Market boom swinging south

Foreign direct investment in Southeast Asia's largest economies surged past China last year, a strong indicator of the region's growing importance in the global economy.

These economies form part of the Association of Southeast Asian Nations, set up to promote regional trade and prosperity and now viewed as the next hub of low-cost manufacturing and fast-growing consumer markets.

Asean was formed by Indonesia, Malaysia, Singapore, Thailand and the Philippines. It later expanded to include Brunei, Myanmar, Cambodia, Laos and Vietnam.

"The main factor that stands out is the demographic differences. We are seeing the demographics turn the worst for China because of the one-child policy, and the working age population is shrinking. Wages are rising a lot more quickly for China than for the Asean countries," said Merrill Lynch economist Chua Hak Bin.

The attractions are clear. With a gross domestic product growth of 5 per cent last year, the region is home to 600 million people, 8.8 per cent of the world's population, and has a consumer market worth US$1.2 trillion. But it is also plagued by corruption and outbreaks of political violence.

Foreign investment in Asean's five founding members last year grew fivefold from 2001 to US$128.4 billion, according to a report by Chua. By comparison, China attracted US$117.6 billion, after peaking at US$124 billion in 2011.