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The business sector growth of Southeast Asian economies

by: SPI


Why should I read this document? 

This document is targeted for the following audience: 

  • European SMEs and start-ups who provide innovative methods or ideas in specific sectors with business potential in ASEAN, such as ICT; sustainable energy; and food, agriculture, and forestry (FAF) sectors.  

  • European SMEs and start-ups with technologically advanced features e.g., advanced materials, Artificial Intelligence (AI), ICT, Fintech, etc. who would like to enter the Southeast Asian market. 




Southeast Asia refers to the south-eastern region of Asia situated east of the Indian subcontinent, south of China and north-west of Australia, which spans around 4.5 million km2, accounting for 10.5% of Asia or 3% of world’s total land area. With a population of more than 655 million inhabitants, it is the third most populous geographical region in Asia, after South Asia and East Asia. The region is culturally and ethnically diverse, consisting of 11 sovereign states: Brunei Darussalam, Cambodia, Indonesia, Lao People’s Democratic Republic (Lao PDR), Malaysia, Myanmar, the Philippines, Singapore, Thailand, Timor Leste and Vietnam. 

Southeast Asia consists of a diverse set of economies, which range from the highly developed, like Singapore, to rapidly developing ones, such Indonesia, as well as frontier ones like Myanmar. When ranked based on Gross Domestic Product (GDP) per capita (2020), the top three richest Southeast Asian economies are Singapore, with a value of 58.48 thousand USD, followed by Brunei Darussalam (23.12 thousand USD), and Malaysia (10.19 thousand USD); the three poorest economies are Myanmar (1.33 thousand USD), Timor-Leste (1.46 thousand USD) and Cambodia (1.57 thousand USD). The Southeast Asia countries, with the exception of Timor Leste, are members of the Association of Southeast Asian Nations (ASEAN), a regional organisation established for economic, political, military, educational and cultural integration amongst its members. Timor Leste, the only country in this region not taking part in the association, is a relatively small nation with its economy heavily relying on oil and gas exports. A lack of basic infrastructure and shortage of skilled labour presents a major problem for its growth. Thus, this article will mainly focus on the business growth of the ASEAN economy and the opportunities for European businesses.

ASEAN has enjoyed a sustained period of rapid economic growth and financial stability, and now acts one of the major players in today’s global economy. ASEAN’s combined Gross Domestic Product (GDP) has been on a positive trend over the period of 2000-2018. Its GDP in 2018 reached around USD 3.0 trillion, which was almost double that of a decade ago (USD 1.6 trillion in 2008) and almost fivefold the value in 2000 (USD 0.6 trillion), positioning it as the fifth-largest economic block in the world. The ASEAN economy was projected to grow over 5% annually and become the world’s fourth-largest economy by 2030. 

ASEAN’s diversity presents a variety of opportunities for European businesses - from Singapore’s highly-developed service-oriented economy to frontier markets of Cambodia, Laos, and Myanmar, the rapidly modernising economy of Vietnam and Thailand, as well as strategically significant consumer centres such as Indonesia. In addition, the region is currently moving toward economic integration, aiming at creating a single market in the near future with free movement of skilled labour, goods, services and investment, which will further enhance opportunities.  

On Level 2 you can find information about business growth drivers in ASEAN, while Level 3 will tell you more about business activities (through case studies) and what the EU has contributed in this region.


This page will offer a brief overview of growth drivers of the ASEAN economies. 


Economic drivers 

The increase of internal consumption is one of the major drivers of economic growth in ASEAN. The GDP per capita rose up to USD 4,601 in 2018, compared to 2010 at USD 3,299, and is almost four times its value in 2000 (USD 1,195). There are now more than 67 million “consumer class” households in ASEAN with an average annual income of USD 7,500. By 2025, it is expected that than 125 million ASEAN households will have an income above USD10,000. This makes the ASEAN consumer market one of the most attractive in the world, as the expanding middle-class population has a high demand for food and beverages, education, healthcare, and other consumer-related items. 

Digitalization is also the key driver for ASEAN business growth. Taken as one entity, ASEAN is a young market with the third-largest population in the world. 60% of the population in this region is below 35 years old and it is estimated that by 2030, the median age of the population will be 33. In addition, the region has the fastest development of internet across the world, with 4 million new internet users per month. These have paved the way for the rapid development of a digital economy. The scale of the ASEAN digital economy hit 100 billion USD in 2019 and was expected to triple to 300 billion USD in 2025, turning ASEAN into the largest digital economy market after the United States and China. In practice, digitalization enables easier market access because it helps investors act faster, makes processes of a market entry more transparent and makes the firm register process easier. With the help of digitalization, local businesses can break into electronic commerce (e-commerce) industry, providing payment, insurance, logistics and warehousing support services for regional e-commerce businesses.

The manufacturing sector has been one of the key economic growth drivers in ASEAN. The region has already become a global manufacturing hub, reaching a value of USD 2,852 billion USD in 2020. Recently, traditional manufacturing hubs like China are shifting towards higher-value manufacturing, and have witnessed rising wages and tighter regulations - which have led to an increase in operating costs. Thus, in order to replace the role that China once played, companies are now turning to the ASEAN region for production networks which have also been largely integrated into global manufacturing value chains. ASEAN’s involvement in extra-regional trade deals has contributed to the improvement of its standing as a global manufacturing hub. The ASEAN Economic Community (AEC) established in 2015, aims to create a single market and production base within ASEAN. In the meantime, mega trade arrangements such as the Regional Comprehensive Economic Partnership (RCEP) – a free trade agreement in the Asia-Pacific region between the AMS and their partners like Japan, China and Australia, are a positive step towards a broader Free Trade Area of the Asia-Pacific (FTAAP) that can serve as a useful intergovernmental forum on free trade. 


Innovation as a key driver

ASEAN policymakers have recognized that the region needs to significantly increase its investment in innovation in order to achieve strong economic development in the future. In 2017, the ASEAN Secretariat declared that it realised ‘the importance of science, technology and innovation (STI) to foster sustainable economic growth, job creation, and enhanced well-being and science and innovation systems, to spur creativity and innovation that will serve as a foundation in driving the growth and competitiveness of industries in the region’. Later in 2019 the ASEAN Innovation Roadmap 2019-2025 was adopted by the ASEAN Ministers on STI. 

SMEs form a major part of the ASEAN economy. They act as a key driver and contributor to the GDP of ASEAN economies, accounting for between 89% and 99% of total business establishments, generating between 52% and 97% of total employment in the countries. The ASEAN Strategic Action Plan for SME Development (2016-2025) allows for the creation of ‘globally competitive, resilient and innovative SMEs seamlessly integrated into the AEC for inclusive growth and sustainable development in the region’. 


This section will centre on benefits for EU SMEs to start a business in ASEAN countries and relevant stakeholders and their actions contributing to innovation and business development in this region. 


Benefits for EU SMEs

ASEAN is a dynamic region offering strong business opportunities. The combined population of this region reached 650 million in 2019. Only just over one-third of ASEAN population lives in urban areas, but contribute more than two-thirds of the region’s GDP. It is expected that an additional 90 million people will move to cities, which could bring more than 500 billion USD to the GDP and substantially boost productivity. The increase of internal consumption will make ASEAN one of the most attractive business destinations with increasing opportunities for European exporters in the food and beverages, agribusiness, healthcare, education sectors, among many sectors. ASEAN is also attractive for European education and training providers, with its labour force the third largest across the globe, after China and India. 

Presence of local and global tech-based companies in ASEAN countries

Local innovative technology firms are essential for the business growth of the ASEAN region. Holistics Software is a tech-based company with offices in Singapore, Indonesia, and Vietnam, and provides end-to-end data analytics and business intelligence platform for companies all over the world to prepare and manage their databases. Over half of its current customers are from South-East Asia and it offers help to an Indonesian AI chatbot company to access internal big data sources without requiring the assistance of a technical team, hence improving the company’s operational efficiency. ViSenze is a Singapore-based AI start-up which established in February 2019 a partnership with Samsung Electronics in South-east Asia region, which enables Samsung customers to search for products online with real-life imagines or existing pictures via their programme called Bixby Vision Shopping.  

In addition, global corporations such as Microsoft, GE, and Bosch, have been contributing to the business growth of ASEAN. Microsoft, for example, has offered support to the ASEAN Digital Skills Vision 2020 launched by the World Economic Forum (WEF) by pledging to provide 15,000 university students with internship opportunities, deliver digital skills training to 2.2 million SME employees, and to hire 8,500 digital workers by 2020 across the region. 


European innovative companies in ASEAN countries



Ericsson, a Swedish multinational company headquartered in Stockholm, is a leading provider of ICT to service providers. It has been actively expanding in Southeast Asia recently. Ericsson was selected with another European telecoms network supplier – NOKIA, by Singapore’s mobile network operators to supply the network equipment and software to power the country’s two standalone 5G networks. Apart from the deal, Ericsson and the Singaporean communication service provider Singtel will jointly launch a Centre of Excellence (CoE) to facilitate 5G development and deployment in Singapore and enable advanced applications such as smart cities, Internet of Things (IoT), augmented reality, and autonomous vehicles. Not only in Singapore, the Swedish company also won a 5G deal in Thailand in 2020 – Thai communication service provider True Corporation has chosen Ericsson as a 5G Radio Access Network (RAN) vendor as part of its national 5G network. 



Bosch, the Germany-based global supplier of technology and services, has set up regional offices and companies in almost all AMSs, and its regional headquarter in ASEAN is in Singapore. The multinational technology and engineering company has built up seven manufacturing plants across the region: one each in Vietnam and Indonesia, three in Malaysia and two in Thailand with the opening of its mobility solutions factory in Rayong in 2017. Besides manufacturing, so far the company also has nine R&D centres located in Singapore, Vietnam, Malaysia and Thailand. 


ASEAN-EU Free Trade Agreement (FTA)

The EU has already signed FTAs with two ASEAN countries – Singapore and Vietnam, and is in negotiations with Indonesia. Its negotiations with Thailand, Malaysia and the Philippines are currently put on hold. Apart from the FTAs and trade negotiations with individual AMSs, the EU is in close cooperation with the ASEAN region as a whole. The trade cooperation between the two regions is framed by a biannual ASEAN-EU Trade and Investment Work Programme. 

In 2019, the EU was ASEAN’s second largest trading partner after China, representing around 14% of ASEAN trade. Manufactured goods dominated EU trade with ASEAN, accounting for 84 % of total exports and 87% of total imports. Among AMSs, Singapore was the largest destination for EU exports of goods, while Vietnam was the largest ASEAN partner responsible for EU imports of goods. As for EU Member States, Germany exported the most goods to ASEAN, with €28 billion while the Netherlands was the largest importer of goods from ASEAN, with a value of €30 billion.

Examples of ASEAN-EU business cooperation are provided below.

  • OptiCat R2V Pte., Ltd., an innovative company from Singapore, has established collaboration with Drupps, a Swedish water purification innovator, with the goal of using renewable energy in ASEAN to further promote the modular water from air technology to many businesses looking for a sustainable solution, including food and beverages and personal care manufactures.

  • vTrium Energy and Heliatek project: vTrium Energy is a Singaporean company specialized in the energy sector and Heliatek is a German company which is in leading position in the development and manufacturing of organic solar film. The two companies signed a Memorandum of Understanding (MoU) for developing the Southeast Asian market. They also jointly test-bedded their innovative solution – the world’s most powerful and Asia’s largest organic PV power generation installation in Singapore, before proceeding with commercialization in Asia.



Last updated: 29.11.2021 - 16:24
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