Six reasons why the future looks bright for the ASEAN energy market

As ASEAN (Association of Southeast Asian Nations) reaches its 50th year, there’s plenty to celebrate. Although the region has often been overlooked in favor of China and India, it’s set to emerge as the world’s fourth largest economy by 2050.

Investors are beginning to recognize the potential of this dynamic and diverse group of countries, ranging from the economic powerhouse of Singapore through to emerging nations like Laos and Myanmar.

Here are six reasons why the future’s looking bright for the ASEAN energy and commodities markets.

1) Fast-growing economy

The ‘Big-6’ ASEAN countries – Singapore, Thailand, Malaysia, Vietnam, the Philippines and Indonesia – averaged 5% GDP growth over the past five years. ASEAN is the third fastest-growing economy in the world, behind China and India, and its rate of growth is easily outpacing major Asia-Pacific economies Japan, South Korea and Australia. By comparison, Latin America’s eight largest economies grew just 1% over the same period.

2) Demographic advantage, untapped potential

The region’s combined population is projected to reach around 680 million within three years, and the number of participants in the workforce is set to grow significantly over the next few decades. The region also has a relatively young population, which bodes well for productivity and sustained growth: the median age is 28.9 years, compared to 46.5 years in Japan.

3) Digital revolution

Internet access is spreading fast, and internet penetration in ASEAN is now 53%, which is 3% above the global average. In 2016, internet use grew 31%, meaning 80 million new users in the past year. According to estimates, ASEAN’s ‘digital revolution’ could add $1 trillion to GDP by 2025.

4) Geographic advantage

ASEAN has a highly-developed financial market center in the form of Singapore, and the region’s proximity to the fast-growing markets and supply chains of larger Asian economies like China give it an edge. It stands to benefit from Beijing’s ambitious infrastructure programme, which is estimated at $60 billion annually for road, rail, power and water.

5) Fueling growth

A growing middle-class will generate demand for housing, infrastructure, goods and services, and energy and commodities will be required to underpin this growth. Energy demand in ASEAN is expected to increase by 50% over the next decade, motivating ASEAN to pursue aggressive plans to increase the share of renewables in the energy mix, aiming for 27% by 2025.

6) Untapped resources

One fifth of the population of ASEAN currently has no access to electricity. However, the region has under-exploited resources of natural gas, coal and renewable sources, and hope for deregulation is growing as relatively low oil prices make subsidies easier to remove.

Entering a new era

ASEAN includes countries with mature oil and gas industries, long-established LNG exporters, first generation biofuels producers and the world’s largest exporter of coal, Indonesia.

The region is expanding its global economic influence and entering an exciting new era that promises many opportunities. As ASEAN celebrates its 50th year, there are plenty of reasons to be optimistic about what lies ahead.

Download our full report to read more about the issues and themes applying to ASEAN in the energy and commodities markets, drawing upon forecasts and market intelligence from across the S&P Global group.

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