Destination South East Asia - Opportunities for Regional Expansion


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A guide to South East Asia - some deep, data-driven analysis of growth opportunities in South East Asia, prepared by our Accenture team in Singapore.

The paper covers macro-economic factors (e.g. GDP, population and income trends) and vertical, industry-specific research across the ASEAN countries.

If you want to get your head wrapped around South-East Asia and start with the basics, this paper is the perfect place to begin with!

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Destination South East Asia - Opportunities for Regional Expansion

  1. 1. Destination South East Asia:A Joint Pathway to Future Growth?Opportunities for RegionalBusiness Expansion
  2. 2. 1
  3. 3. ContentsIntroduction 4A Guide to South East Asia 6The Regional Landscape 6Top Destinations: Sources of Growth 12Local Attractions: Building on Complementary Strengths 14The South East Asian Consumer 16Social Fabric: Young, Educated, Diverse 16Evolution of a Consumption Culture 19The Road Ahead: Growth Paths for the Region 22The Role of the Free Market 24Conclusion 25 2
  4. 4. “One’s destination is never a place but rather a new way of looking at things.” 13
  5. 5. IntroductionWell known for its beaches, rice fields, Asian nations is giving birth to a new By recognizing sometimes opposing,rainforests, cultural and culinary regional business destination. But yet complementary strengths, theattractions, South East Asia is not only will that destination be attractive South East Asian economies can seizea popular tourist destination, but a fast enough for business expansion the window of “regional” growthevolving economic community. This and under what conditions? opportunity. This paper suggests thatdestination is a showcase of distinct the future growth of this buoyantcultural, social and political identities South East Asia remains a region will be influenced by theencompassing 10 nations: Brunei heterogeneous region which continues appetite of businesses to recognise theDarussalam, Cambodia, Indonesia, to face several challenges on its potential of rising consumption power,Laos, Malaysia, Myanmar, Philippines, journey towards becoming a unified and regional ‘scale’ opportunities.Singapore, Thailand and Vietnam. economic powerhouse. In this paper, However, the conditions for expansion Accenture explores the attractions of a of regional and global businesses willThese 10 countries are formally cohesive South East Asian region as a vary widely across South East Asianknown as the Association of South new source of business opportunities. nations and significant improvementsEast Asian Nations (ASEAN) – a will be required to enable stronger freeregion on a journey towards Our research indicates that several market activity.becoming an integrated and opportunities exist within nationalprominent economic powerhouse.2 as well as regional borders as South Market-driven intervention across East Asian nations continue to build national borders will play a criticalBy 2020, the region is expected to and grow their economies. These role in furthering economic growthbe among the world’s 10 largest range from meeting investment across the region. To accelerate thiseconomies and the fourth largest demands in less developed nations process, a shared effort betweenin Asia. The demographic fabric will or leveraging existing advantages in ASEAN governments and businessesconsist of more than 650 million certain sectors such as high value- to identify, chart and co-develop apeople, most of whom will be middle add manufacturing, to opportunities joint pathway can potentially act as anclass, educated and aged below 30, that are driven by increasing important catalyst for regional growth.with rising disposable incomes and consumer demands or complementarya strong appetite for consumption. strengths across the region. The journey has already begun: are youA growing consumer market and ready?significant economic integrationefforts across the 10 South East 4
  6. 6. “The whole object of travel is not to set foot on foreign land; it is at last to set foot on one’s own country as a foreign land.” 35
  7. 7. A Guide to South East AsiaThe Regional Table 1: ASEAN Member NationsLandscape Brunei Darussalam CambodiaEstablished in August 1967, the IndonesiaAssociation of South East Asian LaosNations (ASEAN) is a political, Malaysiaeconomic and cultural organisation Myanmarof 10 member countries [see table The Philippines1]. In recent years, these nationshave embarked on a journey towards Singaporegreater cooperation and integration, Thailandrecognising that a cohesive region Vietnamcan achieve a higher potentialand create a strong economicposition in Asia and beyond. 6
  8. 8. Accenture analysis indicates that a Development of a regional economy Transitioning high-growthmore cohesive South East Asian region is a journey of many challenges,could reinforce its competitiveness most notably the lack of an effective economiesamongst the world’s top 10 economies supra-national authority; strong The landscape of this region is likewithin 10 years. By 2020, the region’s nationalism; persistent political an archipelago – a chain of uniquereal GDP is projected to reach US$1.9 tensions and instability; wide disparity islands, each richly inhabited by atrillion, albeit at a modest growth rate in social-economic progress; and complex identity. As one navigatesof 5 percent [see figure 1]. ambiguity in building an ASEAN through this landscape, the passage identity. These challenges will pose will be marked with high contrastsThe region’s economic and business significant risks and possibly delay the and many transitions. Each nationlandscape is dominated by Indonesia, planned economic initiatives aimed at is at a different stage of economicMalaysia, the Philippines, Singapore, accelerating regional growth. development, from less matureThailand and Vietnam, known markets such as Laos and Cambodia,collectively as the ASEAN 6. All Greater attention needs to be given to to developing economies suchnations across the region display the role of market-driven intervention, as Indonesia and Thailand, fasthealthy growth prospects, and and particularly the expansion of developing Malaysia, and the highlythe ASEAN 6 will continue to play business activity in driving future advanced economy of Singapore.dominant roles in driving economic growth across the national borders ofgrowth in the future. the region. [Figure 2] illustrates the current stage of development4 across the 10To accelerate the transition to a single Accenture believes the journey to a economies in South East Asia and themarket and production base by 2015, stronger economic community can be expected growth prospects. Manythe ASEAN Economic Community navigated more effectively through nations, including Cambodia, Laos,[see table 2] was formed in 2007 to increased market liberalisation. Myanmar, the Philippines and Vietnam,promote regional cooperation and remain at the factor-driven stage,integration. and are highly dependent on natural resources, mainly unskilled labour and capital investments to stimulate growth and increase competitiveness.Figure 1: South East Asia Real GDP, 2010–2020US$ Bn 2020 South East Asia Combined GDP = US$1,901 Bn$700 8%$600 6.8% 7% 6.5% 6%$500 5.5% South East Asia GDP CAGR = 5% 4.9% 5%$400 4.8% 4.6% 4.5% 4.3% 4%$300 2010 - 2020 CAGR 3% 2.8%$200 2% 1.7%$100 1%$0 0% Indonesia Thailand Malaysia Singapore Philippines Vietnam Myanmar Brunei Cambodia Laos 2010 Real GDP 2020 Real GDP 2010 - 2020 CAGRSource: Accenture Analysis of data from IHS Global Insights, 2011.7
  9. 9. Table 2: The ASEAN Economic CommunityThe ASEAN Economy Community, the Key development areas include: Equitable economic developmentASEAN Political-Security Community A single market and production base • Develop small and mediumand the ASEAN Socio-Cultural enterprises (SMEs)Community are the three pillars • Liberalise and facilitate the free flowestablished by the ASEAN organisation of goods, services, investment, capital • Facilitate effective cooperationto enhance regional cooperation and and skilled labour and mutual assistance to narrowintegration in building an ASEAN the development gap of Cambodia,community by 2015. • Accelerate regional integration Laos, Myanmar and Vietnam (CLMV) across 12 priority sectors countriesThe vision is to create a highly • Enhance trade and the long-termcompetitive single market that Integration into the global economy competitiveness of ASEAN’s food,promotes equitable economic agriculture and forestry products/ • Negotiate free trade agreements anddevelopment for member states, as commodities comprehensive economic partnershipwell as facilitating their integration agreements with major tradingwith the global community. Towards a competitive economic partners region Source: ASEAN Economic Community Scorecard: • Lay the foundation for competition Charting Progress Towards Regional Economic Integration, ASEAN Secretariat, March 2010; ASEAN policy, and consumer protection Economic Community Blueprint, ASEAN Secretariat, January 2008. • Strengthen intellectual property rights [IPR] protection • Develop transport (maritime, land, air, transport facilitation and logistics services), ICT and energy infrastructureFigure 2: South East Asia Economics – Stage of Economic Development, 2010 1. Factor Driven 2. Efficiency Driven 3. Innovation Driven 7.5% Vietnam 6.5% Cambodia Laos Indonesia 5.5% Myanmar Malaysia Thailand Singapore 4.5% PhilippinesReal GDP 2010-2020 CAGR Transition from Stage 1 to 2 Transition from Stage 2 to 3 3.5% Brunei’s economy is categorised as one in Transition 1-2 due to 2.5% its dependency on oil and gas. Brunei 1.5% 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 37 47 Nominal GDP per capita, 2010 (US$‘000s)Note: Stage of economic development is based on World Economic Forum’s Global Competitiveness Report 2009-2010Source: Accenture Analysis of data from IHS Global Insights, 2011. 8
  10. 10. Figure 3: South East Asia Population Growth, 2010–2020Mn300 2.0% 1.7%250 1.6% 1.6% 1.6% 1.5%200 1.4% 1.2%150 1.0% 0.9% 0.9% 0.8%100 2010-2020 CAGR 0.5% 0.5%500 0.0% Indonesia Philippines Vietnam Thailand Myanmar Malaysia Cambodia Laos Singapore Brunei 2010 Population 2020 Population 2010 - 2020 CAGRSource: Accenture Analysis of data from IHS Global Insights, 2011Malaysia and Thailand have focus on the services sector – to shift continued evolution of a largetransitioned into the efficiency- towards an increasingly efficient consumer market and potential labourdriven stage of development, where economy that would generate higher workforce [see figure 3].efforts have been channelled towards productivity and income levels. Thedeveloping more efficient processes to productivity agenda is strongest in an Despite the availability of a largeimprove overall productivity levels for innovation-driven economy such as labour force base, particularly inboth nations. Singapore, the region’s Singapore where government spending the ASEAN 6 which will be homemost advanced economy with the is focused on continuing education to to 300 million workers by 2020,highest GDP per capita, is considered enhance its innovative capabilities. improving labour productivityto be an innovation-driven economy. will become more critical.It relies on sophisticated production Greater regional cooperation andprocesses and innovation to produce integration could aid South East The highest population increasesnew and unique products so that Asian nations in accelerating their are expected in the less developedhigher wages and the associated voyage to the next stage of economic nations, putting pressure on theirstandards of living can be sustained in development. For example, timely ability to improve economic outputthe long term. intra-regional supply of skilled labour and competitiveness. and capital by more mature marketsA country’s stage of economic to factor-driven emerging economies For the South East Asian region todevelopment is also reflected by could assist in increasing economic maintain its historic GDP growthgovernment priorities and investments output for the region. rate since 2000, the Internationalin specific sectors. For example, in Labour Organization [ILO]5 estimates that productivity growth needsfactor-driven economies such as Labour workforce to accelerate from 3.3 per cent inIndonesia, the Philippines and Vietnam,government agenda are focused on productivity 2000–2006 to approximately 4.1 perinvesting in infrastructure to facilitate cent in 2007–2015. In particular, there The region is projected to support is strong pressure on Cambodia, theeconomic growth and directing a combined population of over 650resources to improve education and Philippines, Singapore and Thailand to million by 2020, accounting for 8.6 improve their productivity, as well as to reduce poverty. per cent of the global populace.Malaysia has defined 12 economic Population growth is expected acrossdevelopment areas – with a strong all South East Asian nations, signifying9
  11. 11. Figure 4: South East Asia Foreign Direct InvestmentsSource Country Breakdown(3yr Cumulative FDI Stock)30%25%20%15%10%5%0% Europe NAM South East Japan ME and South China ANZ Taiwan India Hong Rest of the Asia Africa Korea Kong World 2004-2006 2007-2009Source: Accenture Analysis of data f rom f Di Markets, 2011.In response to this need for greater Greater capital availability in thelabour productivity, South East Asian region would help expand high-governments have been investing potential industry sectors. Accentureheavily in education in recent years. believes that the region’s moreMost notably. education spending developed economies could becomeaccounted for one of the largest central investment engines forbudget expenditures in 2010 across neighbours that rely on capitalthe ASEAN 6. inflows. Already, Malaysia’s foreign direct investments in neighbouringCapital investment nations has grown to account for more than half of the total intra-regionalCapital investment is a key driving investment inflows during 2007–2009.factor in expediting economic growth.Over the last decade, the region hascapitalised on its highly productivelabour force to attract foreigndirect investment, particularly in themanufacturing sector.One way to reduce the region’sexposure to investment fluctuationsarising from global economies’performance is to stimulateintra-regional capital flows. Suchinvestments have more than doubledin contributing to the overall foreigndirect investment inflows into theregion, from 6 per cent during 2004–2006 to 16 per cent during 2007-2009[see figure 4]. 10
  12. 12. “The real voyage of discovery consists not in seeking new landscapes but in having new eyes.” 6Figure 5: South East Asia GDP BreakdownIn US$ Mn$1,200$1,000$800$600$400$200$0 1970 1980 1990 2000 2009 GDP Household Consumption Expenditure Investment Government Consumption Expenditure Net ExportsSource: Accenture Analysis of National Accounts Main Aggregates Database,United Nations Statistics Division, 2011.11
  13. 13. Top Destinations: direct investment at pace with China, the world’s top destination for foreign The region can further boost economic resilience by leveraging geographicSources of Growth capital. Despite suffering a dip during the 2008-2009 global financial crisis, proximity to increase intra-regional trade and maximise the free flow ofTo achieve economic growth across foreign direct investment levels have goods, services, investment and talentthe region, the South East Asian slowly rebounded in 2010, reflecting between nations.nations need to collectively address global confidence in South East Asianthe development gaps between larger economies’ growth prospects. Initial regional integration effortsand smaller economies. Instead of by the ASEAN Economic Community have already facilitated the ASEANtreating differences as a hindrance, Inter-connectedness Free Trade Agreement [AFTA] that isthe region could seek out and leveragecomplementary strengths to potentially Trade has been integral to South East critical in increasing trade flows withinaccelerate regional growth prospects. Asia since the beginning of the Spice the region. Notably, intra-regional Trade in Asia. The region has enjoyed exports have increased over the lastAn integrated South East Asian trade growth over the last decade and decade, accounting for 34 per cent ofeconomy is heavily dependent on showed relative resilience during the total South East Asia exports in 2009consumption to drive economic recent financial crisis. However, there compared to 23 per cent in 2001.growth, more so than its counterparts is a strong reliance on imports driven Import trends also reflect an increasingin other economies globally. In 2009, by consumption demand. While the dependency on neighbouring countriesconsumption accounted for 58 per larger South East Asian economies in the region [see figure 6].cent of the region’s GDP, compared to contribute the most to total trade23 per cent for investment, 11 per cent value, there is potential for export- While tariff levels are decreasing,for government expenditure and 8 per driven growth from the resource-rich the region has to be vigilant andcent for net exports [see figure 5]. smaller economies. Facilitating trade prepared for potential hindrances to agreements between ASEAN as a the integration process, for exampleHowever, in the past 10 years, the single unit with major trading partners following through on commitmentsrole of investment and trade in could strengthen the negotiating to agreements, the use of non-stimulating economic output has power of these individual nations. tariff barriers and independentbecome increasingly prominent. Since actions of individual nations to2003, the region attracted foreign protect national interests.Figure 6: South East Asia Exports and ImportsSouth East Asia Export South East Asia ImportDestination Breakdown Source Breakdown100% 100%90% 90%80% 80%70% 70%60% 60%50% 50%40% 40%30% 30%20% 20% 34%10% 23% 10% 24% 20%0% 0% 2001 2009 2001 2009 Extra-regional Exports Intra-regional Exports Extra-regional Imports Intra-regional ImportsSource: Accenture Analysis of data from Euromonitor International, 2011. 12
  14. 14. “A man travels the Shifting sector advantage to China for regional and global businesses. Given the region’s varying With the exception of Singapore, world in search of the South East Asian nations have levels of manufacturing sophistication, we expect to see a build up of an eco- traditionally relied on their rich natural what he needs and resources to drive economic growth. system in which certain economies will continue to focus and improve The relative size of these sectors (i.e. their core manufacturing capability returns home to agriculture, mining and utilities) in certain economies, such as Brunei while others will continuously advance towards higher value-add find it.” 8 Darussalam, Cambodia, Laos, Malaysia manufacturing. In parallel, Malaysia, and Myanmar will continue to offer the Philippines and Singapore are opportunities for investors. building a strong services sector by driving investments and business The push for infrastructure activities in industries such as financial improvement region-wide to services, information technology, improve ease of doing business tourism and business services. and productivity will also drive investments, particularly The increased focus and facilitation in construction, transport for specialised manufacturing hubs and communications. and regional services industries could enable South East Asia to diversify its Our analysis reveals that the region is future economic growth model. increasingly shifting its comparative advantage from the primary sector towards export manufacturing and high value-add services [see figure 7]. The potential of the region’s manufacturing sector, across the ASEAN 6 nations, positions it as an alternative production destination Figure 7: South East Asia GDP Sector Value-add Contribution 6% 4%Sector Value Weight Change 1989-2009 (as % of GDP) 2% Transport, storage, Manuf acturing communication 0% Other Activities (Financial & Construction Wholesale, Retail, Business Services -2% Restaurants, Hotels Mining, Utilities -4% -6% -8% Agriculture, Hunting, Forestry, Fishing -10% 0% 5% 10% 15% 20% 25% 30% 2009 Sector Value-add Contribution to GDP (%) Size of Bubble – 2009 Value-Add Contribution (US$) Source: Accenture Analysis of National Accounts Main Aggregates Database, United Nations Statistics Division, 2011. 13
  15. 15. Sub-regional growth 2. Manufacturing Local Attractions:clusters Establishing a single productionTaking into consideration the relative base across the ASEAN 6 could Building on strengthen the region’s manufacturingsector strengths and developmentpriorities across the 10 economies, capabilities. The manufacturing Complementary sector accounts for at least 25 perAccenture has identified severalgrowth opportunities at the sub- cent of Thailand’s output in 2009 Strengths and contributes to around 20 perregional level. Three sectoral growth South East Asian businesses and cent of Indonesia, Malaysia, theclusters deserve attention: global multinational corporations Philippines, Singapore and Vietnam’s with interests in the region do not GDP. Intra-regional collaboration1. Agriculture have to venture far to find high presents opportunities for utilising potential new destinations. SeveralOpportunities for joint intra-regional manufacturing complementarities, complementary strengths existdevelopment could involve taking e.g. inputs for specialised across South East Asian economiesadvantage of growth clusters across manufacturing can be produced that provide a foundation for strongspecific economies. For example, and supplied by low-cost locations economic growth, and thus potentialtransforming South East Asia’s four within the region. Reliance on for increased business activity:smallest economies (Brunei, Cambodia, imports from outside of the regionLaos and Myanmar) into the region’s could be significantly reduced. 1. Continuing cooperation betweenagricultural hub could increase export South East Asian nations will furthercapacity, while improving long-term 3. Services drive intra-regional trade, facilitatefood security across the region. Other intra-regional growth capital flows and strengthen economic opportunities exist in the mature reciprocity, all of which are crucialFurthermore, the Brunei Darussalam- to the region’s development. Labour services markets such as Singapore,Indonesia-Malaysia-Philippines East productivity, in particular, will Malaysia and to an extent, theASEAN Growth Area (BIMP-EAGA) determine the speed and ease of Philippines. These economies areinitiative will be implemented in regional economic advancement. building strong financial and businessmid-2011 to strengthen collaboration services industries, and will offerin agriculture and fisheries across 2. Adopting a diversified economic opportunities for greater specializationthe four countries. As part of growth model would strengthen the that can be exported to the rest of thethis initiative, the countries will region’s long-term competitiveness. region. For example, Singapore, withconsider trade facilitation measures A collective view and focused effort its strong education and biotechnologyand food regulation and control in stimulating potential sectoral hubs, can provide training and R&Dstandards to help reduce the cost of growth clusters across specific expertise across the region. The regionfood products and increase intra- economies provide joint development could also leverage the Philippines’regional trade in agriculture. opportunities that can accelerate strength and economies of scale in the provision of outsourcing services. regional growth prospects.If productivity trends remain at 2008levels, the region is expected to 3. The region is clearly aware of its The examples of sectoral ‘growthproduce US$27 billion in additional potential as an emerging economic clusters’ across specific economiesagricultural output by 2015. powerhouse, with governments provide opportunities for jointHowever, if average annual growth actively pursuing a regional development that can be appliedin agricultural labour productivity integration agenda that will clear to advance the regional economicwere to accelerate by just 1 per cent a path to a single market. development journey.over 2007–15, the region wouldgenerate an additional $10 billion per The South East Asian macro-economicyear by 2015. A boost in agricultural landscape provides vast opportunitiesproductivity would contribute to for regional business expansion,economic growth, lower food prices which are expected to fuel privateand improvement in rural incomes.7 consumption – a key economic driver. But the true potential lies in the highly diverse and rich social fabric of this region that signifies a continued evolution of a large consumer market. Understanding this complex market is a pre-requisite for businesses to assess the benefits of future consumerism in South East Asia for business growth. 14
  16. 16. “The great difference between voyages rests not with the ships, but with the people you meet on them.” 915
  17. 17. The South East Asian ConsumerSocial Fabric: Youthful population Asian landscape, an increasing number of people will choose to form a family The region’s population is projected toYoung, Educated, reach more than 650 million people at a later life stage. The region’s large younger population will have profound by 2020, half of which will be agedDiverse under 30 [see figure 8]. Although impact on future consumption across the region.The South East Asian region is a family-oriented social structures willrich and highly diverse collection continue to dominate the South Eastof distinct cultural values andnational identities, both of which Figure 8: South East Asia Population by Age Groupwill influence the developmentof a new consumer mindset. 120,000Consumers will play a critical role in 100,000driving economic growth in the region.Demographic shifts, including risingpurchasing power, a younger, better 80,000educated population and increasedurbanisation, will create a consumer 60,000market with distinct needs and strongbuying power. The fusion of different 40,000 Thousand Peoplesocial fabrics will open the door fornew business opportunities. 20,000 0 0-9 10-19 20-29 30-39 40-49 50-59 60-69 70+ Years old 2000 2010 2015 2020 Source: Accenture Analysis of data f rom Euromonitor International, 2011. 16
  18. 18. Income class transitions business models similar to those that expenditure category across South have proven to be successful in other East Asia. Those aged below 20 Expected future growth in consumer emerging markets (e.g., China, India). will drive demand for primary and expenditure indicates increasing secondary education. More than 380 maturity of the consumer market The growing affluence of the million people are expected to attain across South East Asia. Consumer upper-middle class in more mature at least primary education by 2020, expenditure growth will substantially economies such as Malaysia boosting literacy standards across the exceed historical levels, reaching and Singapore will become region. An increased number of adults US$1.5 trillion by 2020. Disposable increasingly important for the in the region are also expected to income levels are expected to increase region in driving demand for high- pursue higher education. – but the relative gap across the value products and services. economies will remain. The prevalence of larger households Transition of households from low to Distinct purchasing needs (four to five people) will continue to drive demand for essentials such as middle class10 income segments will and expectations housing, transport and food. With over be the catalyst for future domestic 40 per cent of the region’s population With their growing purchasing power, consumption [see figure 9]. continuing to live in rural areas, there consumers across the region will have a greater appetite for education, will be a higher demand for mobile The relative size of the middle class communications, although poor will help create aggregate purchasing household goods and services, communication and entertainment infrastructure in rural Indonesia, the power that will exceed that of the Philippines, Thailand and Vietnam may smaller premium income households. [see figure 10]. constrain wired connectivity. By 2020, middle class households Demand for premium products and across South East Asia will have an Consumers are also expected to invest services are expected to be driven aggregate purchasing power of at in health and financial security due from consumers in more mature least US$0.75 billion as compared to to the lack of a strong social security markets due to their higher income US$0.5 billion offered by households system in some countries. levels. For example, consumers in with greater than US$75,000 in annual Malaysia and Singapore have a disposable income. In summary, consumers in developing higher affinity to spend on high-end economies will direct a large portion Despite the healthy growth of the consumer electronics and household of their disposable income towards middle class, low-income households durables, medical and health- improving general living standards, will continue to be the backbone of related products, higher education, whereas mature markets will show a the region’s economy. This dominant entertainment and travel. growing propensity to save and build segment represents business wealth for the future [see figure 11]. A large young population will make opportunities that may be realised education the fastest-growing by adopting innovative and simpleFigure 9: ASEAN 6 – Number of Households by Annual Household Disposable Income 60,000 Middle Class Income Segments 50,000 40,000Number of Households (‘000s) 30,000 20,000 10,000 0 >US$100,000 >US$10,000 >US$15,000 >US$25,000 >US$35,000 >US$45,000 >US$55,000 >US$65,000 >US$75,000 >US$1,000 >US$2,500 >US$5,000 Annual Household Disposable Income Category 2000 2010 2015 2020 Source: Accenture Analysis of data f rom Euromonitor International, 2011. 17
  19. 19. Figure 10: Consumer Expenditure by Category, 2000–2020US$ Bn$400$350$300 2010-2020 CAGR:$250 8.2% 2010-2020 CAGR:$200 6.5% 2010-2020 CAGR: 10.2%$150 2010-2020 CAGR: 6.6%$100$50$0 Food and Beverages Health Goods and Financial Services Household Goods Communications Medical Services Clothing and and Services Alcohol and Leisure and Hotels and Recreation Education Insurance Transport Footwear Catering Housing Tobacco Others 2000 2010 2015 2020Source: Accenture Analysis of data f rom Euromonitor International, 2011.Figure 11: ASEAN 6 – Savings Ratio relative to Expenditure Growth, 2020 9% Size of Bubble – Average Household Disposable Income (US$) 8% Vietnam 7% 6% Indonesia 5% MalaysiaExpenditure Growth Philippines 4%(10Y 2020 CAGR) Thailand 3% Singapore 2% 1% 0% 5% 10% 15% 20% 25% 30% 35% 40% Savings Ratio, 2020 (Percentage of Disposable Income) Source: Accenture Analysis of data from Euromonitor International, 2011. 18
  20. 20. Figure 12: ASEAN 6 – Consumer AttributesAttributes Indonesia Malaysia Philippines Singapore Thailand VietnamExpenditure GrowthIncome GrowthAverage DisposableIncome SizePropensity to saveHousehold IncomeDistributionPotential Market SizeAgeEducationMobilityConnectivityUrbanisationRelevance High LowSource: Accenture AnalysisEvolution of a propensity to save, expenditure growth, household income distribution Givers Givers are aged 35-50, upper-Consumption and potential market size expected by 2020 [see figure 12]. Based on these middle class consumers with a busy professional life. They tend to beCulture attributes, we predict the evolution of seven key consumer segments in the married with young children with livesWith the continuing role of region by 2020: revolving around work and family. Mostconsumption in driving economic of their leisure time is spent with family and their spending too is focused ongrowth across South East Asia, it is Premium Silvers the long-term welfare of the family.critical to gain a better understandingof the common consumer attributes They may be aged 60+ and retired, but They focus on saving for the future.across the region. Understanding Premium Silvers are still leading full, healthy lives. Their high disposable This sizable segment with highthese attributes will assist businesses income allows them to cultivate disposable income is representedin tailoring their products and new hobbies and stay active in the across ASEAN 6 nations by 2020,services to meet the expectations community. They may be affluent with relatively higher concentration inof different consumer segments, but they spend their money wisely, Malaysia and Indonesia.and test the extent to which similarsegments can be targeted using preferring to buy things that offera common business model. good value. As they get older, Premium Opportunists Silvers are increasingly reliant on medical services and products. Opportunists belong to the hardBased on common demographic and working, above 35 years of agelifestyle shifts observed across the Though small in size, this segment consumers who live in rural or cityregion, Accenture has identified a has high disposable income. Well fringe areas. Most of them are marrieddistinct set of attributes that can represented across ASEAN 6 nations and have children. With low / nobe used to describe the South East by 2020, and particularly in Singapore education, they tend to rely on lowerAsian consumer of the future. These and Malaysia. incomes (<US$5,000 per annum) andattributes include age, education, may need to depend on social systemmobility, connectivity, urbanisation support at times. They have limited(where they live), income growth, spending power and will focus onaverage disposable income size, meeting their families essential needs.19
  21. 21. By 2020, the Opportunists will remainthe dominant segment across ASEAN, Young Connectors “Consumer profiles andwith high concentration in Indonesia, Technology dominates the lives of Young Connectors and they spend a behaviours are verythe Philippines and Vietnam. considerable portion of their income similar across certain and time on entertainment and media.New Royals As students aged 15 to 24, this money ASEAN countries, forThese are young singles earning ahealthy income from their high-flying, comes from allowances or part-time jobs. They use mobile devices to example, betweenwhite collar jobs. New Royals are aged connect to social networking sites so Laos and Cambodia,between 20 and 35 and well educated. they can stay connected with friends.Their independence allows them to and Singapore and This sizable segment is largelyseek new experiences through travelor employment opportunities. Personal dominated by Indonesia, the Malaysia. We haveenrichment is a significant buying Philippines and Vietnam given their higher concentration of younger similar tastebudsmotive with high brand affinity andlatest introductions. population of these countries by 2020. and a strong eatingGiven their propensity to spend, this Increasingly, large businesses in the out culture.”premium segment will be significant region are tailoring their products Lerssak Boonsongsup, Group Directorby 2020. New Royals can be found and services to meet the needs and of Global Supply Chain Management,across ASEAN 6 nations by 2020, expectations of the South East Asian Minor Food Groupwith relatively higher concentration in consumer. For example, Malaysian-Indonesia and Malaysia. based bank CIMB has provided an avenue for consumers such as the Givers and Value Seekers to startTrend Seekers saving and investing for the future.Trend Seekers are young singles Without the Sharia-compliant bankingwho are brand conscious and aspire products, the Muslim communities into be part of the ‘in-crowd’. With the region were not able to participatean average-paying job but high in banking activities for commercialpropensity to spend, they may have and religious reasons rely on credit to fund purchases attimes. Aged between 20 and 35, they To meet the growing demand fortend to place importance on following affordable air travel amongst thethe latest fashion trends. young and sophisticated travellers such as the New Royals, Air AsiaEven with a lower income threshold, launched its’ low-fare, long haulTrend Seekers will be an attractive proposition in 2007 with greatsegment given their relative size. success. The company’s continuedThough dominant in Indonesia, this focus on customer needs and valuesegment has fair representation creation is becoming more relevantacross Thailand, Malaysia, the to the South East Asian consumersPhilippines and Vietnam as well. as they seek to enrich their lives by exploring new travel destinationsValue Seekers within the region.The Value Seekers are aged 35-60 This is only the beginning: theconsumers who live in rural or city evolving consumer power and identityfringe areas, rising up to become across the region provide attractivethe new middle class. Most of them opportunities for businesses that areare married and have children. ready to understand the differencesAlthough not highly educated, and leverage similarities of the Souththey are determined to provide a East Asian consumer of the future.better life for their children. Withsome disposable income on hand,they tend to look for bargains andgood value for money purchases.The second largest segment by2020, Value Seekers can be foundmainly in Indonesia, Thailand,Vietnam and the Philippines. 20
  22. 22. “If you want to succeed you should strike out on new paths, rather than travel the worn paths of accepted success.” 1121
  23. 23. The Road Ahead: Growth Paths for theRegionYou’ve done the grand tour of SouthEast Asia and seen the major regional Economic Development – Growth priorities differ based on each South “ASEAN businesses areattractions. As a seasoned traveller, East Asian nation current stage of likely to expand towhat you really want to do is uncover economic development. Less maturethe hidden gems – the sights and markets need to focus on building meet China’s demandexperiences that are yet to bediscovered by the masses. basic infrastructure and institutional frameworks to lay a strong foundation needs. Strong oil andIn business as in travel, the key to for sustainable growth. The growth commodity prices offer agenda is applicable for moresuccess is the ability to recognise developed nations where increasing other stimulants foropportunities and capture those faster productivity and efficiency will enablethan competitors. Two emerging the respective economies to progress. region-centric or nicheforces are set to shape the futureof economic growth in the South expansion. PoliticalEast Asian region: market focus and and economic stabilityeconomic development imperatives. for countries in theMarket Focus - Economic growthin the region can be spurred by region is a precursorimproving individual nations’ globalcompetitiveness through further for ASEAN businessinvestments and specialization in expansion.”the respective economies. In parallel,a market focus that transcends Alan Hamzah Sendut, Chief Strategynational borders will enable Officer, Sime Darby BerhadSouth East Asia to build regionalcompetitiveness by leveragingon complementary strengths. 22
  24. 24. Based on these forces, four growth 2. Domestic specialisation 3. Regional scalepaths are projected [see figure 13]. This growth path involves leveraging Regional scale requires building mature sector capabilities to increase deeper ties with neighbouring1. Investment exports and improve competitiveness economies through investmentaccumulation against other Asian counterparts. in complementary capabilities to For example, Singapore is likely to improve productivity. An exampleInvestment accumulation involves leverage a highly skilled workforce to of this is the implementation ofaccelerating infrastructure continue developing a high value-add the BIMP-EAGA in mid-2011 todevelopment and social welfare manufacturing sector. The Philippines strengthen collaboration in theinvestments to increase economic and could build on its business process agriculture and fisheries industriessocial stability. For example, Vietnam outsourcing capabilities to become across relevant countries. Regionaland the Philippines are looking to the regional hub for these services. scale opportunities exist in agriculturebuild basic social services for the poor, Opportunities exist in low-cost and manufacturing. For thesewhile Indonesia requires infrastructure and specialised manufacturing, oil opportunities to come to fruition,to improve transportation and and gas, refineries, and IT services. there must be true economiccommunication. Opportunities exist Success depends on a commitment to reciprocity based on intra-regionalin construction, transportation and technology investments and on-going strengths; a commitment to buildinglogistics, basic healthcare, education innovation; access to labour with a regional industry support network;and financial services sectors. Critical specialised skills (either by building and a commitment to joint technologysuccess factors include access to domestic talent or importing skills); investments and on-going innovation.foreign capital; a commitment to and improving labour productivitybuilding well-developed transportation to create cost advantages within the 4. Consumerismand communications infrastructure; domestic in the provision of basic An opportunity exists to leverageeducation and health services; and the the purchasing power and commonestablishment of a stable and quality needs of consumers to fuel regionalinstitutional environment. domestic demand, while investing in services to strengthen regional comparative advantage. Key developments in this area include the implementation of a cross-borderFigure 13: Future Economic Growth Paths for South East Asia trading platform for retail investors in Singapore, Malaysia, Thailand and Grow the Philippines; and the development of a common tourism curriculum and competency standards for tourism professionals. Opportunities exist in tourism, financial services and telecommunications. However, Domestic Consumerism there needs to be a commitment to Specialisation servicing the ASEAN consumer as a single market; and liberalisation of the services sector to encourage moreDomestic Regional market competition. Accenture believes the future economic growth of the South East Investment Regional Asian region will require measures to Accumulation Scale strengthen domestic consumption; improve the investment climate and social infrastructure; develop the financial system; and deepen regional integration and cooperation. BuildSource: Accenture Analysis23