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It’s time to rethink your Asean plan

Sushil Saluja,Chairman of TheCityUK’s ASEAN Market Advisory Group, and a senior managing director in Accenture’s Financial Services group | Sept. 23, 2015
According to Sushil Saluja, the AEC represents an enormous opportunity, and those who support the rising middle class, burgeoning SME sector and PPP projects will win the hearts (and financing opportunities) of a growing market.

As a middle class emerges in the region, so does demand for insurance. Compared with global standards, insurance penetration in ASEAN is still low. But it is growing - and marks an opportunity for global insurers to up their presence. SwissRe projects that total premiums in the Asean region will grow by an average of more than 7 percent a year up until 2017, compared with global increases of 4.5 percent a year during the past decade. 

Meanwhile banks could focus on the SME and trade-financing opportunities. ASEAN is a rapidly growing consumer market. We define the consuming class as individuals who earn more than US$3,500 annually, which is a minimum wage benchmarks used by governments in the region.  In this decade the consuming class will grow to 175 million people, according to Accenture research. We forecast spending will double, reaching US$2.3 trillion. This presents opportunities for small and medium-sized enterprises (SMEs) that are selling consumer goods. And in the domino effect of finance, that creates opportunities for banks that handle transaction banking and foreign exchange services. It is reasonable to forecast that a growing SME sector will not only boost the commercial banking sector, but also lead to more capital market activities as businesses expand and seek financing.

Foreign investors have long been attuned to the Public Private Partnership (PPP) potential in the region. And that isn't likely to abate as such arrangements will be key for funding new infrastructure, given estimated investment needs of US$60bn to US$100bn a year through to 2022 for the region. That presents ongoing opportunities for financial institutions globally.

Perhaps the most democratic of all potential opportunities is the chance to change the paradigm through internet and digital banking. We are in talks with both foreign banks that are revamping their offerings globally as well as regional banks ready to take the lead in developing new apps and mobile payment services. ASEAN is unquestionably a market ready for more digital services. Just consider Indonesia. Accenture's 2014 Digital Consumer Survey of 1,000 Indonesians found that 82of respondents own a smartphone. Given the remoteness of parts of the archipelago, digital services make far more sense than trying to expand banking by building more brick and mortar banks. And Indonesian consumers are hungry for new and innovative products: 41% of Indonesians either like to be the first to own, or try out latest products and services, according to the survey. In short, Indonesia is a market waiting for a first-mover. Singapore, which is arguably even more attuned to mobile services is also ripe for disruption.


Of course, there is scepticism in some corners. Some point out that the 2020 timescale for creating a semi-integrated financial market is not definitive, and national regulations could hamper cross-border payment integration. While this is a plausible counterargument, our experience talking to corporate executives in the region is that the aspiration is integration rather than isolation. When Accenture surveyed executives in the business community to get their first-hand perspective of the integration and potential for the region, confidence was indeed low that all of the AEC's measures will be implemented by the specified deadlines. But they did express strong enthusiasm that the AEC initiatives will open markets in which they can sell goods and services and position ASEAN as a destination for investment.


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