VIP Welcome for Southeast Asia at Davos

Although the global economic outlook remains uncertain, attendees at the World Economic Forum (WEF) in Davos were keen to highlight Asia’s attractions.

The 53rd WEF meeting in Davos, Switzerland, themed Cooperation in a Fragmented World, was attended by 2,700 representatives from 130 countries. The gathering is often dominated by acronyms. At the turn of the century, everyone wanted to talk about the BRIC economies – Brazil, Russia, India, and China – that had been identified as rising economic powers. However, this year the BRICs were being outclassed by the VIPs – Vietnam, Indonesia, and the Philippines.

While much of the world is resigned to seeing growth hampered by inflation, rising interest rates, and geopolitical conflict, the Association of Southeast Asian Nations (ASEAN) trading bloc is expected to buck the trend. Made up of 10 countries – Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam – with a combined population of 664 million,  analysts predict that ASEAN will see gross domestic product (GDP) growth of 5.2% this year.

That optimism is reflected in comments by chief executives, such as Unilever’s Alan Jope, who told Yahoo Finance that his company is “Very bullish on South Asia.” He added, “Vietnam, Indonesia, the Philippines and Thailand are starting to come back strongly.” Also, Indonesia’s coordinating minister for maritime affairs, Luhut Pandjaitan, observed that “Thailand, Vietnam, the Philippines and Indonesia are doing pretty good this time.”

ASEAN at the heart of Asia

The Pulling Power of ASEAN session on 18 January highlighted the health of Southeast Asia’s economies. What came through clearly from the panellists was the importance of the trading bloc, both at the heart of economic expansion in the region and physically, given it sits at the crossroads between the East and West. Pandjaitan also described ASEAN as “the epicentre of growth” in Asia and highlighted its confidence, solidarity, and stability.

Yet, the region can also act as a bridge between China and the US. “We are trying to be as neutral as we can,” said Anutin Charnvirakul, Thailand’s deputy prime minister and minister of public health, speaking of tensions between the two countries. It is certainly proving beneficial. Trade between ASEAN and China rose 29% to US$669 billion in 2021. Meanwhile, the exchange of goods and services between ASEAN and the US reached US$362.2 billion in 2020, according to the Office of the United States Trade Representative.

“If you look geographically at the formation of ASEAN countries, we are the only region that connects the West with the East,” continued Charnvirakul. “Nobody could pierce through the eastern hemisphere without passing through ASEAN.”

Vietnam steps up

Although there was no high-level political representation from Vietnam at Davos this year, the country was very much in the business community’s mind. Within the ASEAN bloc, Vietnam is expected to be the fastest-growing economy, with the Organisation for Economic Co-operation and Development predicting growth of 6.9% in 2023 as it capitalises on being the largest ASEAN trading partner of China, the US, and the EU.

Vietnam’s bullishness also comes at the expense of China. The message from Beijing was that it had shrugged off the lockdowns imposed by the pandemic. “China’s door to the outside will only open wider,” said China’s vice premier Liu He, addressing the forum on 17 January.

However, delegates felt this was an attempt to shore up an economically challenging 2022 that had seen some of the weakest figures in 50 years. China’s GDP growth last year was only 3%, missing expectations of 5.5%.

As China’s growth slips, Vietnam has stepped up. It is using its lower-cost base and harnessing supportive government policies to become a preferred regional manufacturing centre for several industries, especially high-tech. Apple and Samsung, for example, have moved elements of their production to the country in recent years.

The positivity for Vietnam and ASEAN that came out of Davos suggests that this sentiment is unlikely to change any time soon.