It wasn’t obvious that Southeast Asia would transform itself into the economic Optimus Prime it is today. After all, its parts hardly fit. Political regimes run the gamut from absolute monarchies to democracies to communism. The region is also a mash-up of some of the wealthiest nations in the world (Singapore and Brunei) and some of the most impoverished (Myanmar, Laos and Cambodia).
Critics predicted the demise of The Association of Southeast Asian Nations (ASEAN), a trade bloc consisting of Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Vietnam, Myanmar, Laos and Cambodia, when it was founded in 1967. Its members seemed to share little other than geography. But what a geography it is. Sitting on one of the world’s busiest shipping channels with a buffet of natural resources, Southeast Asia became a magnet for foreign investments and now makes its mark as an export-oriented, industrialised hub.
As the countries grew richer, so did their people. ASEAN’s combined population of over 630 million makes it the world’s third-largest market after China and India. Gross domestic product (GDP) per capita tops US$4,100, blowing past India’s US$1,580 and nearing China’s US$7,590 – a figure that Brunei, Singapore, Malaysia and have already surpassed.
Even Myanmar, which opened up to foreign players just seven years ago after an extended isolation under military rule, is now one of the fastest-expanding economies in Southeast Asia, along with Vietnam and the Philippines.
Like Southeast Asians’ favourite smartphones, much of the region’s investments have come from China. Rail lines, energy projects and other infrastructure across Malaysia, the Philippines, Thailand and Laos are running on Chinese Yuan.
Meanwhile, Reuters calculated that exports to China from Indonesia and Malaysia grew more than 40% in the first half of last year, while the hike in Singapore and Thailand was almost 30%.
The dependence could be a crouching tiger: economists warn of the region’s vulnerability to economic pressures from China. Thailand offers a cautionary tale. The country’s largest source of tourist arrivals is from China. However, the Chinese boycotted tourism to Thailand following a boat accident off the island of Phuket that killed many Chinese tourists in July. The trip cancellations are estimated to cost the Thai economy US$1.5 billion, according to economists at Nomura.
Speaking with your wallet
Southeast Asia does not need to draw the ire of China to make businesses nervous. In the wake of rising religious and nationalist sentiments, brands risk getting caught in the crosshairs of heightened sensitivity.
In Malaysia, for example, social media was abuzz last year with rumours accusing Cadbury chocolates and McDonald’s burgers of being unsuitable for Muslims, who make up 60% of the country’s consumers, even though both brands are certified halal.
Filipino and Vietnamese consumers have shunned products from China, in part due to territorial disputes. Indonesians are also known for their preference for homegrown brands. But a growing affluent and cosmopolitan class is breaking away from these behaviours. To them, all’s fair in (brand) love and (price) war.
The Southeast Asian consumer market is a jungle of diverse preferences and trends. But there is a similarity across the board – the burgeoning middle class who, while retaining bargain-hunting instincts, aspires to better-quality living.
In the wake of rising religious and nationalist sentiments, brands risk getting caught in the crosshairs of heightened sensitivity.
This means a penchant for international and premium brands, and an adventurous appetite for new products and innovation, as well as indulging in vacations and self-care.
A survey by the Hong Kong Trade Development Council (HKTDC) in 2017 showed that in six out of the seven cities across Southeast Asia, ‘travel and leisure’ is the top spending category for the past two years. This is usually followed by either the category of health, beauty and wellness, or consumer electronics.
Although local brands still dominate the regional market, 68% of respondents reported a preference for imported wares to domestic rivals.
Case in point – Vietnam. According to Campaign’s top 100 brands ranking for Vietnam last year, reigning local brands tumbled down the scoreboard while foreign ones like Samsung and Apple sit at the top.
But while they seek to trade up, Southeast Asians have little tolerance for put-downs from brands. Last year, for example, Watsons Malaysia came under fire for an ad that implied dark skin was inferior to fair skin. Its first apology, a textbook “we are sorry that some of our fans feel offended” attempt, was shot down as insincere and the drugstore chain had to re-apologise.
Other than respect, the increasingly sophisticated consumers demand ethical practices. A Nielsen study in 2015 showed that 80% of Southeast Asians are willing to pay more for sustainable products and services – the highest percentage in the world.
With great spending power, it seems, comes great social responsibility.