- This is the right moment for Southeast Asia to leverage its newly improved investment climate.
- Beyond attracting FDI, domestic sources of capital need to be tapped.
- Effective governance will play a key role in catalysing growth. Lessons from China are useful.
- State-enabled competition within sectors can help.
- Entrepreneurism plays a critical role in fully realising growth potential.
Southeast Asia has grown despite headwinds. Over the last three decades, the region withstood shocks from the Asian financial crisis, the SARS pandemic, a global financial crisis, and the Covid-19 pandemic. And it stayed the course.
Southeast Asia grew, even as the China miracle siphoned manufacturing investment and jobs away from the region.
In recent years, Southeast Asia has become more attractive to investors, but so have India, Mexico, and Eastern European countries.
This is the right moment for Southeast Asia to leverage its newly improved investment climate and well-established, dynamic sectors.
Much of the world is bracing for lower growth because of higher interest rates, unsustainable government spending levels, trade protectionism, and the potential fallout from the US-China rivalry. But in Southeast Asia, tailwinds should prevail.
Southeast Asia comprises of six major markets and a handful of smaller ones. 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 catalysing growth. The China model involves the state setting priorities and bending funding toward them. Execution occurs at the city and provincial levels through state-enabled “hyper-competition.” Entrepreneurism plays a critical role in fully realizing growth potential.
We say, let’s unfurl the mainsails.
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