Southeast Asia is one of the regions on the Asian continent that has very promising economic prospects. The interconnectedness between countries is a major factor in economic growth in Southeast Asia, especially member countries of the Association of Southeast Asian Nations (ASEAN).
With a population of 600 million, ASEAN is the world's third largest market share after China and India. Its strategic location at the crossroads of global trade makes this region the most open region in the world. Therefore, infrastructure development is very necessary to increase the economic potential in this region.
However, infrastructure has a major role in contributing to the ASEAN economy, but the commodity sector is still the mainstay sector that contributes the most to the economy in Southeast Asia, except for Brunei and Singapore.
Singapore with its economic progress has made the city-state a financial center in this region. Singapore forex broker is proof of the strength of Singapore's financial sector in Southeast Asia.
Main Factors of Southeast Asian Economy
A country's economic growth is closely related to the level of welfare of its people. Therefore, there are several factors that influence development and economic growth in a region. Below are some of the main factors that influence the economy in Southeast Asia.
- Strategic position
The geographical conditions of Southeast Asia, located between the Indian Ocean and the Pacific Ocean, make Southeast Asia a stopover for traders from countries all over the world.
- Foreign Direct Investment (FDI)
Stable and continuously growing foreign direct investment is also one of the important factors driving the economic growth of Southeast Asia.
- Domestic demand
Increasing and strong domestic demand is also one of the factors driving the economic growth of Southeast Asia.
- Labor availability
A large number of workers can give a positive and significant impression on economic growth in Southeast Asian countries.
- Capital investment
Capital investment is one form of investment that can drive the economy and play an important role in improving welfare in Southeast Asia
- Financial policy
Financial policies that are oriented towards macroeconomic stability have proven to be able to keep inflation low.
Southeast Asia as the Center of World Economic Growth
Southeast Asia has remained a major investment destination for global companies since the past until now. Some of the reasons why this region has grown into a world trade center include its abundant natural resources, tourism industry potential, and large population.
Southeast Asian economists believe that this region is still relevant as a center for world economic growth. This is evidenced by the economic growth of Southeast Asia which has improved somewhat in recent years. There are three aspects that are on the agenda of the central banks of ASEAN countries to face various challenges in the current global economy.
- First, further improving the macroeconomic mix to support stability, recovery and economic integration in the Southeast Asia region.
- Second, expanding the use of Regional Payment Connectivity (RPC) among ASEAN member countries.
- Third, strengthening financial resilience, including the use of domestic currencies to support cross-border trade and investment among ASEAN countries.
Impact of Climate Change on Southeast Asian Economy
The Southeast Asian region is known to have a variety of natural conditions that can support agricultural activities. Some of them, such as high rainfall, temperatures that are very suitable for farming, to fertile soil conditions.
Even so, Southeast Asia is a region that is very vulnerable to climate change, and this can have an impact on the economic perspective. Climate change that occurs in the future can have a major impact including on food sector production.
Therefore, Southeast Asian countries must immediately make a strategic plan to address the issue of climate change by making policies that aim to maintain the food sector and issuing fiscal policies to support climate change actions by providing tax incentives, such as tourism taxes, eliminating value-added taxes, and eliminating import duties on the renewable energy sector.