Connected growth: Asean and South Asia in 2037

This now seems a very long time ago. As 2017 draws to a close, let us reflect on the last two decades and envision what the next 20 years could be like. The recovery that followed the Asian financial crisis had been driven largely by domestic policy reforms, demographics in Asean and South Asia, and infrastructure investment in China. Corrective measures by governments strengthened the economic foundations. Over the past 20 years (1997-2016), GDP per capita across Asean-6 countries, as one example, had grown by 155 per cent. Indonesia’s sovereign rating is now investment grade.
So what will Asia look like in 2037, two decades from now? I believe the transformation over the next 20 years will be much more fundamental than the change seen over the last 20. Favourable demographics will continue to lift many Asian markets, but on top of this we have an unprecedented level of infrastructure investment transforming the region. And not just the obvious infrastructure – bridges, railroads, ports. But, perhaps more excitingly, digital infrastructure. Demographic lift plus physical and digital infrastructure will catapult the region to a new level of productivity and prosperity – if the risks can be managed.
Firstly, physical infrastructure: The era of physical infrastructure building has undoubtedly arrived. On the back of China’s Belt and Road initiative, the region is planning to build – and starting to construct – at an unprecedented pace. It is estimated that US$4-8 trillion of cumulative infrastructure investment will flow on the back of BRI over the long term. Although ambition has been there historically, governments are now putting their money and actions where their mouths are. At a recent Philippines investment forum, the finance team set out plans to more than double infrastructure investment from 3 per cent of GDP to 7 per cent of GDP within President Rodrigo Duterte’s term. When asked about implementation challenges, the Philippines’ Finance Minister quipped that delivery agencies needed to “use it or lose it – but which we mean not their budgets, but their jobs.”
Secondly, digital infrastructure: When India announced Aadhaar in 2009, few understood that digital identities were clearly the first step in digitising economies. Today, with over 1 billion Indians with Aadhaar digital identities, India has been able to move the unbanked into the banking system en masse, and then digitise payments in one big leap on the back of demonetisation. Other governments have been sending teams to India to study this transformation, believing economic efficiencies and higher tax takes on the back of greater transparency will quickly follow.
What this means is that by 2037 Asean and South Asia will be truly connected. From manufacturing to payments to delivery, the supply chain will always be only a click away. This connectivity will decrease inefficiencies and ultimately cement two decades of strong growth.
It’s also worth noting that connectivity does not just have upsides – there are risks we have to manage. To date, countries are building national payment systems and identity solutions – there are not enough cross-border points of connectivity. National tensions also exist – most clearly on the back of BRI between India and China. And finally, the ability to move seamlessly across digital and physical spaces create security challenges, of both the real and cyber varieties.
Despite these risks, the rewards will be worth it. Companies positioned to capitalise on the infrastructure and logistics booms will thrive. And the economic growth that follows will lift both individuals and countries to new levels of prosperity. Over the past 20 years, Asia has gone from crisis to growth hot spot. In the coming two decades, the growth hot spots will connect, creating a brighter and more sustainable future across the region.

Contributed by Anna Marrs, CEO of Standard Chartered Bank’s ASEAN and South Asia region