Of these five countries, China is responsible for about half their combined GDP. It is the second largest economy in the world today, after the USA and before Japan. That is if one does not take into consideration the combined GDP of the 27 EU countries, but only the GDP country by country.
Given China’s economic size, its potential of 1.3 billion consumers and its still fast net GDP growth of over 7% per year, it is a magnet for Foreign Direct Investment (FDI) in Asia from multinational companies.
China is not the only developing country in Asia drawing interest from investors: there is also India. It has the same potential of 1.3 billion consumers, but is some eight years behind in its economic development compared to China and growing a bit slower these days at about 5% net per year.
Still, India is an IT powerhouse, not least in the city of Bangalore where most of the top IT multinationals have very large subsidiaries; some even have their Asian HQs there. India, too, is a major recipient of FDI in Asia and the world.
Are China and India the only two places to invest in developing asia?
Not really. there is also Indonesia with its 250 million people. then you have Malaysia, Thailand and Vietnam. Hasn’t President Obama visited Myanmar lately? We should not forget about Cambodia, laos and the Philippines. Of course there is also the city-state of Singapore, home to a lot of Asian or South-east Asian multinational regional HQs, and famous for its ‘can do’ spirit. Add the tiny state of Brunei and you have all 10 Asian countries that have grouped themselves in ASEAN (Association of South-east Asian Nations).
ASEAN saw the light in 1967. Myanmar, Cambodia and laos were the last countries to join in 1997. These 10 ASEAN countries have a total population of over 560 million souls. Their combined GDP is about 20% larger than that of India and roughly twice that of South Korea.
In 2003 the ASEAN countries signed the ‘treaty of bali’ with the aim of becoming an economic union by 2020. This is a group of countries to be reckoned with.
It must be said that the recent financial, economic and political instability in the EU has drawn their attention. The leaders now want to make sure that ASEAN does not move too fast, and that all the member countries are ready to move together to the next stage. But the aim of further economic integration has not altered.
For European and USA multinationals ASEAN should be the third way of engaging with developing Asia.
On purpose, I have not yet focused attention on Japan and South Korea in this article. One of the main reasons is that those countries should be considered as developed countries, not developing ones. Furthermore, both countries, and Japan in particular, have understood the importance of ASEAN for well over a decade. As insiders in Asia they were among the first to invest there and reap profits from those investments.
The easy inroad into ASEAN has long been the city-state of Singapore with its excellent infrastructure, administration and the quality of its workforce. Lately, it is being challenged to some extent by Bangkok in Thailand and, to a lesser extent, by Kuala Lumpur in Malaysia. I trust by now you can agree that there is much more to investing in developing Asia than simply targeting the two usual suspects, China and India. Join the Japanese and Korean companies in taking advantage of the growth and potential of ASEAN, as a third way to engage with developing Asia.