Maximizing Growth Potential in the ASEAN Economic Landscape

Southeast Asian countries, particularly those in the Association of Southeast Asian Nations (ASEAN), are predicted to experience positive economic growth.

There was a palpable sense of optimism at the World Economic Forum Annual Meeting in Davos, Switzerland. The ASEAN bloc, consisting of ten countries and over 660 million people, has a total GDP of USD 3.3 trillion, with Indonesia being the largest economy. 

The Organisation for Economic Cooperation and Development (OECD) foresees ASEAN’s GDP growth to be 5.2% in 2022 and 2023. However, economic growth varies significantly by country, with the Philippines being on the high end and Myanmar on the low end.

ASEAN’s Positive Economic Outlook in 2023

The positive economic outlook for ASEAN is attributed to various factors, including the region’s strategic geographic location, abundant natural resources, young population, and the continued implementation of economic reforms and policies. 

Additionally, ASEAN has been able to mitigate the effects of the global economic downturn by strengthening its intra-regional trade and investment, deepening economic integration, and diversifying its trade partners. 

However, the bloc still faces challenges, such as infrastructure gaps, income inequality, and geopolitical tensions. Nevertheless, ASEAN’s prospects for sustained economic growth and development remain promising. The region constantly attracts significant investment and attention from domestic and foreign investors due to the developing local market.

Read more: Indonesia Outlook 2023: Potential in the Mining Sector

Industries to Watch Out for Growth in ASEAN in 2023

1. Manufacturing

The manufacturing sector faces challenges due to downward pressure on demand in advanced economies, rising interest rates, and inflation. 

However, there are several reasons to expect capital inflows into manufacturing in ASEAN states to continue in 2023, such as the shift of supply chains from China, the cost-effectiveness of ASEAN-made goods, and preferential incentives and policies implemented by ASEAN governments to capitalize on this shift. 

2. Tourism

The tourism sector has faced challenges across ASEAN states since the start of the pandemic. However, there are several reasons to expect 2023 to be a more positive year for the sector, such as the reopening of travel from China and returning demand for tourism elsewhere in the world. 

ASEAN states have also developed programs to attract foreign arrivals, such as Malaysia’s digital nomad visa program and Indonesia’s second home visa scheme.

3. Digital Economy

The digital economy across ASEAN-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam) is expected to reach a gross merchandise value of USD 200 billion by the end of 2022 and USD 330 billion by 2025. 

The region saw the emergence of 100 million new internet users over the past three years, with internet adoption being enhanced by the pandemic. 

The expanding digital economy offers enormous opportunity scope in digital financial services, particularly for most of Southeast Asia’s unbanked or underbanked and for MSMEs that need formal credit histories. 

Fintech companies can plug this gap by issuing microloans with terms and maturity that are small and short, which borrowers can receive within 24 hours.

Indonesia’s Chairmanship of ASEAN

President Joko Widodo of Indonesia received the ASEAN chairmanship from Cambodia during the 40th and 41st ASEAN Summits in November in Phnom Penh. 

For Jokowi, the ASEAN summit is an important regional stage during his final year as the President of Indonesia, with international recognition. Indonesia chairs ASEAN once a decade, with its previous chairmanship occurring in 2011.

Indonesia’s Top 4 Industries to Watch for in 2023

1. Infrastructure

Indonesia has a massive infrastructure deficit, and the government has recently invested heavily in infrastructure projects. This trend will continue in 2023, with more investment in roads, ports, airports, and other infrastructure projects, especially with the rapid development of Indonesia’s new capital project.

2. Healthcare

Indonesia’s healthcare industry is still in its early stages but is overgrowing, driven by increasing demand for healthcare services and a growing middle class. As a result, more investment will go into healthcare in 2023, particularly telemedicine, medical devices, and pharmaceuticals.

3. Renewable Energy

Indonesia has vast renewable energy potential, including solar, wind, and geothermal. An enormous investment will go into renewable energy in 2023 as the government seeks to reduce its reliance on fossil fuels and meet its climate change commitments.

4. Tourism

Indonesia aims to welcome as many as 7.4 million tourists by 2023 to generate approximately US$5 billion in revenue. However, this falls short of the pre-pandemic figures of 16 million foreign visitors.

Therefore, the country’s tourism ministry has permitted foreign investment in the sector to promote sustainable tourism development. It includes developing sustainable-based tourism projects, five priority tourist destinations, and eight special economic zones dedicated to tourism. 

The ministry has emphasized that these investment opportunities are worth a total of US$1.5 billion and have the potential to create 1.5 million new jobs.

3 Major Challenges Indonesia Will Face

Here are further elaborations on the three significant challenges Indonesia faces as the chair of ASEAN in 2023:

Balancing Competing Interests

As a chair, Indonesia must navigate these competing interests and find ways to unite member states to achieve common goals.

Promoting Economic Integration

Indonesia must encourage further integration and reduce trade barriers among member states. It may involve harmonizing regulations, lowering tariffs, and facilitating cross-border investment.

Addressing Security Concerns

With tensions over territorial disputes and the threat of terrorism and extremism in the region, Indonesia must strengthen ASEAN’s existing security frameworks, such as the ASEAN Regional Forum and the ASEAN Defense Ministers Meeting Plus.

How InCorp Indonesia Can Assist

To conclude, this opportunity is integral for Indonesia. Therefore, businesses may make the best use of the momentum. In doing so, InCorp Indonesia (formerly Cekindo) provides services for the company and product registration and immigration for companies seeking such services. 

By partnering with InCorp Indonesia, businesses can focus on their core operations and objectives while leaving the regulatory and administrative tasks to a reliable and experienced partner.