600 million reasons to invest in Asean

In its fascination with all things China, much of the world seems to have overlooked one of the great trading opportunities of the post-crisis global economy: the potential of Southeast Asia.

It is a strange omission: the 10 members of the Association of Southeast Asian Nations comprise a market of 600 million people with a combined annual gross domestic product of US$2.1 trillion, solid growth, low manufacturing costs and a rising middle class.

We expect these trends to be amplified when the Asean Economic Community comes into existence at the end of 2015. It is designed to eliminate tariffs and other trade barriers between members, effectively creating what could be one of the world's biggest single markets.

Part of Southeast Asia's attraction is the range of opportunities it offers, both as a manufacturing base and market. Asean spans the spectrum from Singapore, a financial and hi-tech industrial hub with a higher GDP per capita than Switzerland; through the offshore manufacturing centres of Thailand and Malaysia; via the newly industrialised economies of Vietnam and Cambodia; to the natural resources of Indonesia and the raw potential of Myanmar.

But the heart of Southeast Asia's potential lies in the middle class, both as consumers and as a source of highly educated, high-productivity labour. A recent report from Ernst & Young estimated there were 525 million middle-class Asians in 2009 - 28 per cent of the global total - and that this number will grow to 3.2 billion by 2030, or 66 per cent of the global total. Much of that growth will be in China and India, but Southeast Asia will also play a key role.

Southeast Asia has not been immune to the global headwinds - we forecast regional GDP growth of 3.9 per cent this year - but that growth is robust, driven largely by domestic consumption and growing intra-regional trade.

Intra-regional trade has grown from 19 per cent of total trade in 1993 to 25 per cent in 2011, but its potential is vastly greater. Growth has been blunted by poor connectivity: for years there has been no rail link between Vietnam on the eastern seaboard and Thailand on the Andaman Sea, for example, and until recently goods travelling by road used to have to change trucks three times to comply with local legislation.