It’s bound to be an “evolution” than a “revolution” but the newly-created Asean Economic Community (AEC) is seen to become the “center of the universe” and replace what used to be a China-dominated Asian economic narrative, said a regional executive of American banking giant Citibank.
Singapore-based Melvyn Low, Citi head for treasury and trade solutions for Asean and Singapore, said in a press briefing on Thursday that the 10-nation bloc would likely be the growth hub in the next three to seven years.
He noted that consumer-focused multinational corporations (MNCs)—from healthcare and pharmaceutical to connectivity support sectors like telecom, airlines and infrastructure companies—were scrambling to have a piece of the action in Asean, or the Association of Southeast Asian Nations, which recently formalized the creation of a unified economic group called AEC.
The Philippines, with its competitive advantages in the services sector and particularly in business process outsourcing (BPO) industry, is standing out as a potential growth market and thereby has a big opportunity now that the Asian narrative has shifted to Asean, Low said. The BPO story, he said, would continue to open doors for the Philippines as AEC progresses. While other companies may set up more manufacturing hubs in the likes of Vietnam or their financial hubs in Singapore, he said the Philippines would remain as the region’s BPO hub.
Low said Asean would surely figure out a way to work with both the US and China, the world’s two biggest economic powerhouses.
“It’s also very clear that the center of the universe suddenly becomes us, amongst all other areas, not Africa, not Latin America, not Europe, not US—they’ve got their own issues. It’s Southeast Asia,” Low said. “This is why I feel so positive and encouraged by the medium-term prospects of Asean.”
“We do have our challenges; I don’t say that we don’t. When you read about AEC, it’s more evolution than revolution. But if we start collectively looking at Asean, with our own countries at heart as well, this would be the growth area in the next three to seven years,” Low said.
Historically, global MNCs looked at Asia as a whole and within Asia, typically looked at Hong Kong and Singapore as a base for their headquarters, Low said. Then China became prominent in the 2000s, dominating the Asian storyline since then. With its economic slowdown in recent years, Low said MNCs started to look elsewhere in the region, looking at India and then the rest of Southeast Asia.
As Asean ramped up efforts and formalized the creation of the AEC, he said global MNCs have started noticing the regional bloc.
“We’re seeing our clients create an Asean strategy for themselves, different from the past when they created only [a broad] Asian strategy,” Low said.
And as MNCs enter new markets or expand existing markets in Asean, this has translated to greater intra-Asean flows. In 2014, such flows grew by 38 percent or far more than the increments in recent years, Low said.