Growth of up to 8 per cent among countries in the Association of Southeast Asian Nations region could provide opportunities for Western Australia, according to a recent report by ANZ.
Growth of up to 8 per cent among countries in the Association of Southeast Asian Nations region could provide opportunities for Western Australia, according to a recent report by ANZ.
In the report ‘Asean – the next horizon’, ANZ predicts that, by 2025, trade and foreign investment flows from Australia to the 10 nations in the region could be as much as $US210 billion, more than double the current level.
Chief executive of international and institutional banking at ANZ, Andrew Geczy, said the bank expected the bloc to replace China as the world’s manufacturing hub in the next decade.
“We expect it (Asean) to become the fifthlargest economy in the world by the end of the decade,” he said.
“Central to our optimism about Asean and the region is the positive feedback which will emerge as foreign direct investment grows, while productivity improves together with greater urbanisation and an emerging middle class.”
Mr Geczy highlighted the region’s infrastructure deficit as a potential source of demand for hard commodities.
“The infrastructure investment required in the region is double the size of the infrastructure investment to which China committed in the financial crisis, Mr Geczy said.
ANZ predicts infrastructure investment will reach almost 30 per cent of GDP in the Asean-5 economies by 2020.
The reduction of oil and gas prices will aid this increase, as countries such as Indonesia and Malaysia have the opportunity to unwind fuel subsidies.
Mr Geczy said the region’s major attractions were favourable demographics, youthful population, and growing consumer class.
“Its potential is greater than is commonly understood,” he said.
In fact, by 2030, almost half of the region’s 650 million people will be below the age of 30, led by the Indonesia, the world’s fourth most populous nation.
Asean economies also have dramatically low labour costs, the ANZ report found, creating opportunities for new production in the manufacturing industry to move to the developing nations.
While factory workers in Shanghai earn around $US449 per month, workers in the Philippines capital of Manila earn about 10 per cent less, at $US398.
Wages are lower still in Bangalore, India, at $US301 per month, but Cambodia and Myanmar are an order of magnitude less.
A Yangon (Myanmar) factory worker earns $US53 per month on average, while for a month’s work in Phnom Penh (Cambodia), employees could expect $US74.
Business News has previously reported that the Asean nations are supporting the state’s exports with strong growth, as trade with bigger partners such as China slows.
In the year to February 2015, exports to Singapore were $5.2 billion, up almost 50 per cent from the previous 12-month period.
Sales to Indonesia, Malaysia and the Philippines also all grew strongly as those countries returned to pre-GFC growth levels.
By comparison, merchandise exports to China for the 12 months to February fell nearly $8 billion, to $61.2 billion, while Japan was stagnant at $23.5 billion.
However, Australia’s share of Asean trade is roughly unchanged, ANZ said.
But there will be challenges to overcome if the emerging nations are to achieve their growth potential. The Asean states need to adopt an ambitious agenda if they are to continue long-term growth, according to the OECD, including building better institutions and public sector reform.
