The United Kingdom is out of the European Union. It now faces an uncertain future alone in the world. To avoid isolation, the U.K. must now focus its efforts on building closer ties with Asia, where the fastest growing economies reside.
The EU had the advantage of being a large trading bloc but out of the EU the U.K. is now more nimble and able to build up its bilateral relations. While China and India get most of the focus in the U.K., Southeast Asia should not be ignored. The diverse and distinct region represents a range of opportunities for British business, and London can advance its interests by taking a regional approach in addition to pursuing bilateral activities.
There are good reasons for London to direct its attention toward Southeast Asia. The 10 nations of the Association of Southeast Asian Nations (ASEAN) have a combined GDP of $2.8 trillion, and ASEAN is now the world’s fifth-largest economy and the third-largest in Asia. With a population of 630 million people and a land mass covering more than 1.7 million square miles, the sheer scale of the region and the number of young working age people is staggering. With its combined trade value, ASEAN is the fourth-largest trading entity in the world after the EU, the United States, and Japan.
And while Europe and the U.S. face relative stagnation, ASEAN is powering ahead. Disparate and diverse, yet integrating rapidly, ASEAN’s total GDP is now almost four-and-a-half times larger than it was in 2000. Taken as a whole, ASEAN is predicted to be the world’s fourth-largest economy by 2050. This is a huge untold growth story. The future does not belong to those who wait and see, but to those that grasp opportunities and look beyond their own shores and horizons. Put simply, not trading and doing business in ASEAN would be to miss out on a golden opportunity.
ASEAN’s economic emergence is a reminder that there is more to Asia’s story than the rise of China and India. The story of modern-day Southeast Asia is much less well understood by businesses, investors, and the public at large in the U.K. The Chinese growth story is slowing as the country matures, and Northeast Asian societies are aging. India and South Asia have their own developmental challenges. Southeast Asia is less discussed yet is a hugely dynamic region.
Today, if we look at the ten countries of ASEAN in order of economic size – Indonesia, Thailand, Malaysia, Singapore, the Philippines, Vietnam, Myanmar, Cambodia, Laos, and Brunei – they form a diverse family of countries that are integrating rapidly. They do more trade put together between them today than the rest of the world does with the whole of ASEAN. Despite economic disparities, different cultures, languages, and ethnicities, this family of nations share many similar threads of history and evolving economic trends today.
These economies vary vastly in economic development and economic opportunity, but all are growing at rapid rates and have a shared story of economic emergence. They, therefore, present a golden opportunity for British businesses and investors wanting to do business in one of the fastest-growing regions of the world.
As Southeast Asia grows, it is now more important than ever for those outside the region to understand what makes the economies and business environment of the region tick and to grasp the paradoxes, complexities, and contrasts that define one of the world’s most diverse and unexplored regions. There is no hidden secret to doing business in Southeast Asia, but the dynamics of the region are quite specific and quite unlike anywhere else in the world. Doing business in the region requires a huge amount of patience, persistence and most critically – understanding.
Furthermore, ASEAN is not an Asian EU. The differences between ASEAN countries are huge. Indonesia is the regional giant making up by far the largest portion of ASEAN’s GDP. Tiny Laos on the other hand is still at the early stages of development. The city state of Singapore is the economic and financial hub of Southeast Asia, controlling and funneling much of the investment that goes into the region and the regional headquarters of most regional and multinational companies. Singapore is a modern first world metropolis, whilst its neighbors still face major developmental challenges, but these challenges should not deter business from exploring markets that offer rich rewards for the right business and investment strategy.
The post-Brexit U.K. should endeavor to build on the gradual growth in U.K.-ASEAN trade and investment in recent years. Total trade in goods and services between the U.K. and the 10 nations of ASEAN totaled $45.5 billion in the four quarters to the end of Q3 2020, roughly split between imports from ASEAN ($24 billion) and British exports to the bloc ($21.55 billion). This has grown considerably over the last ten years. The stock of U.K. outward foreign direct investment (FDI) in ASEAN was at least $36.5 billion in 2019, accounting for 1.9 percent of total U.K. outward FDI stock.
Total U.K. ODA to ASEAN over the past decade has been more than $4.8 billion. The U.K. also joined as one of the founding members of the Asian Infrastructure Investment Bank (AIIB) and is the joint-largest contributor to the AIIB’s $128 million technical assistance Special Fund. ASEAN desperately needs to build up its infrastructure if it is to continue to grow. U.K. expertise in this area will be welcomed.
Since its exit from the EU, the U.K. has slowly deepened its engagements with ASEAN and its member states. It has appointed an Ambassador to ASEAN, based in Jakarta, and sought to become a dialog partner of the Southeast Asian bloc. It has already signed free trade agreements with Singapore and Vietnam, but those deals were made easier by the fact that both countries had an existing free trade agreement with the EU, allowing that to be used as a reference point. But the U.K. will need to forge deals from scratch with other ASEAN members. The U.K. is also conducting joint trade reviews with Thailand and Indonesia for potential deals and is also engaged with Malaysia through a joint committee on issues such as trade policy and market access.
Nevertheless, London is keen for deeper ties with countries in the region. U.K. Foreign Secretary, Dominic Raab recently clocked up a three-day visit to Southeast Asia, with high-level meetings in Vietnam, Cambodia and Singapore focusing on trade, defense, and security.
The U.K. has recently formally asked to join the 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a pact that currently covers a 13 percent share of global gross domestic product. Negotiations will soon begin on the U.K.’s accessions to CPTPP, whose members currently have a combined GDP of $12.4 trillion, a value which is expected to grow rapidly in the coming years.
Now is the time for British businesses to look outwards to Southeast Asia and make the Global Britain slogan a reality.