N AVIGATIN G HIG H WI NDS

Southeast
Asia O U T L O O K
2024—34
© Navigating High Winds: Southeast Asia Outlook 2024-34
A collaboration between the Angsana Council, Bain &
Company, and DBS Bank

All rights reserved. No part of this report may be

reproduced, stored in a retrieval system, or transmitted,
in any form or by any means, electronic, mechanical,
photocopying, or otherwise without attribution and/or
prior consent.

Lead Authors
Charles Ormiston is Chair of the Angsana Council and an Advisory Partner with Bain & Company based in Singapore. You can reach him at [email protected].
Taimur Baig is Managing Director and Chief Economist at DBS Bank. You can reach him at [email protected]

Supported By
Gullnaz Baig is Executive Director of the Angsana Council, a not-for-profit advisory council that examines Southeast Asia’s potential for long-term, sustainable development. You can reach her at
[email protected].

Acknowledgments
The authors would like to thank Andreas Sohmen-Pao, Aw Kah Peng, Bea Ramos, Brigitta Jakob, Calum Handforth, Claudia Brechenmacher, Doris Magsaysay Ho, Doris Sohmen-Pao, Frederick
Kliem, George Yeo, Gita Wirjawan, Hans Vriens, Han Teng Chua, Hilary Thean, Iain Tan, Jackie Xiao, Jeremy Ng, Jilyn Yeow, Nels Friets, Phong Tran, Radhika Rao, Ricky Toh, Stanford Anwar, Tieying
Ma, Qhamar Rosli and Zia Zaman for their contributions to this report.
Key Messages
1• Southeast Asia will likely outgrow China 3• Five “traditional” priorities stand out to 4• Strategies to raise growth will require
over the next decade, despite global raise Southeast Asia growth policy intervention
headwinds
▪ Raise workforce skill levels/education ▪ Investing in future growth sectors
(including foreign talent) ▪ Fostering tech-enabled disruptors (TEDs)
▪ Increase physical and digital ▪ Expanding capital markets’ breadth and
2• The world has changed in fundamental
infrastructure spending
ways; governments need to adjust depth
▪ China manufacturing and innovation is ▪ Attract more domestic and foreign ▪ Accelerating green transition
now ultra-competitive and has driven investment
▪ Committing to growth-friendly multilateral
premature de-industrialization of many ▪ Raise competition in domestic markets initiatives
developing countries ▪ Strengthen government institutions
▪ Low-cost labor, subsidized land, and tax
holidays are no longer the main drivers of
FDI 5• Opportunities to integrate are less
important than domestic levers
▪ Climate change raises investment needs
and changes priorities
▪ Deep technology innovation is
concentrating in the US and China; their
rivalry is accelerating the pace of change
▪ The G7 is becoming more protectionist

© Southeast Asia Outlook 2024—2034 3

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

GDP | Southeast Asia has enjoyed stable economic growth
over the last 30 years, with Vietnam leading the region

Real GDP indexed to 1993 (1993–2023) 2023 Real ‘22–’23

GDP change ‘93–’03 ‘03–’13 ‘13–’23 ‘93–’23
(USD B) (USD B) CAGR CAGR CAGR Multiple
1997 Asian 2008 Global 2020 Covid-19
financial crisis financial crisis crisis
Vietnam 420 ~20 7.4% 9.0% 6.0% 8.7x

Singapore 501 ~5 5.3% 6.7% 3.0% 4.3x

Malaysia 400 ~14 5.4% 5.0% 4.0% 4.1x

Philippines 437 ~23 3.9% 5.4% 4.7% 3.9x

Indonesia 1,371 ~65 3.2% 5.7% 4.2% 3.6x

Thailand 515 ~9 3.6% 4.0% 1.8% 2.5x

SEA-6 3,643 ~138 4.1% 5.7% 3.9% 3.8x

China 17,795 ~888 9.5% 9.5% 6.0% 11.0x

India 3,574 ~231 6.1% 7.6% 5.7% 6.6x

Notes: Real GDP calculated based on constant 2023 USD exchange rates, indexed to 1993. China GDP excludes Hong Kong and Macau.
Sources: CEIC; IMF

© Southeast Asia Outlook 2024—2034 5

GDP per capita | Adjusting for population growth, Southeast Asian
countries all more than doubled income, with Vietnam a breakout leader

Real GDP per capita indexed to 1993 (1993–2023) 1993–03 2003–13 2013–23 1993–2023
CAGR CAGR CAGR Multiple
1997 Asian 2008 Global 2020 Covid-
financial crisis financial crisis 19 crisis Vietnam 6.0% 7.9% 5.0% 6.3x

Singapore 3.1% 3.8% 2.5% 2.5x

Indonesia 1.6% 4.4% 3.2% 2.5x

Malaysia 2.9% 3.2% 2.8% 2.4x

Philippines 1.6% 3.5% 3.1% 2.2x

Thailand 2.4% 3.2% 1.4% 2.0x

SEA-6 2.5% 4.3% 2.8% 2.6x

China 8.5% 8.9% 5.6% 9.1x

India 4.1% 6.1% 4.7% 4.3x

Notes: Real GDP calculated based on constant 2023 USD e xchang e rates, indexed to 1993; YoY e xchang e rates likely impacted GDP grow th figure s given volatility of foreign exchange across countries; China GDP excludes Hong Kong and Ma cau. Sources: CEIC; IMF

© Southeast Asia Outlook 2024—2034 6

Manufacturing value-added | Manufacturing share of GDP has declined in most
Southeast Asian countries since the 2000s; Indonesia and the Philippines were
hit particularly hard

Manufacturing value-added as percentage of GDP (1993–2022, three-year rolling average)

Legend: Peak of manufacturing value-

added as percentage of GDP

Notes: SEA-6 includes Sing apore, Indonesia, Malaysia, the Philippines, Thaila nd, and Vietnam; (1) MVA ref ers to manufa cturing va lue-added; MVA is the total estimate
of net output of all re sident ma nufacturing activity units obtained by adding up outputs a nd subtra cting inte rmediate consumption. Sources: WTO; World Bank

© Southeast Asia Outlook 2024—2034 7

FDI | FDI growth in Southeast Asia is strong, led by
Singapore with over 60% of SEA-6 FDI since 2018

▪ For the first time in 10 years,

Southeast Asia now attracts more
FDI than China

▪ While FDI is growing rapidly in India,

it is just keeping pace with Southeast
Asia

▪ Within Southeast Asia, Singapore

has gone from 56% (2013–17) to
62% (2018–22) of FDI

▪ FDI is to some degree a lagging

indicator:

▪ Vietnam has the highest growth,

but our sense is that
commitments will slow over the
next two years

▪ Malaysia shows the slowest

growth in FDI, but announced
commitments point to a
significant increase in FDI over the
coming years (semiconductors,
electronics, data centers, and
other China+1)

Note: (*) Includes Hong Kong, Macau. Sources: UNCTAD; Government source s

© Southeast Asia Outlook 2024—2034 8

Domestic Capital Formation (DCF) | Strong DCF reflects confidence
in local business opportunities and improving capital markets

▪ Indonesia has the largest domestic

investment volume in SEA-6,
supported by policies aimed at
developing downstream industries
like nickel ore processing for EV
batteries and energy storage systems

▪ Vietnam and the Philippines saw

strong growth in gross fixed capital
formation:
▪ Vietnam’s growth is anchored in
its robust manufacturing base

▪ The Philippines saw an increased

growth in infrastructure

▪ Malaysia’s relatively flat GFCF growth

reflects the downturn in the mining
and construction sectors during
Covid-19, political instability, and a
softer macroeconomic outlook

▪ Both Singapore and Thailand

experienced relatively subdued
growth in GFCF post-Covid-19, with
slower private investments across
Notes: (1) Gross fixe d capital forma tion (GFCF) is a mea sure of the total amount of re sources invested in e ither building or rene wing fixed asse ts, such as infrastructure,
machinery, and equipment, as well as changes in inventories w ithin an economy over a specified period. It is an indicator ofan economy's investme nt in enhancing its
construction and machinery
production capacity; 2023 Preliminary is estimated by tria ngula ting across local de partment sources and historica l data fromWorld Bank, to be finalized late r this year.
Sources: World Bank; Trading E conomics; DOSM; Lit. S earch; CEIC

© Southeast Asia Outlook 2024—2034 9

Trade Growth | Southeast Asia is highly dependent on trade

Real GDP and trade volume 1 indexed to 1993 (1993–2023)

TRADE AS % OF GDP 1993–2003 2003–2013 2013–2023

Avg. growth rates2: Avg. growth rates2: Avg. growth rates2:
GDP: ~3.7% GDP: ~4.4% GDP: ~3.7%
Trade (World): ~10% Trade (World): ~14% Trade (World): ~4% World 26% 42% 43%
Trade (SEA-6): ~13% Trade (SEA-6): ~15% Trade (SEA-6): ~5%

US 10% 15% 17%

EU3 35% 60% 68%

China 14% 35% 34%

India 11% 15% 30%

SEA-6 56% 86% 89%

Notes: (1) Real GDP indexed to constant 2023 prices (base d on 2023 USD fixed e xchang e rate), trade volume includes both imports and exports of total merchandise goods; (2) Represe nts 10-year a verag e growth rates excluding periods of crises: 1993–2003
excludes 1998 (Asian Financial Crisis) and 2001 (Dot com Bubble and 9/11), 2003–2013 excludes 2009 (troug h of the Gre at Fina ncial Crisis), and 2013–2023 excludes 2020 (Covid-19 pande mic); (3) E U 1993–2003 average only captures data from 2000–2003 period,
when the data was published | Source: WTO; E uromonitor

© Southeast Asia Outlook 2024—2034 10

Seven traditional growth drivers set the foundation for our forecast framework;
On these drivers, the performance of SEA-6 countries has been mixed
Lowest in SEA Top in SEA

GROWTH DRIVERS I ND I C A T OR U NI T ID MY PH SG TH VN
Ease of doing Score
1 business
Ease of doing business score by World Bank (2020)1 0–100 70 81 63 86 80 70

Increase Score
2 competition
Herfindahl-Hirschman market concentration index (2021)2 0–1.0 0.09 0.10 0.10 0.07 0.07 0.12

Strengthen Average of World Governance Indicator scores by World Bank Score

3 institutions (2022) -2.5–2.5 -0.1 0.5 -0.3 1.9 -0.1 -0.1
Score
Average reading, math, science PISA score (2022) 0–600 369 404 353 560 394 468
Improve Score
workforce Human Capital Index by World Bank (2020) 0–1.0 0.54 0.63 0.55 0.89 0.62 0.69
4 quality and Female labor force participation ratio (2023) % total pop.4 53% 52% 47% 62% 59% 69%
availability
Employment to population ratio (2023) % total pop.4 65% 63% 59% 67% 66% 72%

Public infrastructure investments (2013–19)3 % of GDP 3% 8% 3% 5% 5% 5%

Build
5 infrastructure Infrastructure score, Logistics Performance Index by World Bank
(2023)
Score 0–5 2.9 3.6 3.2 4.6 3.7 3.2

6 Increase stability Reserves to gross external financing (2022) Ratio 2.5 1.2 2.2 0.35 1.8 2.3
Cumulative Foreign Direct Investment as percentage of cumulative
Facilitate GNI (2018–22)
% 2.3% 3.6% 2.6% 35.3% 1.9% 6.7%
7 investment Cumulative Gross Fixed Capital Formation as percentage of
cumulative GNI (2018–22)
% 38.5% 24.6% 25.3% 27.9% 28.4% 45.3%
Notes: (1) The World Ba nk conducted changes to the rank a nd score calculation me thodology for the inde x after an interna l a udit in 2020 to ensure consistency a nd comparability of scores across countries and betw een year to year; the chang es resulted in
revision of previously published scores; (2) HH index computed by squaring ea ch company’s marke t share and summing the m up re spectively; (3) Singa pore’s low reserves to gross external financing ratio is a result of its high exte rnal liabilities f rom large capita l
inflow s as an inte rnational fina ncial center; (4) Percentage of 15+ population; (5) IMF data published in May 2021 w ith late st year up to 2019 | Sources: World Bank; Euromonitor; T ra ding Economics; OECD; UNCT AD; UNSD; WTO; IMF

© Southeast Asia Outlook 2024—2034 11

The world has changed profoundly;
Country growth strategies must evolve

1 China - Competitiveness 4 Changing drivers of FDI 6 Global green transition

China manufacturing and innovation Low-cost labor, subsidized land and tax Climate change will shift investment priorities
are ultra-competitive, causing holidays do not drive high quality FDI
premature de-industrialization in ▪ Investment requirements require deeper
▪ Minimum tax agreement reduces capital markets
many developing countries
opportunity for tax subsidies
▪ Ignoring CO₂ invites a protectionist response
▪ Shift to artificial intelligence and
automation reduces value of
2 China - Southeast Asia
unskilled labor
▪ Requirement for abundant, low-cost,
reliable, green energy and water
7 US-China innovation leadership
In addition to being the largest trading
partner, China is likely to become the supplies
largest investor in Southeast Asia
Innovation is now dominated by the US and
China, with different approaches but
Rising global tariffs; leveraging common advantages
3 China - US Competition 5 improving Asia-Pacific trade ▪ Large domestic markets
relations ▪ Strong tertiary academic institutions

This creates opportunities, but also the ▪ Massive R&D spend by corporates
Developed markets are becoming more
risk of diplomatic pressure and protectionist; within Asia the RCEP is ▪ Long investment horizons by governments
compliance cost reducing tariff barriers

© Southeast Asia Outlook 2024—2034 12

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

Our growth framework considers three broad
drivers of economic growth potential

1 2 3
Situational/contextual Traditional growth drivers: Five new growth drivers
factors that prompt the building blocks of a that require strategic insight,
policy change and high-growth economy policy change, good government,
benefit agile countries and risk-taking
1. Ease of doing business
A. Invest in emerging growth
2. Increase competition sectors
3. Strengthen institutions B. Foster tech-enabled disruptors
(TEDs)
4. Improve workforce quality
and availability C. Strengthen capital markets
5. Build infrastructure D. Accelerate green transition
6. Increase stability E. Embrace multilateral initiatives
7. Facilitate investment

© Southeast Asia Outlook 2024—2034 14

Southeast Asia Macro Scenarios
(Over Next 10 Years)

LOW GROWTH EXPECTED GROWTH HIGHER GROWTH

China slowdown China maintains steady growth China rebounds

China Health (growth at 2%–3%) (growth at 3.5%–4.5%) (growth at 5%+)

US-China relations improve as

China-US US and China demand US-China relations frosty, compete for both prioritize domestic
Competition alignment, splintering ASEAN favor; Southeast Asia benefits challenges
Rising protectionism in US and Europe
Rising protectionism hits US and Europe back off from
Global Trade Southeast Asia offset by trade growth raising tariffs
within Asia
China real estate/banking crisis
Global Interest and US deficits and inflation lead
Moderate global GNP and trade growth; Global growth picks up with
Rates to high real interest rates acceptable real interest rates benign inflation and interest rates

Green investments accelerate, benefiting China accelerates investment to

Southeast Asia delays green Southeast Asia hard
Green Transition investing from low-cost China manufacturers and infrastructure and green
BRI transition

Taiwan Conflict Simmering tensions but no conflict Status quo

Impact of Productivity gains slightly higher than New levels of productivity

AI and automation displaces jobs
Technology disruption to affected labor markets unlocked, measurable growth

© Southeast Asia Outlook 2024—2034 15

SEA-6 is expected to grow ~5% on average
annually over 2024–2034

HISTORICAL AVERAGE FORECAST

2000–09 2010–19 2020–23 2024–34

Vietnam 6.9% 6.6% 4.6% 6.6%

Philippines 4.5% 6.4% 2.3% 6.1%

Indonesia 5.3% 5.4% 3.0% 5.7%

Malaysia 4.7% 5.4% 2.5% 4.5%

Thailand 4.3% 3.6% 0.0% 2.8%

Singapore 5.4% 5.0% 2.7% 2.5%

SEA-6 5.1% 5.3% 2.6% 5.1%

© Southeast Asia Outlook 2024—2034 16

Vietnam, Indonesia, and the Philippines are expected to be the
faster-growing countries, with Vietnam continuing to stay ahead
HISTORICAL AVERAGE FORECAST
2000–09 2010–19 2020–23 2024–34 Positive drivers Negative drivers

▪ Export-oriented economy well-positioned to ▪ Collateral impact of anti-corruption

capture “China + 1” opportunities campaign
▪ Highly diverse sources of FDI ▪ Cyclical slowdown and credit weakness
Vietnam 6.9% 6.6% 4.6% 6.6% ▪ Productive inter-provincial competition ▪ Pace of infrastructure spend falling short
▪ High-quality workforce and education levels ▪ Energy and water shortages
▪ Slow movement on green infrastructure

▪ Pro-growth administration ▪ Traditional growth drivers lagging other

▪ Prioritized infrastructure investments, with Southeast Asian countries (education,
renewable projects garnering interest from FDI infrastructure, government effectiveness)
Philippines 4.5% 6.4% 2.3% 6.1% investors ▪ Geopolitics, especially tensions with
▪ Growing population and workforce China, might escalate, disrupting
recovery

▪ Booming base metal processing, mining, and ▪ Low manufacturing value-added activity,
infrastructure sectors beyond commodities
▪ Increasing infrastructure spend ▪ Declining commodity prices
Indonesia 5.3% 5.4% 3.0% 5.7% ▪ Leader in entrepreneurial, tech-enabled ▪ Potentially more populist stance
disruption ▪ May further embrace protectionist slant
▪ Growing population and workforce

© Southeast Asia Outlook 2024—2034 17

Malaysia, Thailand, and Singapore are expected to experience more
gradual growth rates, over all SEA-6 as a region will grow healthily
HISTORICAL AVERAGE FORECAST
2000–09 2010–19 2020–23 2024–34 Positive drivers Negative drivers

▪ Shifting to pro-growth stance to attract FDI ▪ Shifting political coalitions, policy shifts and
▪ Past success with electronics, semiconductors and data weak government mandates
centers paying off ▪ Slow and steady talent drain
Malaysia 4.7% 5.4% 2.5% 4.5% ▪ Willingness to pursue structural reforms, e.g. subsidy cuts ▪ Fallout from not fulfilling long-term
▪ Potential benefits from cooperation with Singapore investment commitments (e.g. high-speed rail
link)

▪ Green shoots in tourism rebound ▪ Uncertain and turbulent political landscape

▪ A key regional automotive hub with well-connected Concerning consolidation in key sectors (retail,
Thailand 4.3% 3.6% 0.0% 2.8% infrastructure telecommunications)
▪ Conglomerates (CP, Central, PTT, Siam Cement, Thai ▪ Demographic challenges
Union) are more regional than Southeast Asian peers

▪ Open and diverse economy, with strengths in advanced ▪ Demographic challenges; immigration offset
manufacturing, services, and tourism faces political hurdles
Singapore 5.4% 5.0% 2.7% 2.5% ▪ World-class talent from every major economy attracted to ▪ Land and labor constraints
safe, stable environment ▪ High business costs vs. SEA-6 peers
▪ Well-funded government efforts to nurture growth

• Benefitting from China + 1 • Needs to be approached as individual country

• Third largest global “market” with 600 million + consumers markets
SEA-6 5.1% 5.3% 2.6% 5.1% • Strong historical linkages with all major trading economies • Increased protectionism in developed markets
• Geographic position in Asia, almost half of world • Gradual deindustrialization due to the
population changing drivers of competitiveness

© Southeast Asia Outlook 2024—2034 18

Forecasting Model Breakdown:
Total factor productivity and capital growth
Total Factor Productivity Capital

▪ Vietnam and Indonesia to see robust capital growth, supported by rising

▪ Total factor productivity (TFP) is often seen as a residual of other growth semiconductor and electric vehicle batteries FDI; the Philippines to be
factors, reflecting the boost from reforms and other structural supported by infrastructure
improvements.
▪ Capital growth in Malaysia and Singapore to benefit from global supply
▪ TFPs are, by and large, expected to be better/stable in the next decade. chain recalibration and green transition, while Thailand wins in attracting
electric vehicle FDI
Sources: CE IC; IMF; Penn World T able; DBS

© Southeast Asia Outlook 2024—2034 19

Forecasting Model Breakdown:
Growth in labor force and labor productivity
Labor Human capital

▪ Labor force growth will be most supportive for the Philippines and ▪ Singapore is already highly educated, with human capital supported by
Indonesia, and positive in Malaysia. continuous upskilling efforts.
▪ Vietnam has a window over the next decade to reap demographic gains. ▪ Vietnam and Thailand can be supported by higher tertiary education and on-
the-job training.
▪ There is a demographic drag for Singapore and Thailand.
▪ Upskilling initiatives, education, and availability of quality health facilities
Sources: CE IC; IMF; Penn World T able; DBS should help this trend.

© Southeast Asia Outlook 2024—2034 20

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

Strategy is about redirecting resources to future opportunities

Invest in Foster tech- Embrace

Strengthen Accelerate
A emerging B enabled C capital markets D green transition E multilateral
growth sectors disruptors initiatives

▪ Prioritize emerging ▪ Provide low-cost, ▪ Encourage growth of ▪ Prioritize easier wins ▪ Strengthen existing
sectors that fit with stable, accessible, diversified players trade agreements
established clusters, regionally connected to ensure efficient ▪ Improve access to low- and alliances such as
workforce capabilities, digital infrastructure capital allocation cost energy with ASEAN or RCEP
and natural resources climate, economic, and
▪ Support co-location of ▪ Increase stock energy security ▪ Prioritize key growth-
▪ Stimulate sustained stakeholders critical to exchange benefits enabling initiatives
investment across a robust ecosystem of attractiveness to that benefit from a
facilitate successful ▪ Upgrade national
multiple participants innovation and regional approach
exits grids to renewables
entrepreneurship
and work towards an ▪ Common standards
▪ Invest heavily in
▪ Increase household interconnected
workforce skills and ▪ Ensure enabling ▪ Unified electrical
participation in regional grid
infrastructure government policies: grid
financial markets
pro-competition, easy ▪ Encourage ▪ Digital payments
▪ Develop government movement of talent, ▪ Support new government-led
capabilities encouraging financial companies and catalytic financing ▪ Carbon markets
regulations to set up financing of SMEs and other financial
businesses innovation for non-
▪ Ensure safeguards in commercially viable
place to avoid fraud opportunities
and overspeculation

© Southeast Asia Outlook 2024—2034 22

We see opportunities for each of the ASEAN-6 to improve
their pursuit of next-generation growth opportunities
Lowest in Sea Top in SEA

DRIVERS I ND I C A T OR U NI T Y E AR ID MY PH SG TH VN

Global Innovation Index ranking Overall GII ranking (1–149) 2023 61 36 56 5 43 46

Invest in
A New Growth 5-year average R&D expenditure as percentage of GDP % of GDP 2017–21 0.3% 1.0% 0.3% 1.9% 1.1% 0.4%
Sectors
5-year average private tech investment USD B 2018–22 11.3 4.3 1.6 35.3 5.5 4.7

Foster Tech- Number of unicorn start-ups 1 # of companies 2023 15 1 2 27 4 5

B enabled
Disruptors Tech venture capital investment USD M 2023 1,140 332 148 7,934 108 224

Strengthen Credit as percentage of GDP % of GDP 2018–22 79.0 214.8 57.3 347.5 232.2 132.0
C Capital
Markets Corporate bond market cap as percentage of GDP % of GDP 2018–22 2.3 54.0 7.3 27.5 25.6 7.7

5-year average greenhouse gas emission per capita tCO2e per capita 2016–21 5.8 11.4 2.1 11.6 6.2 4.2

Accelerate Share of electricity production from renewables % share of production 2022 19.6% 19.1% 21.6% 2.4% 15.5% 50.3%
D Green
Transition Total value of investments in green sectors2 USD M 2023 1,593 1,029 1,464 913 394 199

Electric car sales % share of sales 2022 1.3% 0.7% 0.7% 6.0% 3.7% 1.7%

Embrace Share of intra-ASEAN trade in goods % value of goods traded 2022 21.0% 27.1% 24.9% 25.7% 21.7% 11.1%
E Multilateral
Initiatives Share of intra-ASEAN FDI inflows % of FDI inflows 2022 33.0% 18.7% 7.4% 4.4% 35.7% 25.1%
Note s: (1) A unicorn i s a privately he ld start-up company wit h a val uation of $1B or m ore; the anal ysis incl udes start-ups that reached $1B val uation by 2017 onwards and considers m ainly compani es wit h publicly di scl ose d valuation data; (2) Figure s i nclude private
se ctor de al transact ions >$10M i n size , includi ng private pl aceme nts and excluding IPOs; amount not representat ive of ove rallprivate sect or investment
Source s: World Intel lect ual Property Organizat ion; Pitchbook; Capit al IQ; W orld Bank; SEA Gre en Economy Re port 2023 (Bain & Company, AWS , and GenZero); Euromonit or; Global Forest Watch; Ember Yearly Ele ctricity Dat a (2023)

© Southeast Asia Outlook 2024—2034 23

Improvements in the past five years are evident; Indonesia and the
Philippines are making strong progress across most dimensions
Declining performance Improving performance GROWTH TRENDS
3 3 4 1 New growth sectors
O UT C O M E I ND I C A T OR Y E AR ID MY PH SG TH VN have seen positive
trends, including a
Global Innovation Index ranking (rank change) '23 vs. '18 +24 -1 +17 0 +1 -1 substantial increase in
Invest in private tech investments
A new growth 5-year avg. R&D expenditure as percentage of GDP '17–'21 vs. '12–'16 +54% -21% +123% -5% +98% +28% and unicorn start-ups
sectors
Green transition has
5-year avg. private tech investment '18–'22 vs. '13–'17 147% +260% +742% +270% +235% +570% 2 been driven by
1 No unicorn No unicorn
Foster tech- Number of unicorn start-ups 1 '23 vs. '19 114% start-up in +100% +145% start-up in +400% investments in green
2019 2019 sectors and EV
B enabled
disruptors Tech venture capital investments '23 vs. '18 -63% +90% +107% +50% -48% -22% adoption, propelled by
attractive government
Strengthen Credit as percentage of GDP '22 vs '18 +9% 0% +4% +13% +20% +16% inves aimed at both
C capital investors and
markets Corporate bond market cap as percentage of GDP '22 vs. '18 -18% +11% +1% -9% +21% +285% consumers

3 Indonesia and the

5-year avg. GHG emission per capita '10–’15 vs. ‘16–’21 -12% +75% +17% +4% +13% +43%
Philippines, which start
from a lower base, are
Accelerate Share of electricity production from renewables '22 vs. '18 +15% +15% -8% +82% +9% +23%
moving in a positive
D the green
direction, especially in
transition Total value of investments in green sectors2 '23 vs. '20 +383% +681% +145% +47% -90%2 -77%
2 economic innovation
4W BEV share of new vehicle sales '21 vs. '22 16x 12x 6x 2x 2x 3x Thailand and Vietnam
4 have seen more
Embrace Share of intra-ASEAN trade in goods ’22 vs. ’18 +21% +40% +36% +27% +26% +44% nuanced growth across
E multilateral
dimensions, esp. in
initiatives Share of intra-ASEAN FDI inflows ’22 vs. ’17 -28% +45% 0% +11% +122% +80%
green transition
Note : (1) A unicorn is a private ly held start-up company wit h a val uation of $1B or m ore; the anal ysis incl udes start-ups that reached $1B valuat ion by 2017 onwards and consi ders mainly companies with publ icly
disclosed valuation data; (2) Fi gures include private se ctor de al transact ions >$10M i n size , includi ng private pl aceme nts and excludi ng IPOs; Amount not representat ive of ove rall private sector i nve stment | Source :
World Intellectual Prope rty Organi zation; Pi tchbook; Capital IQ; Worl d Bank; SEA Green Econom y Report 2023 (Bain & Company, AWS , and GenZero); Euromonit or; Global Forest Watch; Ember Yearly Ele ctricity Dat a
(2023)

© Southeast Asia Outlook 2024—2034 24

 Invest in Emerging Growth Sectors:
A SEA countries are competing for next-generation sectors; a few winners are emerging

Cumulative FDI value committed to SEA for key growth sectors1

TH ID PH MY VN SG
▪ Thailand and Indonesia are likely to emerge as
winners, given their strong OEM base, government
EV manufacturing support on EV, and market size
(non-exhaustive, ▪ Indonesia’s EV development is driven by growth in
USD B, 2019–23) EV battery sector and government incentives for
sales and manufacturing

EV battery ▪ Indonesia is likely to continue outperforming

manufacturing other SEA countries given its abundant nickel
(non-exhaustive, reserves, strict regulations, incentives, and
USD B, 2019–23) mandates

Semiconductor ▪ Malaysia and Singapore are leading in different

parts of the value chain; Singapore has
manufacturing
competitive edge in wafer fabrication (which
(non-exhaustive,
requires more advanced skills), while MY leads in
USD B, 2019–23)
packaging and testing

▪ Malaysia, Thailand, and Indonesia are

Data centers attractive—Malaysia and Thailand for their reliable
(non-exhaustive, infrastructure, Indonesia for its growing digital
USD B, 2019–23) economy and stricter data protection
▪ Singapore’s relatively absent data center
investments reflect the 2019–22 moratorium on new
Note : (1) Tot al value commit ted, not necessaril y fully realize d by the indi cated year
Source s: ASE AN Investme nt Report (2019-23); Lit. search data center projects lifted in late 2023

© Southeast Asia Outlook 2024—2034 25

 Invest in Emerging Growth Sectors – Electric Vehicles (EVs)
A EV adoption in SEA is nascent but expected to reach double digits by 2030;
Thailand is likely to lead FDI in 4W, Indonesia and Vietnam in 2W

MARKET AND FDI OVERVIEW

EV share of new sales projection 1 in SEA EV manufacturing FDI committed2 in SEA IMPLICATIONS
(percentage of sales of new cars) (non-exhaustive, USD billion, 2019–23)

2021E 2030F Thailand is likely to emerge as

the winner in attracting FDI for
4W 4W EV manufacturing with its
strong existing combustion engine
OEM presence, comprehensive
government support, and large
Expected potential market size
to be ver y
2W small

Indonesia and Vietnam have

potential to win in the 2W EV
FDI DRIVERS ID MY PH SG TH VN
manufacturing with their large
1 Existing auto mfg. sector: OEM capabilities that can shift to EVs domestic markets and growing
Comprehensive
OEM presence
Govt policies and support: incl. upstream incentives (e.g., mining, subsidies and
2
batteries), downstream incentives (e.g., assembly), and mfg. targets tax incentives
Other SEA-6 can focus on
Access to value-chain critical resources: incl. ability to work in attracting FDI for EV
3 industrial zones that allow for tariff privileges/exemptions,
availability of FTAs, etc. SG has FTA with components (e.g., Indonesia on
ID proposing
FTA with US
China, EU; TH EV battery manufacturing and
Large base of potential EV demand: projected potential size of EV has FTA with
4 on battery
China, S. Korea tires, Singapore and Malaysia on
market in 2030 for either 4W or 2W
automotive semiconductors, etc.)
Legend: Leading in policies/drivers in SEA Medium policies/drivers Lagging in policies/drivers
Notes: (1) Captures Battery EV (BEV) proje ction only; (2) T otal value committed, not necessarily fully rea lized by the indicate d year
Sources: AS EAN Investment Report (2019–2023); International Energy Agency (IEA); Fitch; Mayba nk; Govt. websites; Industry participant interviews; Bain ana lysis; Lit . search

© Southeast Asia Outlook 2024—2034 26

 Invest in Emerging Growth Sectors – EV Manufacturing
A Largest recent investments are concentrated in Thailand and Indonesia, driven by
policy initiatives and its existing manufacturing bases

Selected recent EV manufacturing investments in SEA1 NO N-EXHA USTIVE

Value
Player Year Market Investment overview Investment drivers
(USD M)
To leverage Indonesia as regional
Abundant nickel resources, Indonesia government’s
1,800 2022 ID manufacturing hub for Toyota’s EV (for both
EV ambition, and existing local supplier network
battery and hybrid EVs) over the next five years
1 Toyota
To boost production of hybrid EVs in response to Government’s investment privileges—excise tax
622 2019 TH
rising competition from Chinese EV manufacturers reduction to establish full EV production

Established car manufacturing ecosystem; promising

Annual capacity will be 150,000 units; BYD
2 BYD 500 2022 TH local market; opportunity to bypass tariffs from direct
currently has 46% of the Thai EV market
China export
To build EV and battery manufacturing plant,
To leverage Indonesia government’s incentives and
3 Vinfast 1,200 2023 ID with an anticipated production capacity of 30,000–
access to nickel resources
50,000 units annually
To modernize its existing manufacturing operations Recognized Thailand’s growing significance as key
4 Ford 900 2022 TH by enhancing level of automation by 80% and manufacturing hub in APAC after the closure of Ford’s
increasing output of new models, incl. EVs operations in other regions (India, Russia, and Brazil)
To improve EV manufacturing plants and
5 expand overall production; at the end of 2020, To capitalize on rapidly expanding EV market in SEA
Mitsubishi 543 2020 TH
Mitsubishi launched its first PHEV as Thailand and utilize Thailand as central manufacturing hub
entry
Note : (1) Tot al EV investments committ ed in that year, not necessaril y fully realize d in that ye ar. Source: Lit. search

© Southeast Asia Outlook 2024—2034 27

 Invest in Emerging Growth Sectors – EV Batteries
A FDI in SEA has surged from 2021, driven by Indonesia. It has been the main recipient given its nickel
resources and policy initiatives

MARKET AND FDI OVERVIEW ▪ EV battery manufacturing FDIs started to pick

EV battery manufacturing FDI committed1 in SEA up in 2019 and have grown by 5x IMPLICATIONS
(non-exhaustive, USD billion, 2019–23) ▪ Key FDIs in Indonesia include:
▪ Volkswagen is working with Vale, Ford, Huayou, Indonesia is likely to emerge
Eramet, and local companies to build an EV battery as the FDI winner in attracting
ecosystem in Indonesia, and conducted a feasibility
study for a USD 5 billion plant FDIs for EV battery with its
▪ CATL invested USD ~5 billion as part of vertical abundant nickel resources, set
integration (nickel mining / processing and battery of incentives, and willingness
manufacturing)
▪ Hyundai’s first battery system assembly in Southeast to mandate down-streaming
Asia, with annual capacity of 10GWh battery cells
(enough for ~150,000 EVs) Other SEA-6 countries need
to set thoughtful strategies
FDI DRIVERS ID MY PH SG TH VN
that recognize the sources of
Availability of raw materials (nickel)—most common competitive advantage:
Access to A batteries, NCA and NCM2, use ~80% and ~30% nickel product and process
value-chain- respectively Has world’s
1
critical largest nickel
technology, scale, access to
resources: B
Ability to work in industrial zones that allow for tariff reserves low-cost materials, and
privileges/exemption committed offtake
2 Govt policies & support: incentives, local battery manufacturing targets
Numerous opportunities exist
3
Existing base of lithium-ion battery manufacturing: building on existing in other components of the EV
synergies and knowledge transfer to produce EV batteries in the future Has largest lithium-ion value chain (e.g.,
battery factory in SEA
Potential presence of EV manufacturers/assembly plants: localizing semiconductors, tires, glass,
4
supply chain to optimize costs powertrains, etc.)
Legend: Leading in policies/drivers in SEA Medium policies/drivers Lagging in policies/drivers
Note : (1) Tot al value commit ted, not necessaril y fully realize d by the indi cated year; (2) NCA = nickel , cobalt, al uminum ; NCM = nickel, cobalt, manganese
Source s: ASE AN Investme nt Report (2019-2023); Govt. websites; Lit. search

© Southeast Asia Outlook 2024—2034 28

 Invest in Emerging Growth Sectors – EV batteries
A Indonesia is getting investments from world-renowned players in the space, such as
Foxconn, Hyundai, LG

Value
Player Year Market Investment overview Investment drivers
(USD M)

Partnered with coal miner Indika Energy to

manufacture both batteries and EVs; plans to To leverage Indonesia’s massive nickel resources
1 Foxconn 8,000 2022
bring in new partners to establish extensive EV as a solid foundation to localize EV manufacturing
ecosystem in Indonesia

Indonesia’s nickel supply and tax incentives can help

Invested as part of Indonesia Battery Integration
CATL secure stable global EV expansion base
2 CATL 5,200 2021 Project, which included nickel mining/processing,
through steady stream of raw materials and low
and battery materials, manufacturing, and recycling
manufacturing costs
ID

Hyundai 1,500 2021 Hyundai’s first battery system assembly in SEA

3 with two factories: Cikarang (100% Hyundai-owned)
& Karawang (co-owned with LG) To leverage existing factory base to win Japanese-
dominated Indonesian car market and expand into
Annual capacity of 10GWh battery cells (enough the rest of Southeast Asia
Hyundai for ~150,000 EVs); to leverage NCMA technology2 to
4 1,100 2021 secure competitive edge in performance & costs
& LG

Government incentives support Evlomo to have

The battery factory to have final capacity of 8GWh
5 Evlomo 1,060 2021 TH the early mover advantage in the largest OEM
and will be used for domestic and exports
manufacturing base in SEA

Notes: (1) Tota l investments committe d in that year, not nece ssarily f ully realized; (2) NCMA: nickel, cobalt, mang ane se, and aluminum-
base d ba ttery cells containing 90% nickel; better performa nce a nd costs by using le ss cobalt, more a luminum. Source : Lit. search

© Southeast Asia Outlook 2024—2034 29

 Invest in Emerging Growth Sectors – Semiconductors
A SEA-6 has a role to play with diversification away from China; Singapore and Malaysia are ahead of
their peers

MARKET AND FDI OVERVIEW

SEA-6 exports of semiconductor devices Semiconductor manufacturing FDI committed 1 in SEA IMPLICATIONS
(USD billion, 2021) (non-exhaustive, USD billion, 2019 to YTD 20241)
Capabilities in wafer As global players seek to diversify their supply
fabrication (higher chains, it is critical for SEA-6 to continue
tech manufacturing) upgrading their capabilities to capture the
Global investments
player in
packaging
& testing Singapore and Malaysia are leading in
different value chain processes; while
Singapore has a competitive edge in wafer
fabrication, Malaysia has developed in
packaging and testing
Requires more advanced skills
Opportunity for Singapore to continue
FDI DRIVERS ID MY PH SG TH VN attracting FDI in legacy process nodes (22–
28nm onwards) given existing semiconductor
Existing semiconductor manufacturing base: manufacturers’ presence, ecosystem to build off
1
ecosystem, and infrastructure
Produced ~5% global ▪ However, small overall footprint today, with
2 Government policies and support: incentives, manufacturing targets 13% less than 4% of global foundry capacity in
wafer
Reliability of basic infra.: e.g., electricity, ultrapure water supply packaging fabrication Singapore and Malaysia combined
3
globally output
Availability of skilled labor: critical to grow front-end manufacturing that (largest in ▪ Risk of over-capacity on some legacy
4 nodes given China capacity increase (for
requires more specialized skills SEA)
their large domestic consumption)
Presence of low-cost labor: low-cost labor important for back-end
5
manufacturing, which is relatively less skill-intensive
For other countries, opportunity to gain
Intellectual property protection: IP index score is a measure of the capability in packaging and testing—less
6
overall strength and effectiveness of a country’s IP framework technologically intensive and more labor-
intensive
Legend: Leading in policies/drivers in SEA Medium policies/drivers Lagging in policies/drivers
Note s: (1) Total value comm itted, not ne cessarily fully realized by the indicat ed year; Investm ents as of 6 June, 2024
Source s: Observatory of Economic Comple xit y l atest dat abase (2021); ASEAN Investment Report (2019–23), Lit. search; Gartne r

© Southeast Asia Outlook 2024—2034 30

 Invest in Emerging Growth Sectors – Semiconductors
A Some of the largest players have invested in Singapore and Malaysia, such as
Intel, UMC, Global Foundries, Infineon

Selected recent semiconductor investments in SEA1 NO N-EXHA USTIVE

Value
Player Year Market Investment overview Investment drivers
(USD M)
Further diversification of fabrication footprint
Vanguard Joint venture with NXP, for 12-inch fabrication
7,800 2024 SG outside of Taiwan to meet customer demand for
(VIS) and NXP focused on 130–40nm process nodes
local manufacturing
Wafer fabrication

8-inch SiC fabrication focused on next-gen power Malaysia serves as a key regional hub for Infineon,
Infineon 7,000 2022/23 MY applications, expected to generate ~USD 7 billion of offering favorable environment and talented
incremental revenue workforce that support sustained growth
Capacity expansion focused on 22–28nm process Strong pool of highly educated talents, government
UMC 5,000 2022 SG
node, with monthly capacity of 30,000 wafers support to expand existing fabrication in Singapore
The company aimed to diversify the production
Global Expand existing fabrication footprint; facility to
4,000 2021 SG amid geopolitical turmoil and further establish
Foundries produce additional 450,000 12-inch wafers annually
global fabrication footprint
To build new advanced packaging and testing Malaysia is an established center for testing and
Intel 7,100 2021 MY factory in Penang, the first overseas facility for 3D assembling in SEA and Intel has had manufacturing
Assembly & Testing

chip packaging facility in MY for 50+ years

First chip production plant in Vietna, to produce a Recognized Vietnam’s potential as a reliable (coupled
Samsung 3,300 2022 VN high-performance semiconductor packaging with govt. support) and cheaper alternatives to
substrates existing manufacturing hubs
Texas Instrument’s longstanding presence within
Texas Build out two new assembly and test facilities in
3,100 2023 MY Malaysia and ambition to bring ~90% of assembly
Instruments Kuala Lumpur and Melaka
and test operations in-house by 2030

Note : (1) Tot al investments committ ed in that year, not necessaril y fully realize d in that ye ar
Source : Lit. se arch

© Southeast Asia Outlook 2024—2034 31

 Invest in Emerging Growth Sectors – Data Centers
A FDIs in SEA have surged since 2021 due to the growth of cloud services and AI; Indonesia and Malaysia
have emerged as attractive regional hubs

MARKET AND FDI OVERVIEW

While Singapore is currently the
SEA-6 DC services end-user spending breakdown DC FDI committed1 in SEA largest data center market in SEA,
(USD billion, 2023) (non-exhaustive, USD billion, 2019–23) other countries have emerged as
Has market-leading attractive FDI destinations—Malaysia
tech and infra.
and Thailand for their reliable
Growth in domestic demand and constrained Driven by
infrastructure and Indonesia for its
supply in SG have led to more localized DC reliable DC growing digital economy and relatively
build-outs in other SEA infra. &
govt.
strict data protection laws
support
~0.05 ~0.05
Malaysia and Indonesia (particularly
~2 the states of Johor and Batam) are
expected to benefit from Singapore’s
slowdown in data center capacity
given Singapore’s cap on data centers
FDI DRIVERS ID MY PH SG TH VN and stringent criteria around new data
DC total capacity (Q1 2024) centers applications due to its limited
1 Limit
additional
land availability and the tremendous
2 Fiber connectivity capacity electricity demands
to 80 MW/
3 Presence of cloud operator year
With rising construction and electricity
4 Data protection laws and cybersecurity protection
costs in Malaysia and Indonesia, the
5 Land/power supply availability Philippines and Vietnam can make a
Personal data can’t better play for sustainable data
Subsidies and government support be sent offshore
6
unless it has same
centers with better policies and
7 Availability of renewable electricity data standards as ID incentives to lure hyperscale players

Legend: Leading in policies/drivers in SEA Medium policies/drivers Lagging in policies/drivers in SEA

Note : (1) Tot al value commit ted, not necessaril y fully realize d by the indi cated year
Source s: Gartner IT Services Fore cast ; ASEAN 2023 Investment Report; Refinitiv: Infra 360; DC Byte SGP Data Centre Market Trends; Cushman and Wakefield Global Dat a Center Market Com parison Report; RedSe er; Energy Inst itut e

© Southeast Asia Outlook 2024—2034 32

 Invest in Emerging Growth Sectors – Data Centers
A Malaysia and Indonesia have plans to significantly grow their IT capacity in the next few years. The
availability of green energy and rising energy costs are significant challenges

While Singapore has the highest live IT capacity, Malaysia Singapore’s electricity cost is high and availability of green
and Indonesia are fast catching up. Vietnam is severely energy is low; the Philippines and Vietnam have some
lagging due to poor connectivity and lack of hyperscale opportunity leverage its green energy potential to draw more
players investments
Electricity costs (in kWh) and Percentage of electricity production from
Total IT Capacity
renewables
(Q1 2023, in MW) (2018–23)

Source s: Gartner IT Service s Forecast, ASE AN 2022 Investme nt Report, Ref initiv: Infra 360, DC Byte, Cushman and Wakefield Globa l Data Center Marke t Comparison Report, Energy Institute-Statistical Review of World Energy), Lit. se arch

© Southeast Asia Outlook 2024—2034 33

 Invest in Emerging Growth Sectors – Data Centers
A Recent investments have been made by hyperscale cloud players such as AWS,
Microsoft, and Google
NO N-EXHA USTIVE

Value
Player Year Market Investment overview Investment drivers
(USD M)
To capture growing customer cloud computing needs, expand
8,880 2024 SG Expand existing cloud infrastructure in Singapore
partnership with Singapore government
Build a cloud region/cluster of data centers across three
To keep up with rapid adoption of cloud services and meet
6,000 2023 MY availability zones (on top of existing ones in Indonesia &
1 AWS data localization requirement
Singapore); FDIs spread out until 2037
Build data center in Bangkok (adding to existing infra FDIs incl.
To bring more advanced cloud computing services to more
2,800 2023 TH AWS Outposts, Amazon Cloudfront) with value to be realized
organizations
within 15 years
Build out new cloud and AI infrastructure; FDI to be spread To meet growing demand for cloud computing services,
2,200 2024 MY
out until 2028; Purchased land in Iskandar, Johor expand partnership with MY government
Build out new cloud and AI infrastructure in Indonesia; FDIs to Expand partnership with ID government, capture growth
2 Microsoft 1,700 2024 ID
be spread out until 2028 opportunities within ID’s digital economy
Build out new cloud and AI infrastructure in Thailand and Expand Microsoft’s hyperscale cloud services, meet demand
Undisclosed 2024 TH
establish the country as a new data center region cloud computing services in the country
Build an AI cloud and supercomputer infrastructure facility
YTL and
3 4,300 2023 MY within the YTL Green Data Center Campus in Johor, powered by a Availability of land and proximity to Singapore
Nvidia
renewable energy source from its on-site solar power facility
Malaysia government’s digital commitments as part of its New
Build out first data center and cloud facility in Malaysia within
4 Google 2,000 2024 MY Industrial Master Plan 2030, help users maintain security and
Elmina Business Park in Selangor
compliance standards
One of four data center operators through the pilot DC-CFA
AirTrunk and Singapore initiative focused on development of green data centers
5 Undisclosed 2023 SG exercise to be awarded about 80 MW of new capacity; Focus on
ByteDance with lower carbon emissions and higher efficiency
key compute capacities such as AI and machine learning

Note : (1) Tot al investments committ ed in that year, not necessaril y fully realize d in that ye ar
Source s: ASE AN Investme nt Report (2018–23); Re fi niti v: Infra 360; Lit. search

© Southeast Asia Outlook 2024—2034 34

 Invest in Emerging Growth Sectors
A
Each country had growth planning failures which provide lessons

Sector Situation and challenges

Indonesia spent billions trying to develop its own aircraft manufacturing over the last 40 years, but faced several challenges including:
Aircraft – Financial constraints and difficulties in securing consistent funding given the capital-intensive nature of the industry
ID
Manufacturing – Challenges in acquiring and retaining necessary technical talent
– Absence of robust infrastructure and limited access to advanced technology

Cyberjaya was launched in 1997 as a world-leading IT entrepreneurial hub. Even though it has hosted hundreds of companies, has not turned into an
Cyberjaya “Silicon innovation hub:
MY
Valley of Malaysia” – Development was led by government’s central planning rather than market -driven dynamics, hindering alignment with evolving needs of the tech industry
– Incentive misalignment, e.g., MNCs can enjoy tax incentives by setting operations anywhere in Malaysia and not specific for Cyberjaya

Despite abundant agricultural land, PH has struggled to produce enough rice and is the world’s top rice importer. Key drivers include:
PH Rice Farming – Low agricultural productivity and low level of investment for agricultural R&D
– Domestic rice is more expensive than imported rice

Singapore is not well-suited for automotive assembly, but has continued to attempt to establish a base
– High input costs including labor, land, and operations
SG EV Manufacturing
– Lack of a robust local ecosystem for vehicle manufacturing
– Small dom estic market with high tax rates for car ownership

While ~30% of Thailand’s GDP is supported by manufacturing, a significant portion comprises assembly-related activities. Growth of high-tech
High-tech manufacturing has been relatively muted despite the presence of MNCs due to:
TH
Manufacturing – Limited R&D investment as compared to leading countries in technology industries
– Competition from other hubs for professionals in high-tech manufacturing

While Vietnam has successfully upgraded its manufacturing from assembly to higher value-added production, its design manufacturing is still
nascent. Potential reasons include:
Design
VN – Shortage of professionals with high-level design skills and experience
Manufacturing
– Insufficient R&D given that investment in R&D for nurturing innovation and design capabilities is relatively low
– Challenges in IP protection; Vietnam’s IP index score is only ~40%, compared to Singapore at ~85%)

Source : Lit. se arch

© Southeast Asia Outlook 2024—2034 35

 Promote Tech-enabled Disruptors (TEDs)
B Total value of private tech investment deals in SEA has increased significantly, with Singapore and
Indonesia witnessing largest deal flows

▪ Southeast Asia's tech sector has witnessed

remarkable investment growth, outpacing
both China and India

▪ Singapore and Indonesia emerged as the

countries with biggest inflows of tech
Legend
investment deals over the last few years
Cumulative 2013–2017 Cumulative 2018–2022
▪ Singapore's growth in tech deal flows is
bolstered by initiatives such as the Tech.Pass
visa program, which attracts global tech
talent, and the Research, Innovation and
Enterprise 2020 Plan that funds R&D across
industries. The government also nurtures a
vibrant start-up ecosystem through schemes
like Startup SG.
▪ Indonesia's position as the largest consumer
market in Southeast Asia has been a key
factor in attracting tech investment deals,
bolstered by government initiatives like the
"1000 Startups National Movement" and the
supportive framework of the Indonesia Digital
Roadmap.

▪ E-commerce, fintech, food and transport, and

digital media are the sectors experiencing the
most significant growth within Southeast Asia's
tech industry

Source : Pitchbook

© Southeast Asia Outlook 2024—2034 36

 Promote Tech-enabled Disruptors (TEDs)
B SEA’s start-up ecosystem has grown rapidly, with the highest concentration of unicorn start-ups in
Singapore and Indonesia

▪ SEA has witnessed increased economic innovation

through a growing start-up ecosystem

▪ Singapore continues to lead as the region’s tech hub

Legend
▪ Singapore’s start-ups usually serve the region and
Cumulative 2013–2017 Cumulative 2018–2022 derive most of their revenues outside Singapore; this
is less so the case for other SEA-6 countries

▪ Singapore’s vibrant start-up ecosystem surge stems

from robust government support in talent attraction,
strong partnerships with the private sector, strong IP
laws, and a dynamic funding landscape

▪ Indonesia, Vietnam, and Thailand have experienced

Thailand and Malaysia
rapid growth in start-up ecosystems
did not have unicorn
start-ups in 2019 ▪ Indonesia's growth trajectory is characterized by its
burgeoning digital market, a large, digitally savvy
consumer base, improvements in connectivity, and a
focus on digital skills development

▪ Vietnam's start-up scene is thriving, thanks to a

supportive policy environment, improved access to
funding beyond government-led initiatives, strong
STEM talent availability. and a diaspora community
that helps Vietnamese start-ups globally

▪ Thailand has a well-developed start-up market and

has recently launched a framework aimed at growing
Note s: (1) A unicorn i s a privately he ld start-up company wit h a val uation of $1 bi llion or more; t he analysis include s start-ups that reached $1 billi on
val uation by 2017 onwards and considers m ainly compani es wit h publicly di scl ose d valuation data. Sources: Tech in Asia; Dealroom; Capital IQ
unicorns through a “unicorn factory”

© Southeast Asia Outlook 2024—2034 37

 Promote Tech-enabled Disruptors (TEDs)
B The digital economy has already reached USD ~100B revenue in Southeast Asia in 2023,
from USD ~12B in 2016

Southeast Asia digital economy revenue

(2016–23, USD billion)

• Payments
• Lending
• Wealth
• Insurance

• E-commerce
(marketplaces, groceries)
• Transport and food
• Online travel (flights,
hotels, rentals)
• Online media (advertising,
Total revenue gaming, video/music)

Source : Sout heast Asia e-Conom y Report 2023

© Southeast Asia Outlook 2024—2034 38

B
Promote Tech-enabled Disruptors (TEDs)
Digital disruptors and tech-enabled incumbents have quickly emerged in recent years
NO N-EXHA USTIVE
B A NK I NG A ND
C ON SU M ER RE T AI L T RA NS PO R TA T I ON LO G I S TI C S I NS U R AN CE E D U CA T I O N H E A LT H C AR E
Share of PA Y ME NT S
SEA-6 GDP
18% 8% 7%* 10% ^ 4%^

~$10B market cap2 3PL Insurtech exchange AI-language learning

SEA’s largest SEA’s largest mobility Digital banking, payments, ID-based digital
D IG I TA L D IS RU P TO RS

provider with ~11M daily platform with ~$50B+ app with over 7m
e-commerce1 platform platform with ~$15B and lending platform with healthcare provider with
parcel volume4 in SEA quoted premiums annually learners 101 countries
with ~$40B market cap2 market cap2 ~$1.8B 2023 revenue >20M monthly active
users, 20k practitioners
Digital insurance Payments and lending Primarily K-12 focused
SEA’s 2nd largest SEA’s 2nd largest 3PL provider with 2M platform offering retail
e-commerce platform, mobility platform, daily parcel volume and focused platform with ID edtech platform
and microinsurance ~$120M 2023 revenues with 22M+ learners
owned by Alibaba primarily focused on ID ~$700M FY 2023 revenue
Mobility platform
SEA’s 3rd largest focused on Vietnam Embedded insurance PH-focused digital Online learning platform
e-commerce platform, providing ~120M rides 3PL provider with for language learning,
for partners, D2C retail banking platform with
primarily focused on ID annually (2023) ~$500M in 2023 revenue >10M learners worldwide
insurance etc. ~3M depositors4
T E C H- E N A BL E D I N CU M B E N T S

ID’s largest taxi brand, SG-based life SG-based bank with strong
Leading parcel SG-based healthcare
>$250M revenue (2023) insurance firm, with digital transformation (named
delivery service with platform with digital
and strong app >$2.5B annual GWP World’s Best Digital Bank)
>$80B revenue, with healthcare services in
integration strong presence in ID, SG, PH, MY, etc.
SG, MY, PH Asia-focused life
insurance with 42M+ One of TH’s largest banks
Leading SG taxi brand individual policies with >$6B market cap
with 40,000+ vehicles, SG multi-disciplinary
presence in 12 medical services
countries Insurance company with group, integrated with
SG-based Digital Bank
strong digital strategy (e.g., Doctor Anywhere
backed by Standard
partnership with Halodoc) Chartered and FairPrice

Note : Digital di sruptors generally selected based on valuat ion/funding raise d; Consum er retail primarily focused on e-comme rce industry; (1) Based on 2022 GMV share est imates; (2) As of 7 June,
2024; (3) Q1 2024; (4) As of 2023; (*) Refers to total fi nancial servi ces, (^) Pe rcent age of govt. and private e xpenditure as percentage of GDP | Source: Lit . search; Tech in Asia; Company websites

© Southeast Asia Outlook 2024—2034 39

 Promote Tech-enabled Disruptors (TEDs)
B
Around 30%–40% of SEA sectors will be impacted by TEDs

GDP by country and industry

(2023, USD billion)

Degree of impact from TEDs: High degree of impact

Note s: Key se ctors incl ude air travel, logistics, healthcare, educati on, consum er retail, financial se rvices; others incl ude value-add from household Low degree of impact
activit ies and undefine d sectors; (* ) Educati on and healt h data are subsume d under Governme nt Services for Si ngapore | Source : Euromonitor

© Southeast Asia Outlook 2024—2034 40

 Strengthen Capital Markets
C Singapore, Malaysia, Thailand lead the IMF Financial Development (FD) Index Trends; Singapore’s
score has dropped since 2010

Financial Development Index ILLUSTRATIVE

▪ Indonesia saw a significant
(2010 and 2021, overall score)
improvement, driven by its increase
in branchless and digital banking
solutions to rural areas

▪ The Philippines has made slight

progress across most of the
dimensions (except for stock
market performance)

▪ Vietnam encountered a decrease in

FD Index, driven by poor stock
market performance

▪ Singapore’s Index is high at above

0.7, reflecting its financial center
status; however, its score dropped
between 2010 and 2021, driven by
poor stock market performance

▪ Malaysia saw gains in financial

market depth and efficiency,
driven by stock market capitalization
and performance

▪ Thailand has seen the most

increase, driven by access to credit
and stock market capitalization
Note: The IMF FD Index consists of six indicators, gauging the depth, access, and efficiency of both financial institutions
and financial markets.
Source s: IMF; DBS

© Southeast Asia Outlook 2024—2034 41

C
Strengthen Capital Markets
Financial Development (FD) Index decomposition and changes

INDIC ATOR DESC RIPTION SG MY TH VN ID PH CH IN

Bank credit to the private sector (% of GDP), pension fund assets

FI Depth (% of GDP), mutual fund assets (% of GDP), insurance premiums,
life and non-life (% of GDP)

Bank branches (per 100,000 adults), ATMs

FI Access
(per 100,000 adults)

Banking sector net interest margin, lending-deposits spread,

FI Efficiency non-interest income to total income, overhead costs to total
assets, ROA, ROE

Stock market capitalization (% of GDP), stocks traded (% of GDP),

FM Depth international debt securities of government (% of GDP), total debt
securities of financial and nonfinancial corporations (% of GDP)

Market capitalization outside of top 10 largest companies (%),

FM Access
total number of issuers of debt (per 100,000 adults)

FM Efficiency Stock market turnover ratio

FD index Compounded score from all sub-dimensions

Note: The IMF FD Index consists of six indicators, gauging the depth, access, and efficiency of both
financial institutions (FI) and financial markets (FM). Score increased >0.05 Score changed within 0.05 Score decreased < -0.05
Source s: IMF; DBS

© Southeast Asia Outlook 2024—2034 42

 Strengthen Capital Markets
C SEA equity markets’ contribution to global markets’ returns has decreased
in the past 10 years

SEA-6 equity markets are underperforming SEA is only 2%–3% of global equity markets,
peers with lower indices returns with a declining share since peaking in 2012
MSCI equity indices 10-year return
SEA-6 market cap as percentage of global equity market cap
(2013–23, %)
(2000–23, %)

Note: 2023 global equity capitalization excludes Angolan Securities Exchange; MSCI returns are net returns. Sources: MSCI; Wo rld Federation of Exchanges; Valverde

© Southeast Asia Outlook 2024—2034 43

 Strengthen Capital Markets
C Some vibrancy in bonds, especially in Thailand and Malaysia, but still a minor part of global
corporate bond market

Corporate bond market capitalization to GDP ratio

(2000–23)

Malaysia stands out in corporate

bond development, esp. due to its
niche financial center supporting
the issuance of Islamic bonds

China
(2023)

Sources: CEIC, DBS; Capital IQ; Bloomberg

© Southeast Asia Outlook 2024—2034 44

 Strengthen Capital Markets
C To further deepen capital market, several actions need to be taken by governments, investors, and
business owners

GOVERN MENTS INVESTORS B US I N E SS E S

▪ Streamline regulations to foster competition • Participate in financial education programs • Expand financial services to underserved
and innovation in the financial sector to enhance investor awareness and populations, including SMEs and low-income
understanding of capital market dynamics and households
▪ Increase support for SME financing through
associated risks
government-backed loan guarantee programs • Invest in technology and innovation to
and funding for VC & PE investments in SMEs
• Utilize fintech platforms to improve the enhance operational efficiency and improve
▪ Improve financial inclusion by supporting efficiency of trading and investment decision- financial access for underserved populations
microfinance initiatives and promoting the use making
of digital banking technology • Integrate sustainable finance principles
• Incorporate ESG factors into investment and ESG considerations into business
▪ Promote sustainable finance initiatives, such decisions, supporting companies with strategies
as green bonds and ESG investing sustainable business practices
• Launch financial education campaigns to
▪ Launch financial education programs to
• Comply with regulatory requirements and improve financial literacy
improve household financial literacy
standards established by relevant authorities
▪ Introduce mutual funds and ETFs catering to • Offer financial products customized to
various investor needs and risk profiles • Conduct comprehensive due diligence on meet investor needs and risk profiles
investment opportunities
▪ Provide tax incentives to encourage retail • Comply with regulatory requirements and
investors’ participation in markets standards established by relevant authorities
▪ Promote good corporate governance
• Strengthen corporate governance practices
practices among listed companies
to bolster investor trust and confidence
▪ Implement investor protection measures to
safeguard retail investor interests

© Southeast Asia Outlook 2024—2034 45

D
Accelerate Green Transition
Southeast Asia is well-endowed with natural resources and green potential

Biodiversity and forests Renewable energy Critical minerals

~20% >30,000 GW ~50%

of global nickel production
of the world’s known plant and Total solar power potential in is in Indonesia and
animal species are found in SEA Southeast Asia the Philippines

210 M Ha >1,300 GW ~35%

Total area of forests in Total wind power potential in of global tin production is in
Southeast Asia Southeast Asia Southeast Asia

30% >200 GW ~22%

SEA’s potential contribution to the Total hydro power potential in of global bauxite reserves are
world's carbon offset supply Southeast Asia in Southeast Asia

Sources: International Energy Association; Lit. search

© Southeast Asia Outlook 2024—2034 46

D Accelerate Green Transition
Southeast Asia is not fully embracing green transition yet, with rising greenhouse gas emissions

Singapore and Malaysia have high Slight rise in renewable energy ▪ There is lagging progress on green
greenhouse gas (GHG) emissions share across the region; Vietnam transition in the region, highlighting
ahead of others a need for capital and commitment

▪ Singapore and Malaysia have the highest

per capita GHG emissions in the region;
key drivers include Singapore's energy-
LUCF1 emissions were intensive industries and port activities and
temporarily a carbon sink in Malaysia's focus on manufacturing and
2011–2015 period before 2030
palm oil production
becoming an emissions
▪ Emissions per capita are increasing,
source 2016 onwards
especially in Malaysia and Vietnam; this
2030 is attributed to their economic growth,
2030 increased coal-based power generation in
Vietnam, and expansion in energy-intensive
2025
sectors in Malaysia

▪ The decline in renewable energy's share

2025 is due to factors such as subsidy cuts,
fossil fuel affordability, and slow
renewable tech uptake; ultimately, a lack
of availability in renewable energy and
storage could disadvantage SEA’s
attractiveness, incl. for data center
2030 development

▪ Policy changes and climate accords may

catalyze a shift toward a faster
sustainability transition

Note: (1) Land use chang e and forestry.

Sources: Climate Watch; World Bank; IRENA

© Southeast Asia Outlook 2024—2034 47

 Accelerate Green Transition
D ASEAN investment in renewables continues to underperform vs. global trends; change is needed to
unlock green potential

Renewables FDI flows into the region have … driven by market and regulatory conditions,
underperformed relative to OECD countries … as well as costs of capital impacting returns
Project Higher costs of capital
investment The cost of capital for renewable energy investments remains
risks relatively high in many SEA countries, e.g., 10%–12% in Vietnam, and
the financial value proposition for private sector investment in
renewables remains unclear vs. advanced economies

Higher perceived risks lower project bankability

Private capital has accounted for only 60% of renewable power
investment in Southeast Asia, compared to about 90% in
advanced economies, due to ongoing perceived currency
fluctuation and regulatory risks

Emerging Higher offtake risk

market risks In many SEA countries, electricity is heavily regulated, often
subsidized to the consumers, and requires a state-owned utility
enterprise to be the sole offtaker; uncertainty about ability and
timing of grid upgrades to support

Lack of policy continuity

“From 2016–2020, for every dollar invested in renewable power capacity in Southeast
Supportive policy incentives in SEA countries like Vietnam have
asia, another dollar was invested in unabated fossil fuels, compared with US$0.5 in
Sub-Saharan Africa, US$0.3 in China and US$0.2 in Latin America.’’ spurred a significant solar and wind buildout, especially over the past
five years, but the process has been characterized by constant
Southeast Asia Energy Outlook 2022, International Energy Agency changes to deployment and grid regulations, and uncertainty
about tariff structure to support
Sources: IEA 2022 Ene rg y Outlook – ASEAN Re new ables: Opportunitie s and Challenges (IEA); Bain / GenZero / Standard Chartered / T ema sek SEA Green E conomy Report 2024

© Southeast Asia Outlook 2024—2034 48

 Accelerate Green Transition:
D
More needs to be done to accelerate investments

Accelerators required to unlock full potential

1 Policies and incentives to further push transition and green investments

2 Innovative finance mechanisms to facilitate more capital flow

3 Scaling corporate investment to establish future-ready businesses

4 Cluster/pilot developments to scale technological development

5 Regional collaboration to drive coordinated Southeast Asia strategy

© Southeast Asia Outlook 2024—2034 49

 Embrace Multilateral Initiatives
E To spur growth, ASEAN will need to improve coordination of various regional transformation efforts

E C O N O M IC I N T E G R AT I O N I N N O V AT I O N & D I G I TA L E N V IR ON M E NTAL & S O C I AL

Ensure free movement of people, Harmonize digital landscape to boost Drive adoption of green practices to
capital, and goods in the region cross-border trade and innovation ensure economic growth and resilience

▪ Ensure ASEAN/RCEP can ease movement ▪ Harmonize regional digital market regulations ▪ Expedite the development of the ASEAN
of talent to strengthen growing sectors under Digital Economy Framework Agreement Power Grid (APG)
according to each country’s needs (DEFA)
▪ Renewable energy integration: Prioritize
▪ Ensure that RCEP’s full potential is ▪ Common framework: Utilize DEFA to develop a the integration of renewables, reducing
realized common digital regulatory framework, dependence on fossil fuels
streamlining digital markets and creating a
▪ Enhance regulatory alignment: Align unified policy landscape ▪ Cost and energy efficiency: Leverage the
standards and regulations among RCEP grid to prevent redundant capacity build-up,
member states to facilitate smoother ▪ Consumer protection: Standardize consumer achieving economic and energy efficiency
protection laws to build trust in cross-border e-
trade ▪ Develop a robust regional carbon market
commerce
▪ Strengthen digital trade policies: Draft Set emission caps and standards: Establish
▪ Coordinate the development of an ▪
policies bolstering digital trade to fully region-wide carbon emission caps and
interoperable digital payment system
leverage RCEP's framework standards
▪ Cross-border payment integration: Link
national payment systems across ASEAN to ▪ Regional carbon credit: Create a shared
allow real-time, cost-effective transactions carbon credit system to promote emissions
reduction regionally
▪ Inclusive financial services: Leverage mobile
technologies to broaden access, cater to ▪ Integrate with global markets: Connect
underbanked/unbanked ASEAN's carbon market with global markets
Source: Bain analysis, Lit. search

© Southeast Asia Outlook 2024—2034 50

 Embrace Multilateral Initiatives – RCEP
E Regional Comprehensive Economic Partnership (RCEP) should boost further economic
integration within Asia
Overview Key expected outcomes
▪ Largest trade bloc in the world, signed in 2020 by 15 countries ▪ RCEP can add up to USD 500 billion to world trade by 2030
accounting for ~2.2 billion consumers and 30% of global GDP
▪ RCEP expected to increase GDP of trading bloc by 0.4%
▪ First trade agreement between China, South Korea, and Japan (USD 170 billion)
▪ Comprehensive trade agreement, aimed at phasing out up to 90% ▪ Net impact on exports expected to be quite significant,
tariffs on imports by ~2030, streamlining customs procedures, and esp. for Thailand
establishing unified trade standards to boost regional trade and
economic integration

Expected net impact on exports by 2030

15 (USD billion)
member
countries China
South Korea
Japan Driven by increased
of RCEP Thailand
exports from other
Vietnam
Philippines
Laos RCEP countries
Cambodia
Malaysia Brunei

Indonesia
Myanmar

Australia
Singapore
New Zealand

Source s: Li t, search; ASEAN.org; ADB; UNCTAD

© Southeast Asia Outlook 2024—2034 51

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

Seven traditional growth drivers facilitate economic progress

GROWTH DRIVERS

Ease of doing Increase Strengthen Improve workforce

1 business 2 competition 3 institutions 4 quality and availability

Simplify regulations to Competition is a prerequisite Bolster public and private Enhance workforce capabilities
foster an environment for higher investment, institutions for better through education, health initiatives,
that boosts investment, innovation, and efficiency governance, accountability, and skills training
entrepreneurship, and and support of sustainable
risk-taking If domestic sectors are overly growth Embrace female participation,
consolidated, international controlled immigration, and
competition is needed worker mobility

Build Facilitate
5 infrastructure 6 Increase stability 7 investment

Broaden access to hard Promote political, economic, Create policies to attract investment,
and soft infrastructure to and policy stability for a reliable enhance economic diversification,
improve connectivity and investment climate and stimulate “good job” creation
efficiency, and support
economic development Domestic investment generally 10x+
foreign investment

© Southeast Asia Outlook 2024—2034 53

 Ease of Doing Business | Vietnam, Indonesia, and Thailand
1
materially improved ease of doing business
World Bank ease of doing business score1 (0–100) Low High
▪ In general, we see positive
trends across the countries
with Vietnam and Indonesia
experiencing significant
improvements

▪ Indonesia and Vietnam in

particular have achieved
significant improvements in
areas such as “Getting credit”
and “Starting a business”

▪ The improvements in both

Ease of doing business score contributors 2 country were driven by
government efforts to drive
Singapore Malaysia Thailand Vietnam Indonesia Philippines policy reforms, e.g., the
2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 2015 2020 Online Single Submission
(OSS) system for new
Starting a business 96 98 89 83 83 92 79 85 64 81 67 71 business registration in
Indonesia and the
Dealing with construction permit 81 88 82 90 71 77 79 79 64 67 65 70
Vietnamese government’s
Getting credit 75 75 70 75 45 70 65 80 50 70 35 40 support for SMEs

Trading across borders 89 90 84 88 84 85 66 71 63 68 71 68 ▪ However, there is still room

for improvement; areas such
Enforcing contracts 89 85 69 68 69 68 66 62 44 49 49 46
as “Enforcing contracts” and
Resolving insolvency 74 74 62 67 72 77 33 38 68 68 55 55 “Resolving insolvency” remain
common areas of improvement
Notes: (1) Ea se of doing business score rates business regulations and their enforcement f rom 0–100 (hig her me ans better reg ulations and stronger protections for businesses); the World
across the countries
Bank conducted changes to the rank and score calculation methodology for the index after an inte rnal audit in 2020 to ensure consistency and comparability of scores across countries
and betw een years; the changes resulted in revision of previously published scores; (2) The e ase of doing business score is then broken down into different sub-categories/sub-scores; the
list of sub-categories presented above is non-exhaustive | Source: World Ba nk

© Southeast Asia Outlook 2024—2034 54

 Increase Competition | SEA-6 countries have less
2
competitive markets than China or India

Hirschman-Herfindahl (HH) market concentration index

(2001, 2011, 2021; lower = more competitive)

China has shown a healthy increase

in market competitiveness since
2001, whereas the performance
of SEA-6 stagnated

Note s: HH index com puted by squaring each company’s market share and summ ing them up respectively; A figure of 1.0 represe nts ful l m arket concentrat ion/monopoly. Sources: W orld Bank; UNCTAD; UNSD; W TO

© Southeast Asia Outlook 2024—2034 55

 Strengthen Institutions | Indonesia, Thailand and Vietnam saw substantial
3 improvements across governance indicators; Singapore ahead of the other countries

Average of worldwide governance indicators 1 (-2.5–2.5) Low High

▪ SEA displays a general
uptrend in governance,
with each country showing
a commitment to reform
and improvement;
Singapore is ahead of the
other countries in all
governance indicators

▪ Indonesia's governance
Worldwide governance score contributors
indicators show
Singapore Malaysia Indonesia Thailand Vietnam Philippines substantial
2018 2022 2018 2022 2018 2022 2018 2022 2018 2022 2018 2022 improvement, notably in
government effectiveness
Political stability and and regulatory quality
1.47 1.46 0.25 0.14 -0.55 -0.44 -0.80 -0.38 0.03 -0.03 -1.10 -0.71
absence of terrorism
Government
0.06
▪ Thailand's scores in
2.23 2.14 1.05 0.99 0.14 0.44 0.25 0.13 -0.01 0.18 0.06
effectiveness political stability and the
Regulatory quality 2.12 2.21 0.58 0.64 -0.02 0.21 -0.04 0.17 -0.37 -0.43 0.03 0.06 rule of law have risen,
with efforts like the
Rule of law 1.80 1.78 0.53 0.56 -0.31 -0.19 0.00 0.07 -0.04 -0.16 -0.56 -0.52 National Anti-Corruption
Strategy potentially
Control of corruption 2.13 2.09 0.30 0.25 -0.30 -0.43 -0.46 -0.45 -0.51 -0.29 -0.58 -0.54 influencing these areas
Notes: Governance indicators include five dimensions (excluding Voice and Accountability), scaled from -2.5 to 2.5 (higher values equal better governance) that summarize quality of
governance across countries; we excluded Voice and Accountability metric in average calculation as we deem it irrelevant for markets in review | Source: World Bank

© Southeast Asia Outlook 2024—2034 56

 Improve Workforce Quality and Availability | Working population growth
4 rates slow down with decline in Singapore and Thailand; immigration slowed down
in Singapore and Malaysia

Slower working population growth in Singapore and Malaysia have highest

Southeast, with declines in Singapore & immigration, while Indonesia and Philippines • Working population growth is
Thailand have largest emigration decelerating in Southeast Asia as the
economies mature

• The Philippines leads with the

strongest working population
increase, whereas Singapore and
Thailand experience declines caused
by low birth rate and aging population

• Immigration rates in Singapore and

Malaysia have dropped due to
targeted immigration policies and
changing economic conditions that
have impacted the flow of labor​

• Indonesia and the Philippines

traditionally export labor but recently,
emigration rates from these
countries are slowing down driven by
improvements in local job markets and
governmental efforts to bolster
domestic employment decreasing the
reliance on overseas work

Notes: Net migration rate is calculated with the following formula: (total immigration – total emigration) / total population; positive number means more people
immigrated to the country whereas negative figures mean that more people emigrated from the country | Sources: Euromonitor; World Bank

© Southeast Asia Outlook 2024—2034 57

 Improve Workforce Quality and Availability | Increasing employment-to-
4 population, female labor force participation is key to developing workforce;
Vietnam, Singapore, Thailand are leading in Southeast Asia

Employment to population ratio (%) Female labor force participation ratio (%)

Note: Employment to population ratio and female labor force participation is based on population over 15 years of age
Source: World Bank

© Southeast Asia Outlook 2024—2034 58

 Improve Workforce Quality and Availability | Education spending is up but
4 below required levels; healthcare expenditures increased, partially driven by COVID -19

ID, PH, and VN saw increase in ID, PH, SG, and TH saw increases in
education spend; SG ahead of others healthcare spend, driven by govt spending • SEA-6 has shown generally positive
Total private and government education Total private and government healthcare spending per trends for education spending with
spending per capita capita
(USD thousand per capita)
Indonesia, Vietnam, and Philippines
(USD thousand per capita)
witnessing a sizeable increase in per
capita spending on education; however,
they still lag significantly behind their
regional counterparts

• Governments in the region have faced

multiple pressing issues, including
healthcare, infrastructure
development, and economic recovery;
despite these challenges, education
budgets have seen steady allocations,
reflecting a commitment to maintain a
balance among various sectors.

• Government spending in healthcare

increased significantly in Singapore,
Philippines, Indonesia, partially driven by
the Covid-19 pandemic

Sources: Euromonitor; World Bank; OECD

© Southeast Asia Outlook 2024—2034 59

 Improve Workforce Quality and Availability | Singapore and Vietnam lead
4 in Human Capital Index and PISA scores; Covid-19 negatively impacted learning
outcomes

SEA countries have varying HCI scores, SEA countries experienced slight decline in ▪ Singapore and Vietnam lead on Human
Vietnam and Malaysia comparable to China average PISA score vs. 2018 Capital index scores, particularly in
Human Capital Index (HCI) Score
education (higher test scores, higher
Average PISA scores in reading, math,
(Measure of human capital that a child science learning-adjusted years of school)
born today can expect to attain by age 18)
▪ Singapore also has significantly better
health outcomes than its peers, with
US 2022 better adult survival rate; apart from
avg. (491) Singapore and Thailand, 20%–30% of
US 2020 children under 5 years old are stunted
avg. (0.7)
▪ While all countries have between 12 and
14 expected years of schooling,
learning-adjusted years of schooling
vary significantly between countries;
Singapore and Vietnam remain ahead
with >10 years, but the Philippines and
Indonesia drop significantly with <8
years

▪ Despite promising trends in education

investment, standardized test scores,
such as PISA, showed a slight decline
across most of these countries, partly
driven by the Covid-19 pandemic, which
disrupted learning and teaching
methods

Sources: Euromonitor; World Bank; DBS

© Southeast Asia Outlook 2024—2034 60

 Build Infrastructure | Indonesia, the Philippines and Vietnam have
5 underinvested in infrastructure; we believe 6+% is the appropriate spend level
for developing markets; 4%–5% for developed
Overspending Underspending Within target range
Average public infrastructure investment 1993 - 2003 2003 - 13 2013 - 19
as percentage of GDP

Indonesia 4% 3% 3%
Southeast Asia Countries

Thailand 8% 5% 5%

Philippines 3% 2% 3%

Malaysia 10% 10% 8%

Vietnam 3% 5% 5%

Singapore 6% 4% 5%

China 20% 17% 16%

Benchmark
Countries

Japan 9% 6% 5%

South Korea 6% 5% 4%
Sources: World Bank; International Monetary Fund

© Southeast Asia Outlook 2024—2034 61

 Build Infrastructure | Over the last five years, most Southeast Asian
5 countries saw improvements in infrastructure quality, except Indonesia

▪ SEA countries, in particular Singapore,

Thailand, Malaysia, and the Philippine, saw
improvements in their infrastructure
quality and have made investments in public
infrastructure over the years. Major
infrastructure project in the region include:
▪ Singapore: The Tuas Mega Port project,
which solidifies Singapore's position as a
global trade and logistics hub
▪ Thailand: The Eastern Economic Corridor
(EEC) project, which encompasses high-
speed rail links, new airports, and deep-sea
port expansions
▪ Malaysia: The Pan Borneo Highway project,
which connects the states of Sabah and
Sarawak, improving regional connectivity
▪ The Philippines: Renewable energy
initiatives, including wind and solar farms,
which contribute to a sustainable energy mix
and increased access to electricity in remote
areas

▪ In contrast, Indonesia's infrastructure score

has remained stagnant, which can be
attributed to challenges in infrastructure
development, geographical complexity, funding
constraints, and regulatory hurdles.
Notes: (1) The Logistics Performance Index (LPI) is a global benchmarking tool developed by the World Bank that assesses the efficiency and quality of a
country's infrastructure and logistics services. It considers factors such as the ease of trade, infrastructure development, and the overall logistics
environment. A higher LPI score indicates better infrastructure and logistics performance, contributing to a country's competitiveness in global trade.
Sources: World Bank; International Monetary Fund

© Southeast Asia Outlook 2024—2034 62

 Facilitate Investments | The G7 have been significantly
7 investing in Southeast Asia

FDI Inflows in ASEAN

11%

Note: Average for each period

Sources: Euromonitor; ASEAN statistics; UNCTAD

© Southeast Asia Outlook 2024—2034 63

 Facilitate Investments | Japan commits highest share of FDI to
7
ASEAN compared to peers; Chinese investments in ASEAN have
continually increased since 2000

ASEAN FDI as percentage of each region’s outwards FDI flows

Note: China includes Hong Kong and Macau, EU refers to EU-28 (including the UK)
Sources: Euromonitor; ASEAN statistics; UNCTAD

© Southeast Asia Outlook 2024—2034 64

 Facilitate Investments | Chinese FDI (investment and construction)
7 are continuing in SEA-6, especially in infrastructure and green transition
industries
China has been active in investments and construction into SEA

Chinese FDI into Southeast Asia Examples of recent non-infrastructure FDI ▪ Chinese investments have
(2018–23, USD billion) recovered in Southeast Asia, with
Tiktok Acquisition of Tokopedia (USD 840M) Indonesia taking around USD 7.3B
TikTok acquired 75% of local e-commerce worth in investments in 2023,
Tokopedia to gain access into the domestic e- focused on EV value chain
commerce space

Bahodopi Nickel Processing Project

(USD 2.1B investment)
▪ Despite a USD 50B gap in Belt &
Shandong Xinhai, Baowu Steel, and Vale collaborating Road Initiative commitments
to build nickel processing facilities in Morowali to on China’s projects (2015–21),
produce ferronickel with up to 80,000 tons of nickel China is still the largest
infrastructure investor in the
region, spending USD ~30B in
Examples of recent infrastructure FDI
2015–21
East Coast Rail Link (USD 12B investment)
Railway on east coast of peninsular Malaysia;
currently under delays as governments have ▪ Belt & Road Initiative
changed construction progress has
slowed down since the
Jakarta-Bandung High Speed Rail pandemic. However, Indonesia,
(USD 4.5B loan investment) Malaysia and Singapore still see
142 km high speed rail completed in 2023 between strong investments
cities of Jakarta and Bandung

Note: FDI figures above from the American Enterprise Institute

Sources: ASEAN Stats; Lowy Report; Griffith University Report; American Enterprise Institute; Lit. search

© Southeast Asia Outlook 2024—2034 65

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

Key statistics across countries

S EA - 6 O T H ER AP AC O T H ER P A R T S O F W O R L D

INDONESI SINGA- PHILIP- SOUTH GERMAN

2 02 3 FI GU RES UNI T THAILAND VIETNAM MALAYSIA CHINA INDIA JAPAN US UK FRANCE BRAZIL MEXICO TURKEY
A PORE PINES KOREA Y

GDP USD B 1,371 515 501 437 420 400 17,795 3,572 4,213 1,713 27,361 4,462 3,340 3,030 2,173 1,790 1,104

Real GDP growth % 5.0% 1.9% 1.1% 5.7% 4.9% 3.7% 5.3% 6.9% 1.9% 1.4% 2.5% -0.2% 0.1% 0.7% 2.9% 3.2% 4.5%

USD K per
GDP per capita 4.9 7.2 87.9 3.7 4.2 12.0 12.6 2.5 33.8 33.2 81.7 52.9 49.3 46.0 10.3 13.9 12.9
pax

Total population M 278 72 6 117 99 33 1,412 1,429 125 52 335 84 68 66 211 128 85

Unemployment rate % 5.3% 1.0% 1.9% 4.8% 2.3% 3.4% 5.3% 8.1% 2.6% 2.7% 3.6% 3.0% 4.0% 7.3% 8.0% 2.8% 9.4%

Population living In
% 9% 5% 19% 16% 3% 0% 14% 9% 15% 10% 11% 14% 21% 16% 27% 43% 13%
poverty1

Inflation % 3.7% 1.2% 4.8% 6.0% 3.3% 2.5% 0.2% 5.7% 3.3% 3.6% 4.1% 6% 7% 5% 4.6% 5.5% 54%

Current account
% -0.1% 1.3% 19.8% -2.9% 7.1% 1.3% 1.4% -0.9% 3.6% 2.1% -3.0% 5.9% -3.3% -0.7% -1.4% -0.3% -4.1%
balance as % of GDP
Public debt
% 40% 62% 164% 57% 35% 70% 83% 83% 252% 55% 122% 64% 101% 111% 85% 53% 29%
as % of GDP
Manufacturing
% 21% 27% 21% 18% 23% 26% 27% 16% 19% 27% 11% 21% 10% 10% 14% 23% 25%
as a % of GVA

FDI inflows* USD B 22 10 141 9 18 17 189 49 33 18 285 11 14 36 86 35 NA

% share* of world
% 0.8% 1.3% 2.4% 0.4% 2.0% 1.5% 21.2% 1.8% 4.0% 3.7% 7.6% 8.9% 2.0% 2.9% 0.5% 2.8% NA
manufactured exports

Notes: (1) Defined as living below national poverty line for each country; (*) 2022 data | Sources: Euromonitor; WTO; Lit. search

© Southeast Asia Outlook 2024—2034 67

Real GDP | Size and growth of GDP

RE A L G DP ( U S D B IL LI O N) RE A L G DP C A G R ( %)

C O U NT R Y 199 3 200 3 201 3 201 9 202 0 202 1 202 2 202 3

Indonesia 380 520 909 1,221 1,195 1,240 1,306 1,371 3% 6% 4% -2% 4% 5% 5%

Thailand 205 293 433 517 486 493 505 515 4% 4% 2% -6% 2% 2% 2%

Singapore 116 196 373 453 435 478 496 501 5% 7% 3% -4% 10% 4% 1%

Philippines 111 163 275 402 363 384 413 437 4% 5% 5% -10% 6% 8% 6%

Malaysia 98 166 270 363 343 355 385 400 5% 5% 4% -5% 3% 9% 4%

Vietnam 48 99 234 351 361 380 400 420 7% 9% 6% 3% 5% 5% 5%

SEA-6 959 1,436 2,494 3,306 3,184 3,329 3,505 3,643 4% 6% 4% -4% 5% 5% 4%

Note s: Real GDP calculated based on constant 2023 USD exchange rates; YoY exchange rat es like ly impacted GDP growth figure s given volatili ty of fore ign exchange across countries. Source : Euromonit or

© Southeast Asia Outlook 2024—2034 68

Real GDP | Compared to China, Southeast Asia GDP has been
well-balanced between consumption, investments, and trade

~4.9x
China’s GDP vs. Southeast Asia’s

~7.0x
China’s investment levels vs.
Southeast Asia’s

~3.3x
China’s private consumption vs.
Southeast Asia’s

Private consumption Investment2 (GFCF) Government expenditure Net exports

Notes: (1) Breakdown was calculated by taking various GDP components as a share of total GDP indexed to constant 2023 prices(based on 2023 USD
fixed exchange rate); ASEAN-6 was aggregated by adding the USD values of each GDP component across the six economies; (2) Investments comprise
gross fixed capital formation and increase in stocks (i.e., holdings of assets and liabilities). Source: Euromonitor

© Southeast Asia Outlook 2024—2034 69

Demographic Shifts | The region is also seeing a growing aging
population and shifts towards smaller households

SEA has relatively low aging population, SEA is also seeing increase in smaller Opportunities
but following trend of China, US and solo households • Emergent market niches and changing customer
behavior: Demographic shifts open new niches,
Population age structure (%, 1980–2030) Average household size including:
– Custom real estate: Rising demand for housing
suited to individuals and small families, such as
modular and compact designs
– Health and wellness: Growth in bespoke health
services and wellness products for aging
individuals and those living alone
– Solo lifestyle services: Rise in tailored products like
single-serving meals and solo-focused
entertainment

Challenges
• Market fragmentation: Catering to a fragmented
market of single or smaller households requires a
portfolio of diverse products and specialized
marketing approaches

• Logistics adaptation: The preference for smaller,

more frequent purchases necessitates agile logistics,
innovative packaging, and efficient inventory
management

• Financial services innovation: Financial sectors,

particularly fintech, must align with the transaction
Southeast China US behaviors of customers who favor micro-
Asia transactions and digital services

Sources: Euromonitor; Southeast Asia’s Digital Consumers Report 2023 (Bain & Company, Meta, and DSG Capital)

© Southeast Asia Outlook 2024—2034 70

Trade Flows | China has emerged as the largest and fastest-
growing external trading partner with Southeast Asia

Trade flows1 in Southeast Asia (USD Billion)

7%

Notes: (1) Trade flows are defined as the sum of exports and imports; EU refers to EU-28 (incl. UK).
Source: Euromonitor

© Southeast Asia Outlook 2024—2034 71

Trade Flows | Southeast Asia exports to China have been growing
more than 10% as China overtakes US as the main export
destination for Southeast Asian countries
Southeast Asia Total Export Value (USD Billion)

Other Countries
+14% +8%
+4% +12% +20%

+1% Key:
+4% +0% +10%
+3% +3%
SG: Singapore
+2%

+2%
+21% HK: Hong Kong
+0%
+6% +20%
-1% JP: Japan
+3% US: United States
+4% +8%
CN: China
+7%
+26% ID: Indonesia
+4%
+13% +7% IN: India

+13% +12% +12% MY: Malaysia

+14%
KR: Korea
VN: Vietnam

Philippines Indonesia Thailand Malaysia Singapore Vietnam

Source: Observatory of Economic Complexity

© Southeast Asia Outlook 2024—2034 72

Trade Flows | SEA-6 exports to the US have increased 2.3x since
2013, while China’s export growth to the US is relatively slower

Value of Exports to the US (2013–23, Indexed to 2013 Export Figures)

Notes: China includes Hong Kong and Macau; exports are FOB values; Southeast Asia-6 includes Indonesia, Malaysia, Singapore, Vietnam, Thailand, and the Philippines
Source: Euromonitor

© Southeast Asia Outlook 2024—2034 73

Trade Flows | Thailand and Singapore are the major energy
importers
Net Import Position of Crude Oil and Natural Gas (Millions of Tons of Oil Equivalent)

Net
exporter

Net
importer

Source: Euromonitor

© Southeast Asia Outlook 2024—2034 74

Manufactured Export Growth | Southeast Asia’s share of global manufactured
goods exports have grown modestly to ~8%, but still lag China’s scale

Country/region share of global manufactured goods exports¹

(1993–2022, percentage of global manufactured goods exports)

EU 27
Increased US tariffs
on Chinese exports
in 2016
China2

China’s admission into

the WTO in 2001 North America
Advanced East Asia3
SEA-6

India

Notes: Data for manufactured goods only available up to 2022; (1) Does not include agriculture or fuel and mining products; (2) Includes Hong Kong; (3) Includes South Korea, Japan, and Taiwan.
Source: WTO

© Southeast Asia Outlook 2024—2034 75

Foreign Reserves | Except Vietnam (which is improving), Southeast Asian
countries maintain healthy government reserves

Average Foreign Reserves in USD Billion (Number of Months of Imports)

C OU N TR Y 2011–15 2016–19 2020 2021

Thailand 159.7 (7.1) 192.5 (8.4) 246.0 (12.1) 224.8 (9.0)

Philippines 69.5 (10.9) 66.2 (7.8) 84.4 (12.3) 81.4 (9.6)

Indonesia 101.4 (5.8) 117.5 (6.6) 131.2 (8.4) 139.3 (6.8)

Malaysia 112.4 (6.3) 94.1 (5.3) 99.7 (6.3) 99.7 (5.3)

Singapore 252.2 (5.3) 270.1 (5.2) 358.9 (6.6) 407.8 (6.5)

Vietnam 25.1 (2.1) 54.5 (2.6) 94.4 (4.0) 107.4 (3.7)

China 3497.5 (18.9) 3082.8 (14.8) 3216.5 (14.7) 3250.2 (11.7)

Brazil 351.6 (12.1) 353.4 (14.3) 332 (14.9) 309.4 (11.5)

Russia 413.9 (10.9) 374.8 (13.3) 457.0 (18.7) 497.6 (15.1)

India 283.2 (6.5) 378.7 (7.9) 541.6 (12.9) 569.9 (9.8)

Bangladesh 18.1 (4.8) 32.5 (6.5) 43.2 (8.7) 46.2 (6.3)

Turkey 96.2 (5.2) 80.4 (4.9) 48.5 (4.6) 64.8 (4.3)

Poland 92.1 (4.6) 110.9 (4.6) 138.5 (5.6) 145.2 (4.7)

Mexico 162.0 (4.6) 167.2 (4.2) 186.2 (5.2) 179.5 (4.2)

Note: Ranked based on 2016–19 foreign reserves by months of import (within Southeast Asia vs. others).
Sources: Euromonitor; World Bank

© Southeast Asia Outlook 2024—2034 76

OUTLINE

1993–2023 Southeast Asia Economic Outcomes

2024–2034 Southeast Asia GDP Forecast

Opportunities to Accelerate Growth

Deep Dive: Explaining 1993–2023 Economic Outcomes

Deep Dive: Additional Data for 1993–2003

Deep Dive: External Trends

Our Assumptions about Southeast Asia Growth

1 3 6
Economic growth derives from China will remain a formidable competitor Competition is required to spur
four sources and innovator in most business segments. innovation and productivity growth
It is also the largest trading partner for all
1. More capital
Southeast Asian countries. SE Asian growth ▪ Tech-enabled disruption has
2. More labor
prospects are now linked to China’s breathed life into slow-growth
3. More productive use of capital
4. More productive use of labor services

4 ▪ When local markets are small,

The long-term globalization trend has international competition
plateaued; however, regionalization will is necessary
offset some negative effects
2 7
Southeast Asia is too diverse to 5 The growth model of subsidizing
be approached as “one market”. state-protected large enterprises
Strong governance and institutions are
Opportunities to cooperate and to drive export-led growth is no
required for above-average growth; many
integrate are less important than longer a viable model; there is
models work but clarity on rules and
domestic levers over-capacity in every sector that
consistency in application are critical. There
is no such thing as “good corruption” lends itself to this approach

© Southeast Asia Outlook 2024—2034 78

Geopolitical Landscape | There are several geopolitical levers that
might affect Southeast Asia economy in the short-to-medium term

Deglobalization
China’s rising US-China US presidential Conflict and
1 leadership 2 competition 3 election 4 Wars 5 and supply
chain shifts
Rising Chinese influence due to Increased tension driven by 2024 US presidential election Major military conflicts such as Marked shift from global
rapid economic growth, economic competition and could potentially result in shifts the Russia-Ukraine and Middle integration to more regional
stronger political influence, and trade policies, competing in political, economic, and East conflicts are affecting and local systems, driven by
growing leadership in geopolitical influence, and diplomatic stances between global geopolitics and the trade tensions and the Covid-
innovation and global trade military tensions in the region the US and SEA countries supply chain 19 global pandemic

OPPORTUNITIES

▪ China's growth can lead to ▪ Potential increased ▪ Chance to bolster security ▪ Shift in global trade patterns ▪ Opportunity to capture
increasing trading activities investments and and economic alliances with could result in opportunities shifts from traditional
and investment inflows opportunities to diversify the US to capture new markets and manufacturing hubs and
between China and SEA exports and trade as the US increased investments modernize local industries
countries and China vie for influence

CHALLENGES

▪ Rising competitiveness of ▪ Risk of trade disruptions ▪ Risk of abrupt changes in US ▪ Risk of interruptions in ▪ Increased costs and
Chinese companies could due to changing policies and foreign policy that could supply chains resulting in complexities due to rising
challenge local businesses sanctions affect existing agreements potential surges in energy protectionism, trade barriers,
and alliances and commodity prices and supply chain shifts
▪ Risk of becoming too ▪ Navigating geopolitical
dependent on the Chinese pressures and increased ▪ Possibility of new trade ▪ Potential global political and
market military tensions barriers or tariffs financial instability

Source s: Li t. search; Bain analysis

© Southeast Asia Outlook 2024—2034 79

 China’s Increasing Role | China will increase its share of FDI into Southeast
Asia, with growth in both BRI and infrastructure spending and private sector
offshoring
TA I LW I N D S HEADWI NDS
Positive trends cementing China’s role in Southeast Asia Negative trends reducing China’s role in Southeast Asia

Trade integration ▪ China is largest/fastest-growing Southeast Asia trading partner ▪ While some Chinese corporations need to offshore, local
with Southeast Asia ▪ Trade agreements, e.g., RCEP and ACFTA governments and Beijing are fearful of deindustrialization
will increase ▪ Dodging tariff and trade sanctions by G7
▪ Need markets for excess production capacity
▪ Expanded commodities supply security

Southeast Asia ▪ Infrastructure deficit in SEA requires FDI ▪ BRI has a mixed reputation; experiences in Sri Lanka and
needs capital for ▪ China has high savings it needs to deploy Pakistan have impacted perceptions’
infrastructure and ▪ BRI shifting to smaller bets with higher probability of payback ▪ Southeast Asia wants capital investment, not just cheap
imports
green transition

Perception of China ▪ Shifting sentiments from US (to China) ▪ South China Sea dispute and past confrontations in the
improving in ▪ Perceived US weakness and poor dependability (2008 crisis, Philippines and Vietnam impair positive “mass sentiment”
Thailand, Malaysia, Trump/Biden protectionism, Trump policies towards allies) ▪ Governments have varying degrees of alignment with the
▪ Support for Israel has further hurt US in Malaysia and Indonesia US’ cautionary outlook on Chinese surveillance
and Indonesia
▪ China has a significant diaspora in Southeast Asia

© Southeast Asia Outlook 2024—2034 80

China’s Increasing Role | Singapore and Indonesia with largest share of Chinese
FDI; strong pipeline of investments committed from both public and private Chinese
companies
NO N-EXHA USTIVE

From 2018–22, Chinese FDI to SEA-6 grew at a Strong pipeline of Chinese investments into SEA-6 from public
10% CAGR and private sector enterprises
China’s FDI outflows to SEA countries I NVES TMEN T T HEMES
(2018–22, USD billion) CAGR
20 (2018–22) Shanghai Tunnel Eng. won a USD Malaysia in talks with China to
10% Transportation 454M contract to upgrade revive high-speed railway
18 17.7 and infrastructure Changi Airport in Singapore (Oct project connecting KL and SG
PH 46%
7% ’23) (Mar ’23)
7% TH 15%
8% -1%
9% MY
15 Advanced BYD to invest USD 1.3B in China’s Chery Automobile and
13.4 12% 10% VN 10% manufacturing Indonesia for its fifth overseas Changan Auto to set up Thailand
expansion factory (Jan ’24) EV assembly plan (Apr ’24)
11.9 10%
6% 11.2
10% 14%
10% 24% 26% ID 25% Huayou Cobalt in talks to invest CBL (CATL subs.) to invest USD
10 Metals mining
12% USD 400M to expand nickel 420M in Indonesia nickel mining
14% 14% and processing
Mostly advanced output in Indonesia (Jul ’23) & EV battery plant (Dec ’23)
15%
16% manufacturing
16%
(electronics, wafer fab.)
20% Xiamen H. to invest USD 900M in
China GNPG1 among top investors
5 Green energy Vietnam energy storage
for the USD 14B Philippines’
47% 47% SG 7% transition systems and battery plants in
renewable energy deal (Jan ’23)
54% (June ’23)
44%
43%
Huawei signed multiple
Advanced China’s Sunny Optical Group to
investments in Thailand’s smart
technology invest USD 2.5B for its Vietnam
0 agriculture & AI computing
2018 2019 2020 2021 2022 and R&D advanced R&D hub (Mar ’23)
center (Dec ’23)
Note: (1) GNPG refers to China’s General Nuclear Power Group
Sources: UNCTAD; Company websites; Lit. search

© Southeast Asia Outlook 2024—2034 81

China + 1 Impact | Foreign manufacturers have started expanding their
operations from China to SEA due to rising costs and geopolitical uncertainties

Selected cases on foreign manufacturers expanding

Foreign manufacturers have started
their operations outside of China into SEA 1 expanding their production facilities
beyond China to SEA to:
PLAY ER I NDU STR Y Y EAR MARK ET I NVEST ME NT OVERVI EW
▪ Minimize risk exposure to
Samsung Electronics 2008 to VN ▪ In 2019, Samsung completely shut down its phone factories in
and smart present
geopolitical instability or
China; it has since invested USD 18B; Samsung VN generated
devices unexpected shocks (e.g., Covid-19
>USD 70B revenue (2021), employing more than 100,000 people
disruption in China resulted in
Foxconn Electric 2023 VN ▪ Foxconn to invest USD 250M in Vietnam for EV and telecom prolonged facility lockdown, labor
mobility (authorize components (reaching USD ~3B total investment in Vietnam), shortages, and slow deliveries)
d) adding >1,200 jobs
HP Commercial 2023
▪ Take advantage of cost-effective
TH, VN ▪ HP aimed to diversify its laptop production; in 2023, it targeted
laptops and skilled labor as
~10% laptop production outside of China
manufacturing costs in China have
LG Innotek Electronics 2023 VN ▪ LG Innotek invested a total USD 2B in Vietnam, including USD 1B increased in the past few years
in Haiphong plant
▪ Gain access to new, growing
Adidas Apparel and 2010 to VN ▪ Since 2010, Adidas has gradually cut the share of footwear it
footwear present markets as intensifying
makes in China in half, moving largely to Vietnam competitions from local brands in
GoerTek / Contract 2024 Various ▪ GoerTek (major Chinese assembler of AirPods) will invest USD
China (e.g., Huawei, Xiaomi) have
Ju Teng / manufacture 280M in a plant in Vietnam to diversity supply chain away from incentivized players to seek other
Nidec CCI rs2 China market potentials
▪ Ju Teng International (Taiwanese 3C manufacturer with ▪ Leverage attractive tax benefits
presence in China) invested USD 200M in electronic and as SEA countries are competing to
automobile component factory in Vietnam draw foreign players relocating
▪ Nidec CCI (Taiwanese cooling module maker with operations from China by offering various
in China) will invest USD 170M to establish site in Vietnam incentives
Note s: (1) Non-exhausti ve; (2) Other examples include Yankey Enginee ring, Taiwan Union Tech, New Kinpo, Sunonwealth etc.
Source s: Li t. search; Reut ers; Nikkei Asia

© Southeast Asia Outlook 2024—2034 82

Political Landscape | Certain domestic political dynamics need to be
considered with regards to their potential impact on near-term growth

COU NTRY K EY POLI TICAL DYN AMI CS

Joko Widodo accelerated infrastructure build, put his weight behind forced down-streaming in nickel, and managed the
New administration’s priorities
complex interests of a diverse and growing island nation; it remains to be seen if Prabowo continues with pro-growth priorities
Indonesia
Regulations in Indonesia are hard to predict and can change abruptly; recent regulatory direction has tended toward
Unpredictable policy landscape
protecting the local market and producers.
Prime Minister Anwar Ibrahim's government faces political cohesion and economic management challenges amid pro-
Government and administration challenges
Bumiputra opposition and coalition dynamics, influencing policy direction and economic growth
Malaysia
States such as Johor, Penang and Sarawak are pursuing ambitious policies leveraging on their comparative advantage that
States charting growth pathways
could buffer against federal politics
Post-Duterte, the Philippines is undergoing positive political shifts, focusing on human rights, foreign policy, and economic
Political landscape
reforms; pro-US stance invites clashing views on whether this will strengthen or weaken growth prospects
Philippines
A slow-moving bureaucracy may get in the way of realizing much-needed policy shifts and improvement in basic growth
Slow-moving bureaucracy
drivers
Singapore faces challenges in talent and manpower availability, particularly in growth sectors, and may be limited in its policy
Demographic pressures
maneuvers; efforts to increase foreign manpower have been unpopular
Singapore
Shifts in political relationships, particularly between Singapore and Malaysia, could spur Singapore playing a more
Changing regional dynamics
complementary role in the growth of the region
The new Thai government, post-2023 elections, is navigating a complex landscape with numerous elite stakeholders;
Post-election government challenges
managing these dynamics and addressing inequalities are critical for stability
Thailand
Frequent political transitions and changes in government have likely contributed to a conservative approach among
Bureaucratic conservatism
policymakers and civil servants, making them less likely to invest in difficult reforms for medium-term payoffs

Communist party's balancing act The Communist Party of Vietnam faces challenges in balancing economic liberalization with party political management
Vietnam
Anti-corruption drive and institutional Vietnam is going through a “classic cyclical slowdown” driven by over-building of real estate and too much debt; investors are
reform looking to the government to use the crisis to strengthen institutions and data transparency

Source s: Li t. search, BMI re port

© Southeast Asia Outlook 2024—2034 83

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