By Anna Nguyen,
Everyone is talking about the economic boom that is taking place in Asia, as it has attracted a lot of foreign direct investments throughout the years. China’s rapid economic growth cannot go unnoticed and it can fairly be called an equal competitor with the United States of America in the race of being the most powerful economic power in the world. However, at the same time, other countries or even regions of the world are significantly growing and thus, are gaining economic power to dominate in the economic sector. An example of the latter is the area of Southeast Asia. Whilst the first thing that comes to one’s mind whenever they hear about it, is poverty, if one shall look deeply in the matter, they will realize that there is more to observe.
Not very far from being one of the world’s biggest economic powers, is the region of Southeast Asia. Countries such as Indonesia, Thailand and Singapore have been steadily growing in the last 50 years whereas countries such as Cambodia, Vietnam and Myanmar are rapidly emerging in the last 20 years which is considered remarkable. This particular region has been an arena for the “Big Powers” of the Cold War era to demonstrate their power but now it is high time for this area to rise into different financially independent countries. The latter can be seen with the creation of the Association of the Southeast Asian Nations (ASEAN) where the member-states are committed to accelerate economic growth and to promote peace and stability in the region. The Association hosts diplomatic missions and maintains alliances and partnerships in various parts of the world. For instance, recently the European Union and ASEAN upgraded their relations to “strategic partnership” where both parts agreed to boost their economic and security cooperation and the Regional Comprehensive Economic Partnership (RCEP) was signed and will ameliorate the trade between the partners.
Investments play a crucial role in a country’s flourishing economy as they result in the increase of productivity and therefore, growth. Multinational companies have turned to Southeast Asia, such as Pfizer and Qualcomm. In addition, Samsung has transferred its manufacturing factories to Vietnam due to its young and low labor workforce costs. It is evident that in case the same product was made for instance in the USA, the final price of it would be much higher than it is now. Thus, countries such as the ones in the examined region are preferred. At some point China was also chosen, but due to its economic growth, its labor cost is rising and thus, places where the latter is lower, are preferred. German industry has always preferred the Asian region and more specifically China, but recent events show that the German investment strategy is shifting towards Indonesia and Vietnam as asserted by Mr. Joe Kaeser, chief executive of Siemens, whilst Mr. Peter Altmaier, Germany’s Minister of Economy, has proposed Singapore.
Another factor that highlights the attractiveness of Southeast Asia is the trade war between the USA and China. Quite a few American industries have moved their industries to Southeast Asian countries in order to avoid the high taxation in China. Investments are mainly made by tech companies as they aspire to make the region a competitive digital hub. The e-commerce sector is one of the most dynamic sectors in the region and results in the increase of investments. Companies need to improve their infrastructure and increase the number of their employees in order to keep up with consumers’ needs. This will lead to a decrease of the unemployment rate and therefore to an optimization of the economy.
Nonetheless, it is evident that the Southeast Asian region is becoming more attractive. In regards to the EU-ASEAN free trade agreement combined with the investment reforms, it can be predicted that this part of Asia will attract a significant amount of investments in the next few years. The GDP of the region is estimated at 9.34 trillion dollars and is expected to continue with the same pace despite the pandemic. Asia has already four powerful economies known as the “Four Asian Tigers” namely South Korea, Singapore, Taiwan and Hong Kong. “Will the area of Southeast Asia be able to be one of them?” is a question that will be answered in the near future.
Bibliography
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- Why German industry is looking past China to the rest of Asia. (2020), MENAFN, Available here.
- Why Southeast Asia is the best investment destination in 2019. (2019), Tech Collective, Available here.
