ASEAN

The ASEAN (Association of Southeast Asian Nations) is a region of growing interest for Basque companies due to its rapid economic growth, its young and dynamic population, and the role of one of its members, Singapore, as an Asia-Pacific strategic hub. This territory – home to some of the world’s most dynamic economies, such as Vietnam, Indonesia or Philippines – represents a potential market of over 600 million people, with significant opportunities in sectors such as manufacturing industry, renewable energy, mobility and infrastructure. Furthermore, the trade agreements of many of its members with the EU facilitate access to the region, while the growing demand for high value-added products and technological solutions are a lure for the internationalisation and diversification of Basque companies.

The region with greatest economic growth of the world

The ASEAN region holds a strategic global position as one of the world’s dynamic economic blocks. Its 10 member countries total a market of over 600 million people and with a combined GDP that positions ASEAN as the fifth largest economy globally. ASEAN is a key hub in international supply chains, particularly in sectors such as manufacturing, electronics, maritime trade and technology. Furthermore, its geographical location connects the main trade routes between Asia, Europe and the Americas, which bolsters its importance in the global economy. Thanks to agreements such as the Regional Comprehensive Economic Partnership (RCEP), ASEAN is extending its influence in international trade, consolidating its position as a driver for growth and a lure for foreign direct investment.

The ASEAN economy stands out for its remarkable diversification, which has been key for its resilience and sustained growth. The region combines advanced economies such as Singapore with rapidly developing emerging markets such as Vietnam and Indonesia, which creates a complementary and balanced ecosystem. The key sectors include manufacturing, agriculture, technology, financial services and tourism, with an ever-greater emphasis on digital and green industries. This diversification allows ASEAN to adapt to global changes and minimise risks associated with dependency on a single sector. Furthermore, the pursuing of economic integration policies and agreements such as the RCEP strengthen intraregional cooperation, incentivising new investments and fostering innovation in multiple economic areas.

Growth is expected to be stable, with an average of 4% in the countries of the association, led by the services and manufacturing sectors, with electronics and tourism as the major driving forces.

The external sector of the ASEAN region is one of the main drivers of its economy, noted for dynamic trade and strong integration in the global value chains. The region is an important exporter of manufactured goods, electronic products, natural resources and food, with the majority of the association’s countries having seen an increase in industrial exports, while it imports machinery, technology and consumer goods; the importing of consumer goods has increased as the result of the improved working conditions in most of the association’s countries. The commitment of the member countries to manufacturing electronics is expected to lead to a trade balance surplus from 2025 to 2028. The growth in exports is not symmetric, as Singapore and Indonesia have exported significantly more than Malaysia, Thailand, Philippines and Vietnam.

However, its proximity to economic powerhouses such as China, Japan and South Korea, combined with key trade agreements such as the RCEP and bilateral treaties, have shored up its global connectivity. Furthermore, the region benefits from ever increasing foreign direct investment, driven by its relative political stability, developing infrastructure and pro-business policies. This landscape makes the ASEAN region into a key territory in global trade and an axis of growing importance in the world economy.

The ASEAN market is one of the world’s most promising and dynamic, with a population of over 600 million and a rising middle class driving consumption. This market is diverse and includes both advanced economies such as Singapore and rapidly growing emerging markets including Indonesia, Vietnam and Philippines. The region is an important centre for manufacturing, technology and services, with an ever-greater focus on digitalisation and the green industries, offering a broad variety of opportunities, particularly in the supply chain of electronic components, e-vehicle components and parts for the energy sector. Furthermore, the ASEAN market benefits from economic integration through agreements such as the RCEP and the ASEAN Economic Community (AEC), which drives the free movement of goods, services, investments and people. This makes ASEAN a strategic destination for companies seeking to expand in Asia-Pacific.

The country risk in the ASEAN region varies significantly among its members due to great differences in their levels of economic development, political stability and regulatory framework. Countries such as Singapore and Malaysia have low risk levels thanks to their political stability, advanced infrastructures and favourable regulatory environments. However, emerging economies such as Myanmar and Laos are facing greater challenges, including political uncertainty, infrastructure constraints and regulatory barriers. Furthermore, the region in general is facing common risks such great exposure to events arising from climate change, geopolitical tension in the South China Sea and dependency on external markets. Despite these challenges, efforts regarding economic integration, policies to foster investment, and the sustained growth of the middle classes make ASEAN an attractive region to trade and investment, particularly in emerging sectors and with a long-term outlook.

Even though the regional agreements have sought to unify the ASEAN members’ policies, the member countries have different political positions as regards the role that the state performs in the economy. In the Singaporean and Malaysian economies, the state plays an active but strategic role, focusing on promoting investment, technological innovation and the development of key sectors, often through state-owned enterprises companies or sovereign funds. On the other hand, countries such as Vietnam and Myanmar show a greater degree of state control, particularly in strategic industries such as energy and natural resources. Indonesia, Thailand and Philippines are midway and also tend to protect key industries in the development phase that could not compete globally.

The ASEAN region is noted for significant trade openness, driven by its economic integration strategy and its role as a hub in global value chains. Thanks to agreements such as the ASEAN Economic Community (AEC) and the Regional Comprehensive Economic Partnership (RCEP), the member countries have lower tariff barriers, facilitating trade and promoting the free movement of goods, services and investments. Furthermore, ASEAN has established multilateral and bilateral agreements with key economies such as China, Japan, South Korea and the European Union, strengthening its global connectivity. This trade openness has shored up its competitiveness, by attracting foreign investments and diversifying its exports. However, challenges persist such as the regulatory disparities between countries and the need for a more robust market infrastructure to fully harness its potential.

Tariffs in ASEAN countries are low due to the association’s common policy and the agreements in place with other countries and regional associations. However, it should be noted that the ASEAN agreements only cover certain sectors; therefore, high tariffs can be found in the sectors outside those agreements, such as the automotive industry. Thailand, Indonesia and Philippines are the ASEAN countries with most obstacles to trade, mainly as they have very high tariffs and requirements to obtain the very strict trade permits. However, Malaysia and Singapore have rigorously reformed their administrative and tax system, making the countries far more accessible. Even though ASEAN initiatives exist to seek to mitigate those barriers by means of policy harmonisation and the streamlining of processes, their full implementation continues to be a challenge in some of the region’s countries.

Philippines and Indonesia are two countries with legal systems deemed to be high risk, as their bureaucracy is slow and hard to access, and they lack effective legislation in areas such as the protection of intellectual property. Furthermore, those two countries have a high rate of corruption. Thailand has a relatively developed and pro-business legal framework, even though the occasional political instability can cause uncertainty. In Vietnam, the legal framework has improved with the reforms to foster investment, but challenges still persist, such as the inconsistent application of legislation and the complex red tape. Malaysia and Singapore offer few legal risks, with modern legal systems in keeping with international legislation and more independent legal systems than the other ASEAN countries.

Contact office

Pablo Huidobro

Director of Basque Trade & Investment ASEAN

BASQUE TRADE & INVESTMENT SINGAPORE

1 Wallich St, #14-01 Guoco Tower, Office 1452, Singapur 078881

+65 6403 3800

phuidobro@basquetrade.eus

* Office hours:

Monday to Thursday: 7.30 a.m. to 4.00 p.m.
Fridays: 8.00 a.m. to 1.00 p.m.

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