The Association of Southeast Asian Nations, also known as ASEAN, has a combined GDP of US$3.6 trillion in 2022. It would be the world’s fifth largest economy, if ASEAN was considered as a single country. Experts predict even greater growth for the region by 2030, where ASEAN will become the fourth largest economy, overtaking Germany and Japan in the process.
This explosive growth will be powered by a multitude of factors, one of which is the size of the growing middle class. Experts believe the middle-income segment in ASEAN will grow to 472 million by 2030. This will drive consumption and growth in the region for the foreseeable future.
Another factor behind ASEAN’s growth prospect lies in its labour force. The region is home to a young and growing labour force of 470 million people. This force will peak in 2050 in many countries, such as Indonesia, Malaysia, Vietnam and the Philippines.
As the population grows, more and more people will move from rural areas into urban areas, looking for jobs. The urban areas are likely to expand by about twice in size between 2010 and 2050 and will house an additional 73 million people by 2030.
Urbanisation is crucial to economic development. Defined as population shift from rural to urban areas, urbanisation has gone hand in hand with greater economic development and the rise of the middle class.
According to Bloomberg , the rate of urbanisation for developed economies, such as Japan and Singapore, is around 80% or higher. Several countries in Southeast Asia, such Indonesia, Thailand, Vietnam and the Philippines have urbanisation levels of around 50%. This means there is much room for growth in Southeast Asia, a trend many observers believe will be happening in the near future.
Rapid urbanisation however, comes at a cost to the environment. The region is already suffering from diverse environmental threats, such as worsening air quality, lack of access to clean water and the devastating effects of climate change.
Access to clean and safe water is a challenge for Southeast Asia, affecting around 110 million people. This issue is especially acute in Indonesia and the Philippines. According to water.org, 18 million Indonesians are water insecure, while some 11 million families in the Philippines lack access to clean and safe water.
Southeast Asia will also have to contend with a growing demand for energy. Already the world’s fourth largest energy consumer, rapid urbanisation will place greater stress on power generation. The region is also accountable for 70% of global carbon emissions. This proportion is likely to increase, as electricity consumption is set to double by 2040. Fossil fuels are used to fulfil 80% of its energy demands and the region may be responsible for higher carbon emissions in the future, unless there is a switch to renewable sources of energy.
Another worrying issue lies in the financial domain. About 225 million Southeast Asians do not have a bank account , locking them out of the digital economy. The region’s digital economy is set to hit US$100 billion in revenue and it will solidify the region’s prospects. More people should be able to tap on this latest wave of economic opportunity.
Some of the larger cities in Southeast Asia are also its most congested cities. Manila, Jakarta and Bangkok rank among the three most congested Southeast Asian cities in 2023, with commuters losing more than 100 hours a year stuck in traffic. The congestion is also responsible for deteriorating air and noise levels in the city.
Southeast Asia is also prone to the effects of climate change. It has one of the longest coastlines in the world at 234,000 kilometres, as well as an estimated 77% of the population living in coastal areas. This makes the region, home to a disproportionate number of coastal cities, one of the world’s most vulnerable regions to global warming and rising sea levels. Jakarta, Ho Chi Minh City and Bangkok are already slowly sinking into the ocean, due to excessive development.
small next-wave cities in the next 30 years, to accommodate the coming wave of growth and urbanisation.
For these cities, investments in social infrastructure will be vital. Technology providers and their co-creation partners can play a contributing role in the government’s plans for sustainable growth in these cities.
Investments in basic infrastructure should be prioritised. Water treatment and desalination facilities can help to resolve water access issues. Upgrades for the power generation infrastructure will help to meet future growth demands and a shift to renewable sources of energy should be a key agenda for the near future.
How can governments and urban planners rise to meet the demands of such rapid urbanisation? It is imperative l to adopt a holistic approach and work with external partners. Technology providers and their co-creation partners should actively contribute to the discussion, -leveraging diverse expertise and resources to bring collective action and cooperation in tackling the complexities of these social challenges.
Investments in basic infrastructure, such as water access and power generation, should be top priorities. Upgrades for the power generation infrastructure will help to meet future growth demands and a shift to renewable sources of energy should be a key agenda for the near future.
It is also vital for investments in digital finance, so that people can participate in the digital economy using their mobile phones for digital payments. Automation and smart factories will drive further growth in manufacturing, keeping ASEAN competitive in the long run.
Social infrastructure is a key focus for many countries at the regional level too. The ASEAN Connectivity 2025 Master Plan clearly highlights the need for social infrastructure. Support for such investments is also available through the ASEAN Infrastructure Fund.
Sustainability is also a target many countries are working towards. At the regional level, multiple cities are proactively joining climate initiatives such as the ASEAN Smart Cities Network. The Asian Development Bank has also launched the ASEAN Catalytic Green Finance Facility, encouraging countries to go green.
Hitachi is a firm believer in technology. When applied to social problems, technology can build a sustainable future and elevate the quality of life for everyone in the region. Hitachi is also walking together with Southeast Asia on the path towards decarbonisation, helping to relieve water access issues, modernising its power grid and switching to renewable sources of energy.
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