Rollercoaster ride for South-east Asia as opportunities mount amid superpower spat

IT is not just the US and Europe that have been experiencing waves of political and economic uncertainty over the last year - Asia-Pacific has encountered its own fair share too.

Though this part of the world has endured a rollercoaster ride in 2018, we continue to see sustained growth allied with strong opportunities in the years to come.

The trade war between China and the US is creating vast uncertainty in the region. We are thankful to see the truce agreed by both countries because as South-east Asia is an integral part of the Chinese supply chain, we are very exposed to this trade war, especially with inter-regional trade accounting for almost 60 per cent of its overall business.

Many "Made in China" products have components or raw materials sourced from South-east Asia, and so slowing American demand caused by the higher prices of Chinese imports is bound to have an effect on South-east Asian suppliers.

From solar panels and washing machines to aircraft parts, medical devices and various raw materials, China faces steep tariffs on its imports to the US. It has responded by increasing its own levies on most of the American goods shipped into the country, such as a 25 per cent duty on soyabeans.

If the trade war continues in 2019, we need to be aware that there are opportunities available. Put simply, South-east Asian exporters can benefit if they are able to replace Chinese goods on the American market through their own exports, while also supplanting American goods on the Chinese market.

This may result in greater investments in high-value manufacturing in South-east Asia, which will contribute to boosting the economies and middle classes of the region. The prospect of countries in South-east and East Asia moving towards a self-sustaining economic entity with its own business cycle is promising, and could lead to greater supply of goods for regional consumption.

Anecdotally at least, we see US and other international companies pursuing an "Asia Strategy" in their fulfilment plans but weary of relying solely on China amid the trade tensions allocating more of their production to South-east Asia.

INFRASTRUCTURE NEED IN S-E ASIA

Once welcomed across South-east Asia as a means to fill critical gaps in infrastructure, there have been growing doubts about China's much-vaunted Belt and Road Initiative. Several plans and mega projects have been put on hold, and while it is debatable on how usful some may be, Asean is sorely in need of infrastructure growth to help connect our economies and further enable easier trade and better prosperity in the region. The Asian Development Bank estimates US$2.8 trillion of new infrastructure is needed in South-east Asia by 2030 and we are looking forward to the possibility that the US and Japan will expand their investment drive into the region, even if it is partially fuelled by the desire to mitigate China's influence here.

As we move into 2019, I hope that South-east Asian export businesses will be nimble and ready to take advantage of any volatility brought on by the disagreements of giants in our backyard. I believe strongly that Asean's integration is key to our continued prosperity and has been a key ingredient in keeping our region peaceful, attracting both foreign and local investment, improving global supply chains and bringing an extraordinary number of people out of poverty.

Within Asean, there has been renewed commitment to continue developing regional economic integration as the bloc continues on its path to become the fourth-biggest economy in the world after China, the European Union and the US.

With policies that unite countries, rather than driving them further apart, South-east Asian nations are in a position to thrive even amid all the global and regional uncertainty we have been experiencing in the past year.