Electric Vehicle Manufacturing

(non-exhaustive, USD B, 2019–23)

Electric Vehicle Manufacturing

(non-exhaustive, USD B, 2019–23)

  • Thailand and Indonesia likely to emerge as winners, given their strong OEM base, government support on EV, and market size

  • Indonesia’s EV development is driven by growth in EV battery sector and government incentives for sales and manufacturing

9
5
0
0
1
0

TH

ID

PH

MY

VN

SG

Electric Vehicle Battery Manufacturing

(non-exhaustive, USD B, 2019–23)

Electric Vehicle Battery Manufacturing

(non-exhaustive, USD B, 2019–23)

  • Indonesia likely to continue outperforming other SEA countries given its abundant nickel reserves, strict regulations, incentives, and mandates

3
26
0
3
2
0

TH

ID

PH

MY

VN

SG

Semiconductor Manufacturing

(non-exhaustive, USD B, 2019–23)

Semiconductor Manufacturing

(non-exhaustive, USD B, 2019–23)

  • Malaysia and Singapore are leading in different parts of the value chain; Singapore has competitive edge in wafer fabrication (which requires more advanced skills), while Malaysia leads in packaging and testing

1
2
3
21
6
17

TH

ID

PH

MY

VN

SG

Data Centers

(non-exhaustive, USD B, 2019–23)

Data Centers

(non-exhaustive, USD B, 2019–23)

  • Malaysia, Thailand, and Indonesia are attractive—Malaysia/Thailand for their reliable infrastructure, Indonesia for its growing digital economy and stricter data protection

  • Singapore’s relatively absent data center investments reflect the 2019–22 moratorium on new data center projects

9
7
1
10
0
1

TH

ID

PH

MY

VN

SG

Foster Tech-Enabled Disruptors (TEDs)

Foster Tech-Enabled Disruptors (TEDs)

  • Provide low-cost, stable, accessible, regionally connected digital infrastructure

  • Support co-location of stakeholders critical to a robust ecosystem of innovation and entrepreneurship

  • Ensure enabling government policies: 

pro-competition, easy movement of talent, encouraging financial regulations to set up businesses

Next

Strengthen Capital Markets

Around 30–40% of Southeast Asia economic sectors will be impacted by TEDs

Low degree of impact

Mid degree of impact

High degree of impact

Indonesia

1371

GDP by country and industry
(2023, USD billion)

29.3%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Estate and Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Thailand

515

GDP by country and industry
(2023, USD billion)

42.1%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Estate and Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Philippines

437

GDP by country and industry
(2023, USD billion)

43.9%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Estate and Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Singapore

501

GDP by country and industry
(2023, USD billion)

48.1%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Estate and Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Malaysia

400

GDP by country and industry
(2023, USD billion)

34.8%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Estate and Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Vietnam

420

GDP by country and industry
(2023, USD billion)

32.1%

Percentage GDP of Sectors with High Impact from TEDs

Other

Goverment Services

Real Est. & Constrution

Manufacturing & Utility

Agriculture & Mining

Education and Health

Transport & Logistics

Financial Sevices

Consumer and Retail

% of GDP of Sector

0%

20%

40%

60%

80%

100%

Strengthen Capital Markets

Strengthen Capital Markets

  • Encourage growth of diversified players to ensure efficient capital allocation

  • Increase stock exchange attractiveness to facilitate successful exits

  • Increase household participation in financial markets Support new companies and financing of SMEs

  • Ensure safeguards in place to avoid fraud and overspeculation

Next

Accelerate Green Transition

Singapore, Malaysia, Thailand lead the IMF Financial Development (FD) Index Trends; Singapore’s score has dropped since 2010

Financial Development Index

(2010 and 2021, overall score)

Singapore
2010

0.74

2021

0.70

Malaysia
2010

0.64

2021

0.73

Thailand
2010

0.63

2021

0.73

Vietnam
2010

0.44

2021

0.38

Indonesia
2010

0.29

2021

0.36

Philippines
2010

0.32

2021

0.38

China
2010

0.52

2021

0.63

India
2010

0.48

2021

0.53

sg
2010

0.74

2021

0.70

my
2010

0.64

2021

0.73

th
2010

0.63

2021

0.73

vt
2010

0.44

2021

0.38

id
2010

0.29

2021

0.36

ph
2010

0.32

2021

0.38

ch
2010

0.52

2021

0.63

in
2010

0.48

2021

0.53

Insights

Insights

  • Indonesia saw a significant improvement, driven by its increase in branchless and digital banking solutions to rural areas

  • The Philippines has made slight progress across most of the dimensions (except for stock market performance)

  • Vietnam encountered a decrease in FD Index, driven by poor stock market performance

  • Singapore’s Index is high at above 0.7, reflecting its financial center status; however, its score dropped between 2010 and 2021, driven by poor stock market performance

  • Malaysia saw gains in financial market depth and efficiency, driven by stock market capitalization and performance

  • Thailand has seen the most increase, driven by access to credit and stock market capitalization

Accelerate Green Transition

Accelerate Green Transition

  • Prioritize easier wins

  • Improve access to low-cost energy with climate, economic, and energy security benefits

  • Upgrade national grids to renewables and work towards an interconnected regional grid

  • Encourage government-led catalytic financing and other financial innovation for non-commercially viable opportunities

  • Establish meaning carbon taxes and purposeful private-public partnerships for capital investment into greener energy

Next

Embrace Multilateral Initiatives

Southeast Asia is well-endowed with natural resources and green potential

Biodiversity and forests

Biodiversity and forests

~0%

of the world’s known plant and animal species are found in SEA

100MHa

total area of forests in Southeast Asia

0%

SEA’s potential contribution to the world's carbon offset supply

Renewable energy

Renewable energy

>29,500GW

total solar power potential in Southeast Asia

>1,000GW

total wind power potential in Southeast Asia

>100GW

total hydro power potential in Southeast Asia

Critical minerals

Critical minerals

~0%

of global nickel production is in Indonesia and the Philippines

~0%

of global tin production is in Southeast Asia

~0%

of global bauxite reserves are in Southeast Asia

More needs to be done to accelerate investments

Accelerators required to unlock full potential include

Accelerators required to unlock full potential include

1

Policies and incentives to further push transition and green investments

2

Innovative finance mechanisms to facilitate more capital flow

3

Scaling corporate investment to establish future-ready businesses

4

Cluster/pilot developments to scale technological development

5

Regional collaboration to drive coordinated SEA strategy

Embrace Multilateral Initiatives

Embrace Multilateral Initiatives

  • Strengthen existing trade agreements and alliances such as key ASEAN initiatives or RCEP

  • Prioritize key growth-enabling initiatives that benefit from a regional approach

    • Common standards

    • Unified electrical grid

    • Digital payments

    • Carbon markets

Given its institutional set-up and diversity, Southeast Asia need not envision itself as a common market

Each country should commit to its own policy upgrades. Specific multilateral initiatives could meaningfully increase the number of opportunities the region has access to.

Freer movement

Ensure free movement of people, capital, and goods in the region

Freer movement

Ensure free movement of people, capital, and goods in the region

Southeast Asia would benefit from freer movement of people, capital, and goods in the region and with partners.

A digital framework

Harmonize digital landscape to boost cross-border trade and innovation

A digital framework

Harmonize digital landscape to boost cross-border trade and innovation

A harmonized digital landscape could boost cross-border trade and innovation. Southeast Asia would benefit from system interoperability and recognized cross-border standards and policies. If successful, current initiatives under the ASEAN, such as the Digital Economy Framework Agreement (DEFA), could improve interoperability for businesses in the region.

Environmental and social

Drive adoption of green practices to ensure economic growth and resilience

Environmental and social

Drive adoption of green practices to ensure economic growth and resilience

As Southeast Asia looks to attract key investments in growth sectors such as data centers and semiconductors, it faces significant pressures on energy demand, energy costs, and its environment. Enabling green practices will ensure sustainable growth and resilience. The region needs to prioritize renewable integration into its energy grids through the ASEAN Energy Grid. Developing a regional carbon market could help Southeast Asia manage some of these challenges.

Much of the world is bracing for slower growth, but in Southeast Asia tailwinds should prevail

This is the right moment for Southeast Asia to leverage its newly improved investment climate and well-established, dynamic sectors. Southeast Asia is comprised of diverse markets. While there are important links between markets and opportunities to pursue regional approaches, each country’s potential must be addressed individually.

While many economists focus on FDI as the key barometer for confidence in an economy, we assign substantial weight to domestic investment. Most Southeast Asian countries are seeing robust growth of domestic investment, which underscores local confidence in the region’s growth prospects relative to alternatives.

Effective government action will play a role in catalyzing growth. Entrepreneurism plays a critical role in fully realizing growth potential.

We say, let’s unfurl the mainsails.

© Navigating High Winds: Southeast Asia Outlook 2024-2034

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