Southeast Asia's growing prominence in world trade

Southeast Asia, although geographically large, covering an area of around 5 million square miles, is comparatively small economically in relation to the number of people that inhabit the area. The Southeast Asian region is home to over 500 million people and yet the region’s GDP is just US$1.5 trillion, or around US$2,500 per person annually.

But, Southeast Asia, wedged between northern Asia and Australia, two regions that have stayed relatively clear of the global financial crisis, is experiencing strong growth of its own and is in many ways leading the world economy out of current worldwide recession. Countries such as Vietnam and Laos, widely regarded as under-developed agricultural economies, are taking steps to reform their financial systems and invest in infrastructure to build an industrial base.

Southeast Asia news media recently reported that Laos was considering the establishment of a stock exchange, which it was hoped would inject foreign currency into the economy in order for the government to fund a massive mining development project. Another new mining project underway is the Tampakan copper-gold porphyry in the Philippines, which over the next 40 years is expected to contribute over US$37 billion to the Philippine economy.

The mine’s copper reserves are massive, recently reported by Southeast Asia news provider Manila Bulletin  to be the largest ever found in Southeast Asia. Once the mine is up and running in 2016, it is forecast to expand the country’s GDP by 1% on its own.

“It is projected that Tampakan would contribute an average of $2.7 billion each year to the national GDP during construction and operations through its capital investments, purchases of goods and services, and payment of taxes and duties,” Mark Williams, SMI manager for the Philippines, told the Manila Bulletin. An open pit mining ban was recently imposed against Sagittarius Mines Inc (SMI) in the Philippines, but the company has told Southeast Asia business news outlets that this will be “ironed out” with local government.

In a sign of Southeast Asia’s global economic reach, it was recently reported that top delegated from Southeast Asian countries were touring Manipur and Mizoram in India’s under-developed northeast region as part of a project to better integrate the two massive economies and spur further development and investment. The northeast regions of India are resource rich, but lack adequate infrastructure for commercial activities.

Another sign of Southeast Asia’s growing economic significance is the underwater network cable being laid between the region and the United States in order to provide a direct link that does not have to be relayed through northern Asia. The 20,000 kilometre long cable will be laid from Malaysia and will pass through Singapore, Thailand, Brunei, Vietnam, Guam, Hong Kong, the Philippines, Hawaii and the West coast of the U.S.

The mammoth cost of US$500 million, is to be worth the investment which will provide a direct link between the two regions. Southeast Asia news reports have indicated that the cable network could be expanded in the future to link Australia, the South Pacific and Africa. Seventeen telecommunications companies were contracted to build the network, with significant help from Southeast Asian governments.

The cable is a physical manifestation of the ancient significance that Southeast Asia has always had in world trade. It was while Christopher Columbus was looking for a quicker way to reach this region that he stumbled upon the New World (now known as North America) and so changed the course of human development and history.

Southeast Asian became the heart of the world spice trade at a time when various spices were as significant as oil is today and even in present times, the city-state of Singapore, which emerged as a mere trading post in the previous century, is now one of the world’s financial centres.

The early emergence of Southeast Asia from the global recession is reflected in the region’s traditionally fairly fragile hotel sectors, which have seen stunning growth during the last year.

“The region is also leading growth in international tourist arrivals and passenger traffic, so if this trend continues, RevPAR may push past the US$100 level at some point this year. If this happens, the region will be achieving the best performances it has ever achieved,” said Alex Kyriakidis, Global Managing Partner of Tourism, Hospitality & Leisure at Deloitte, a firm that tracks and records changes in the performance of the world’s hospitality industry.

RevPar is an abbreviation for ‘revenue per available room’ and is a key performance metric when charting the growth or decline in a hotel sector or industry. When reported in US dollars, every single major Southeast Asian hotel sector from Bangkok to Jakarta to Manila, reported growth in all three key performance metrics (occupancy, average daily rates and RevPar).

With tourism arrivals increasing and supplementary industries benefiting from this growth, many countries, such as Thailand, Malaysia and Indonesia are seeing a spate of construction projects taking place as hotels and resorts are developed, which in turn will prop up additional market sectors that rely on or complement the construction sector.

The next few years therefore look interesting for the Southeast Asian region as it continues to grow economically and industrialise, following the example of powerhouses such as Singapore, Malaysia and Indonesia.