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Photo: Isaac Smith
Over the years, Southeast Asia has been a rapidly growing region worth paying attention to — the Malaysian Ringgit reached an all time high, signalling steady economic improvement for the country. This economic trend is present in other ASEAN nations too, and the outcome of this it seems, is European businesses being increasingly optimistic about the region, according to the 10th Edition of the EU-ASEAN Business Council’s poll.
About the EU-ASEAN Business Council
The EU-ASEAN Business Council is an organisation recognised both by the European Comission, and the ASEAN Secretariat and accredited in the ASEAN Charter. While recognised by these institutions, the EU-ASEAN Business Council is an independent body looking to improve trade and investment between the regions by advocating for European business interests and regulatory changes between the two.
The European Chambers of Commerce in ASEAN also worked with the EU-ASEAN Business Council for the poll, which aims to serve as a meter assessing key issues in Southeast Asia.
Region of opportunity
Every year, an increasing proportion of respondents firmly express an intentions to enter the Southeast Asian market. In 2024, 86% of respondents expecting their level of trade and investment in ASEAN markets to increase over the next 5 years, an increase from 84% in 2023.
Respondents intentions in Southeast Asia (Photo: EU-ASEAN Business Council)
These firms are drawn by the opportunities presented in Southeast Asia, where they can enter a rapidly developing economy and access a rapidly expanding consumer base.
Six out of ten respondents identified Southeast Asia as the region with the most significant economic potential over the next five years. However, respondents also showed interest in India and China, both of which are experiencing rapid development. These countries, with their billion-plus populations, also pose a strong appeal for companies looking for new markets.
Barriers to entry
Southeast Asia retains its crown, but paying attention to factors that may impede this optimism is crucial in retaining it. One such factor is the barriers to trade.
One major issue is the inefficiency of supply chains within ASEAN. A significant 88% of respondents highlighted this as a challenge, the highest figure since 2021. This rising concern underscores the urgency for ASEAN to improve infrastructure and efficiency to maintain its competitive edge.
Respondents are also worried about local products and services and if these align with European regulations. For instance, the upcoming EU Deforestation Regulation (EUDR) requires companies to ensure that products sold in the EU do not contribute to deforestation. As the regulation takes effect later this year, European businesses are increasingly concerned about compliance, potential cost increases, and the competitive disadvantages that may arise.
Closer alignments
Furthermore, law and policy often reflects the views of the societies that it serves. The EU’s increasingly stricter environmental, social, and government (ESG) regulations reflect the large importance placed on ESG. This means that the EU companies may look favourably on trading with markets that align with these values, with around 50% of respondents still viewing these regulations as positively impacting their business operations in ASEAN.
“ASEAN’s growth potential for European businesses remains unparalleled, boasting a rapidly expanding consumer base, strategic location at global trade crossroads, and a dynamic workforce,” Said Chris Humphrey, Executive Director of the EU-ASEAN Business Council.
“However, the slight dip in confidence indicates that regional complexities are becoming more pronounced. Without swift action to advance regional economic integration, ASEAN risks losing its competitive edge.”
Recommendations
To attempt to facilliate economic exchange between the EU and ASEAN, a Free Trade Agreement (FTA) may help. The report specifically cites how 88% respondents view the absence of such an agreement as disadvantageous to European companies as compared to companies from other regions.
What this means is that having such an agreement would help European businesses tap into Southeast Asia’s economic potential. To create such an agreement, responsdents seem to believe that European institutes need to step up. Six in ten respondents feel that European institutions need to increase their level of engagement to support European businesses in the region better.
Humphrey said, “There is also a clear need for stronger engagement from European institutions to support businesses in navigating these challenges and to ensure that ASEAN remains a leading hub for trade and investment.”
“European businesses are eager to fully capitalise on ASEAN’s immense potential, but they need stronger EU support. It’s time to decisively tap into ASEAN’s growth opportunities.”
