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Richer Southeast

Why is the rapidly developing economy of the countries of Southeast Asia interesting for Russia?

Consumers in Southeast Asia have never been so willing and unable to spend money as they are today. At the moment, the region is a fast-growing market, and to understand its features is becoming an increasingly necessary task for business.

Richer Southeast
Photo: shutterstock

Kevin Martin

Head of Retail and Private Asset Management, HSBC, Asia Pacific
To better imagine how rapidly the well-being of this region grows with more than according to the World Bank, 650 million consumers, just look at the passenger traffic data of several airports in Southeast Asia. In 2017, Manila Airport handled 41 million passengers. This is twice as much as in 2006. In Ho Chi Minh City, the number of passengers at the local airport more than quadrupled over the same period. In Jakarta - from 37 million in 2009 to 63 million in 2017.  

This is just one indication of the growing activity of consumers in the region, which, as it seems, for many companies and investors often remains a secondary focus against the background of the larger and more densely populated neighbors - India and China.

A region in which such diverse countries as Indonesia, Thailand, Malaysia, and Singapore coexist undoubtedly requires a thoughtful approach to doing business there. Anyone who is going to develop their business here should be ready to meet dozens of different languages, cultures and levels of economic development. The region is diverse in political, regulatory and financial systems and the uneven penetration of the Internet and mobile communications. Do not forget about the extraordinary geographical fragmentation of the territory, numbering tens of thousands of islands.

Nevertheless, Southeast Asia is rapidly becoming a powerful independent economic unit and today is a key market for a wide variety of goods and services - from cars, cosmetics and computers to wealth management services, insurance and international money transfers.

Just look at the numbers from HSBC Global Research and  Southeast Asian Associations: According to forecasts, per capita GDP in the 10-member ASEAN will rise to more than $ 2030 by 9000. While this is well below the level of Hong Kong, the UK or the US, compared to $ 3000 in 2010 - an increase of almost threefold. Wherein  Mckinsey considersthat by the year 2025 the number of households that can be attributed to the middle class will reach 120 million, which is about two times more than in the 2010 year. 

According to the latest release of the CapGemini World Wealth Report  World Wealth Report, in 2017, about a third of all the wealthiest people in the world lived in the Asia-Pacific region. 

Whether it’s a Vietnamese 20-year-old buying her first motor scooter, a Philippine call center operator purchasing a life insurance policy, or a newly-made millionaire investing in real estate or receiving a commercial loan for her company, the growing wealth of Southeast Asia opens new opportunities that companies and investors, including in Russia, should not ignore.

Bilateral relations between the Russian Federation and the ASEAN member states, as well as with the region as a whole, are already actively developing today, thanks also to the growing purchasing power of its inhabitants. A free trade agreement has been signed between the Eurasian Economic Union and Vietnam. Singapore and Thailand are negotiating, and Cambodia, Laos and Indonesia have expressed keen interest in signing similar agreements with the EAEU.

The year before last, the trade turnover between Russia and the ASEAN member states grew by more than 35% compared with a year earlier.  According to the Russian Ministry of Economics, agriculture, health, finance and information technology are among the key sectors of cooperation, but communications in other sectors are also developing rapidly.  

For anyone looking to offer their services to rapidly growing wealthy consumers in Southeast Asia, it is important to understand that the region is changing rapidly, especially when it comes to e-commerce and mobile communications. Back in 2015, the volume of online trade in the six largest countries of Southeast Asia (Indonesia, Malaysia, Philippines, Singapore, Thailand, Vietnam) amounted to about $ 30 billion.  Temasek and Google research, by 2025 it is likely to grow to $ 200 billion.  

Despite the fact that different countries show different growth rates, the changes are a result of stable economic growth, improvements in the quality of infrastructure and the ongoing urbanization of most of the region. In the coming years, tens of millions of people will move from the village to the cities, where they will have better education, health care, transportation, and better paying jobs. At the same time, the demand for more developed financial services will increase in the urban environment.

Do not forget that, speaking of the consumers of Southeast Asia, we mean mostly young people: more than half of the inhabitants of ASEAN are younger than 30 years. That is, the majority of consumers will be young, tech-savvy people who like to try - and buy - new things, preferably using mobile devices. Therefore, it is not surprising that in recent years, many success stories in the field of Internet entrepreneurship have appeared in the region.

Go-Jek, founded in Indonesia in 2010 year as a telephone service for booking a motorcycle with a driver, today offers services from transportation and logistics to mobile payments and food delivery. Singapore Grab, which began as a transportation company in 2012, is today engaged in financial services, food delivery and logistics in eight countries. The Lazada e-commerce portal, which also appeared just six years ago, today serves users in six markets in Southeast Asia.  

Despite the progress made in recent years, the future promises even greater changes and opens up even greater opportunities that can be used by anyone who makes the effort. 

Take, for example, financial services. Tens of millions of people in the region still do not have a bank account. With increasing prosperity, demand for services such as savings programs, health or life insurance products, and international banking services (for those who increasingly travel, study or work abroad) will only grow. The main challenge for companies and financial service providers who plan to enter this market is the sheer variety of opportunities and the high rate of ongoing changes in the market. 

But the moment to enter is almost unique: the growth of welfare in Southeast Asia has created a critical mass for the market to move to a new state, while the region is still far from exhausted its potential. Those who are willing and able to meet the rapidly growing needs and expectations of Southeast Asian people for high-quality goods and services and are ready to solve this problem with the help of convenient, reliable, personalized digital tools and technologies are still open endless possibilities.
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