Happy Sunday!

It’s been a pretty busy couple of weeks. I started winding down my Asia Director role for a US health food company where I was supposed to relocate to Singapore. I decided to stay in Australia with my partner instead. It’s one end and another beginning. It’s time to explore new opportunities and turn them into a real business!

I’ve also been talking to quite a few exporters interested in the Asian markets as well as importers interested in Australia. I realise that my real value-add to F&B companies is making their Operational Backend (Finance, Tech, Supply Chain, HR, Data) strong before they expand internationally. Sure I might help them find distributors but most of the work should be left to the local experts. More development to come…

SO MUCH happened in the last two weeks. We’ve had the Australian Prime Minister announcing Australia’s 2040 ASEAN Economic Strategy whilst visiting the region in person. We also had the ASEAN summit happen in Jakarta, and Biden visited Vietnam.

On the non-political front, we are seeing China’s demand for durian exploding and Jakarta soon to take over Tokyo as the world’s most populous city.

Without further due, let’s dive in and unpack!

Special Corners: Australia’s 2040 ASEAN Strategy

Every month or so, I will pick a topic and do a deep analysis relevant to SMEs.

In the 208-page PDF report released on 1 September, one diagram showing middle-class household growth (USD 15,000 p.a. or more) between 2022 and 2040 pretty much summarised why Australia is doing this. I repurposed it for an easier view and manually added China, the USA and the ASEAN total (excluding Brunei and Timor-Leste).

^{*Assume China grows 1.9% between 2022 and 2030, then halve it to extrapolate it to 2040 due to the slowing population growth.
**Assume the USA grows at a similar pace to Australia and Singapore.
***This is the household size that would have meaningful disposable income (USD 15,000 p.a. or more) so it is a better proxy than the total population.}

Key Insights

The more economic influence (and potentially political) will come from ASEAN:

• The whole of ASEAN (+111.4m) will grow more than China (+75m).

• It will have added 3x the American middle-class households (+32.7m).

• The whole of ASEAN (145.3m) will be almost as big as the USA (157.7m) even though they are only a quarter of the USA now (33.9m vs 125m).

• Indonesia (+50.1m) will have more growth than the USA (+32.7m).

Australia can and should position itself as a preferred regional partner while we still ‘punch above our weight’:

• Australian middle-income households (9.1m) are currently 27% of the total ASEAN (33.9m). This is impressive given that our 25m population is only 4% of ASEAN’s 600m.

• Compared to Australia’s total (9.1m), Indonesia will be 6x (63.1m), the Philippines will be 3x (30.2m), and Vietnam will be 2x (19.7m).

• The three largest countries (Indonesia, the Philippines, Vietnam) are showing a 10% CAGR.

• Australian households will still be sizeable at 11.4m in 2040 but our proportional influence would be much less compared to ASEAN’s 145.3m or 7%.

The following are four key insights that are extracted from a Lowy Institute’s article.

• Disconnect in Australia-ASEAN Relations: Despite ASEAN being the fifth-largest economy in the world, Australia's foreign direct investment (FDI) in the region is less than its FDI in New Zealand. This highlights a significant gap between Australia's trade and investment flows and the geo-economic importance of Southeast Asia.

• New Strategy for Engagement: The Australian government has launched a report, "Invested: Australia’s Southeast Asia Economic Strategy to 2040," signaling a new era of engagement. The report adopts a "whole of government" approach and focuses on unlocking private sector investment. An initial fund of $70.2 million has been allocated to set up "investment deal teams" in the region.

• Shift from Aid to Economic Partnership: Australia's relationship with Southeast Asia is transitioning from one based on aid and development to equal and strategic economic partnerships. Initiatives like the New Colombo Plan and the Trilateral Infrastructure Partnership (TIP) have aimed to build long-term economic and human connectivity.

• Challenges and Risks: The private sector perceives risks related to political instability, regulatory barriers, corruption, and currency fluctuation in the region. The strategy aims to build confidence for private sector engagement, possibly through mechanisms like political risk insurance.

Join me on this exciting journey to integrate further with the very neighbours that we should spend more time with!

Quote of the Week

“Symbolism often has its own substance in Southeast Asia, and the double upgrade is an illustration of that.”

— Dr. Prashanth Parameswaran from ASEAN Wonk on Biden’s historic visit to Vietnam and the subsequent upgrade of the bilateral relations to a Comprehensive Strategic Partnership. While terms like “allies” and “partners” may be used more loosely in some U.S. circles, Vietnam has a structured, hierarchical set of partnerships. An elevation like this one thus sends an important signal within Vietnam’s system about where its priorities lie that can substantively affect how cooperation advances in designated areas. Source

Statistics of the Week

• China accounts for 91% of the world's demand for durian and has imported $6 billion worth in the past two years. Source

• Indonesia’s proposed TikTok ban would have an immaterial impact on its eCommerce market where TikTok makes up 5% of the total $52B Gross Merchandise Value (GMV). Source

• Southeast Asia's mobility-as-a-service market, which includes two-wheeled vehicles for transport, is projected to grow by about 30% from 2022 to reach $29.1 billion in 2027. Source

Politics

• The recently held ASEAN summit in Jakarta, Indonesia highlighted the region’s effort to establish its sphere of influence and relevance via a two-pronged approach of strengthening relations with diverse external partners (Australia, Canada, Korea, Japan, USA) and focusing on internal cohesion and growth. Source

• ASEAN face challenges to shape their own threat perceptions and policies as demonstrated in the recent ASEAN-China Summit, led by Indonesia and Malaysia. Central issues such as the mutual trust deficit between ASEAN and China and ongoing maritime disputes in the South China Sea dominated the discussions. Source

• President Biden visited Vietnam to establish a "comprehensive strategic partnership" focused on technology and critical minerals, aiming to counter Chinese influence in the region. But the extent of its impact on defense and economic aspects remains uncertain, considering Vietnam's reliance on Russia for weapons and ongoing domestic debates on reform. Source

• Anwar Ibrahim's Malaysian government is facing credibility issues after former Prime Minister Najib Abdul Razak and 1MDB's old CEO Arul Kanda Kandasamy were acquitted of abuse of power charges. Source *_{1MBD was a Malaysian sovereign wealth fund with US$4B+ assets under management where perpetrators such as Razak, his wife and Jho Low systemically embezzled and diverted the entirety of the fund.}

Economy

• Jakarta is set to overtake Tokyo as the world’s most populous city by 2030. But its vast lack of infrastructure shown in its current rail network (5 commuter lines, 2 light rail lines, 1 metro line, and an airport rail link) is comparable to Tokyo whose land size is 3X. Even comparing Jakarta to Seoul whose land size (~600km² ) and populations (~10m) are very similar indicates how much work is up ahead. Source

• Foxconn and Luxshare, Apple’s major suppliers, to hire 25,000 migrant workers in Vietnam as part of the push to diversify the manufacturing base for some of the world’s largest brands. Source

• Airway is opening up in Vietnam with Vietnam Airlines’ announcement to commit to ordering 50 Boeing 737 MAX jets, enabling the national airline to meet market demand and expand its single-aisle fleet. Source

• Gojek will replace all gasoline-powered two-wheelers with electric motorbikes by 2030 as part of the Indonesian government's target of having 9 million electric motorcycles on the road. It also helps that electricity bills in Southeast Asian nations are lower than those in developed countries, partly because Indonesia, Thailand and Malaysia are rich in natural gas, coal and other resources. Source

• The new rules have been implemented from September 2023 regarding residence permits and visas for Indonesia. These new rules impact temporary (1–10 years) residence permits (ITAS) and permanent residence permits (ITAP), and they have implications for individuals seeking to work, invest, study, or engage in remote work in Indonesia. Source

Food & E-Commerce

• Thailand dominates ASEAN's durian export market, while other countries like the Philippines and Malaysia are seeking to expand their exports to China. Growers in Hainan, China, have started harvesting the country's first home-grown durian crop. Source

• Cross-border E-commerce still seems far for Indonesia whose recent proposed ban on TikTok aims to protect offline markets and prevent predatory pricing. is taking its innovation two steps back. TikTok, which has 2 million sellers in Indonesia, has previously said it had no plans to roll out a cross-border business in Indonesia after officials expressed concerns the firm's e-commerce push could flood the country with Chinese products. Source

Diagram of the Week: Implication of the proposed TikTok ban in Indonesia

Will the proposed ban on Social Commerce platforms affect brands operating in the following categories? Beauty & Personal Care is the most impacted and Food, Health & Wellness is the least impacted.