AS the world braces for an economic slowdown in 2023, we believe Asean will hold its weight, with many economies in the region coming in for a soft landing.
Taking a longer lens, we see Asean growing into an economic powerhouse, fuelled by recent developments across the economic and investment space.
We are particularly encouraged by investment flows into Asean.
The latest United Nations Conference on Trade and Development (Unctad) report on Asean investments showed that inflows of foreign direct investment (FDI) into the region rose 42 per cent in 2021 to US$174 billion.
Second only to China, the rebound in FDI underscores confidence in Asean, which has emerged resiliently from the pandemic.
Asean is well-positioned to take on a more significant role in an increasingly multi-polar world, where manufacturing is more fragmented and geographic diversification is more critical in business, investment and wealth management.
Recall how the “Four Asian Tigers” – Hong Kong, Singapore, South Korea, and Taiwan – underwent rapid industrialisation, catalysed by FDI inflows, and attained high GDP growth rates of more than 7 per cent a year.
Today, Asean is the fifth largest economy in the world, with a GDP of US$3.1 trillion.
We expect Asean to surpass Germany and rise to the fourth place by 2030, with GDP more than doubling to US$6.6 trillion.
Meanwhile, Asean’s middle income population is anticipated to grow from 172 million in 2010 to 472 million in 2030.
Hence, as the developed world grapples with slower economic and productivity growth, Asean provides enormous opportunities via its demographic dividends in three key areas.
First, the relatively young Asean population will grow from 654 million in 2018 to 726 million in 2030. At a size of half the Chinese population, this will be a massive market that the world cannot ignore.
Second, the United Nations forecast predicts that Asean’s urbanisation rate will increase strongly from 49 per cent in 2018 to 56 per cent in 2030, and further to 66 per cent by 2050.
A growing population with higher levels of education due to urbanisation will generate greater FDI inflows, driven by higher productivity growth, above global average GDP growth, technological transfer, and the creation of indigenous industries.
Third, Asean’s participation in the Regional Comprehensive Economic Partnership (RCEP) – the world’s largest trade agreement – will bring about a virtuous cycle of global investment and talent flows into this region. This will inject fresh assets under management (AUM), create new Asean wealth, and enlarge the wealth management pie.
With more investment and trade flows into Asean, there will be increased opportunities in wealth management. And private banks serving high-net-worth individuals (HNWI) must stand ready to capture market share in this developing story.
Singapore’s role in the Asean wealth phenomenon
Without doubt, Asia has become the most significant node for wealth generation among HNWIs and family businesses in the 21st century.
The Boston Consulting Group (BCG) projected that Asean, China and India would lead this growth – and Singapore will play a pivotal role.
Over the years, Singapore has developed the right conditions to become the gateway for global connectivity.
With an established network of 27 implemented free trade agreements (FTA), Singapore-based exporters and investors stand to benefit from tariff concessions, preferential access to certain sectors, faster entry into markets and intellectual property (IP) protection.
Alongside this growth, the number of family offices here quintupled between 2017 and 2019. The Singapore Economic Development Board (EDB) cited four strong enabling factors that family offices and businesses look for when selecting Singapore: trust, knowledge, connectivity and liveability.
Seizing opportunities in the region
The potential of Asean is apparent. But private banks will need to take steps to fully capitalise the wealth from the region.
Wealthy clients have a desire to preserve, grow and pass on their wealth, but they are faced with market elements that may erode the intrinsic value of their portfolio.
They need regional solutions to diversify and grow their portfolios, while de-risking their holdings across countries.
While most private banks are able to meet their complex wealth needs within the banks’ domiciles, this capability diminishes once overseas.
This growing demand necessitates private banks to offer more robust solutions to serve clients’ varied needs across Asean.
For example, UOB set up a Foreign Direct Investment Advisory (FDIA) team in 2011 in response to the rising cross-border investments by global and Asian companies. Located in 10 cities in Asia, the team provides a comprehensive one-stop platform to support our clients who wish to expand their business into Asean.
Over more than a decade, the team has supported 3,800 companies as they expanded into South-east Asia – enabling the creation of more than 176,000 jobs and a projected investment value of S$41 billion.
During the Covid-19 pandemic, when strict travel limitations and quarantines were imposed, UOB also helped clients with other needs, such as working with local authorities to secure work permit quotas.
Such collaborations enable clients to benefit from the bank’s strength and regional presence, and enjoy holistic support for both their wealth management and business needs.
This is an important capability that clients appreciate, and one which private banks must seek to build as the needs of Asean’s wealth clients change.
Source : TheBusinessTimes