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In its fascination with all things Chinese, much of the world has overlooked one of

the greatest trading opportunities of the post-global financial crisis economy: the
potential of Southeast Asia.
This is a somewhat strange omission, as together the 10 members of the Association of
Southeast Asian Nations (ASEAN) comprise a market of more than 600 million people
with a combined GDP of US$2.1 trillion. In addition, the region offers sustainable
economic growth, low manufacturing costs and a rising middle class who are hungry for
the consumer experience.
A decade ago, the majority of Western companies that came to Asia identified China as
the preferred option when setting up manufacturing facilities. They were encouraged by
the nations competitive wages, developing infrastructure and the vast opportunities
presented by its domestic market. But this is beginning to change as Southeast Asian
markets become more accessible and increasingly cost-competitive.
In 2011, foreign direct investment (FDI) into China increased by almost 10% year-on-
year, reaching US$116 billion. FDI into ASEAN for the same period, however, grew by
almost 25% year-on-year, reaching US$114 billion indeed, if the regions economies
were a single entity, it would be the eighth largest in the world.
ASEAN trade, past to present
Since the associations formation in 1967, economic growth throughout the region has
been exponential. For instance, in 1975 manufactured goods made up around 18% of
ASEAN exports. Yet by 1991 its share was around 63%. Between 1990 and 2010, the
associations economy increased by 10% annually, driven by commodity exports. Trade
with China and India, which grew an average of 24% year-on-year between 2000 and
2009, contributed greatly to this rise.
A key factor behind ASEANs success is its diversity. Looking across the various member
states, there are frontier markets like Cambodia, Laos and Myanmar that are largely
untouched by foreign investors, but which manufacture low-value goods such as agri-
commodities and export them elsewhere; there is Vietnam, which has now become a
hub for textiles, garments and footwear; there is Malaysia and Indonesia, both with a
huge commodities base and, in the case of the former, has become very strong on the
technology front; and there is Singapore, which houses high-value chain industries
including pharmaceuticals, IT and chemicals and acts as the regions financial hub. As
such, Southeast Asia boasts all stages of the value chain, which in turn, has made it a
highly competitive trading bloc. Furthermore, each member state has built up a
competent labour force in their respective sectors.
Stemming from this, the trading opportunities for businesses from all corners of the
region are somewhat staggering. Not only can they look to trade with counterparties
from neighbouring ASEAN states, but they can also capitalise on trade flows that carry
goods to China, India and the rest of the world.
Indeed, the burgeoning growth of trade volumes between each member state has given
rise to the proposed ASEAN Economic Community (AEC), which is due to commence in
2015. Among many other goals, the AEC aims to encourage inter-regional trade and
investment, free movement of capital, and freer movement of skilled labour.
Furthermore, it is hoped that the communitys formation will boost the regions
competitiveness within the global economy and thus expand on the trade and
investment opportunities currently presented to the region.
In Indonesia, for instance, producers of commodities and other low-value goods could
capitalise on the trade routes that carry coal from the archipelago to Japan and South
Korea, which is eventually used to make steel. From the beginning to the end of its
journey, the coal will pass through various ports. The movement of this coal is heavily
reliant upon people and infrastructure, which could be used to help shift other
commodities and manufactured goods along the same route.
Likewise, Malaysias particular expertise in manufacturing high-tech goods could
encourage other industries that involve similar skill sets. This too provides
opportunities for various manufacturers from other ASEAN states.