Asean is poised for post-pandemic inclusive growth and prosperity – here’s why

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Asean’s outlook remains promising and the region is well on track to become the world’s fourth largest economy by 2030.

World Economic Forum

The Covid-19 pandemic caused global investment activities to fall – due to economic uncertainties, lockdowns, supply chain disruptions and postponement of investment by multinational enterprises.

Asean also recorded a decline in foreign direct investment (FDI) in 2020 to US$137 billion, down from its highest-ever inflow of US$182 billion in 2019 when it was the largest recipient of FDI in the developing world.

Despite the decline, Asean remained an attractive investment destination.

The region’s share of global FDI rose from 11.9 per cent in 2019 to 13.7 per cent in 2020, while the intra-Asean share of FDI in the region increased from 12 per cent to 17 per cent.

Additionally, the longer-term trend shows that the value of international project finance in Asean has doubled from an annual average of US$37 billion in 2015-2017 to an annual average of US$74 billion in 2018-2020.

And the future looks bright. According to the first-of-its-kind Asean Development Outlook (ADO) report, the total combined GDP of 10 Asean countries in 2019 was valued at US$3.2 trillion – making Asean the fifth-largest economy in the world, well on track to become the fourth largest by 2030.

With a total population of about 700 million people, 61 per cent are under the age of 35 – and the majority of young people are embracing digital technologies into their daily activities.

The outlook remains promising, with coordinated pandemic response efforts and several key developments underway in the region.

Coordinated Pandemic Responses

Asean members took coordinated actions to respond to pandemic challenges, such as the Hanoi Plan of Action on Strengthening Asean Economic Cooperation and Supply Chain Connectivity in Response to the Covid-19 Pandemic.

Members collaborated on the flow of essential goods and enhanced the resilience of its supply chains and sourcing in the region.

This joint response was critical given how the concentration of FDI in Asean is connected to global value chain activities or regional production networks that involve intra- and inter-firm linkages.

To support recovery and resilience building, Asean launched the Covid-19 Asean Response Fund and cooperated with external partners on the Asean Centre for Public Health Emergencies and Emerging Diseases (ACPHEED) to enhance regional health security and to sustain Asean preparedness and resilience in the face of public health emergencies.

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