Executive Summary

In the bustling cities of Jakarta, Ho Chi Minh City and Manila, green-helmeted motorbike taxi drivers whizz past warung or sari-sari stores. The presence of homegrown technology decacorns - new businesses like Go-Jek or Grab worth more than $10 billion - alongside thriving traditional mom-and-pop stores best illustrates South- East Asia's vibrant growth story. As a market bloc, the 10 member states of the Association of Southeast Asian Nations (ASEAN) are on the cusp of a tremendous leap forward in socio-economic progress, but on their own terms. ASEAN will not simply be the next China or India. The economic and cultural backgrounds of each ASEAN market are heterogeneous, and while the region will see abundant opportunities, each country will take its own distinct path to growth.

ASEAN is the world's third most populous economy and over the next decade is expected to become the world's fourth largest. Domestic consumption, which powers roughly 60% of gross domestic product (GDP) today, is estimated to double to $4 trillion. Yet, as this growth story plays out, public and private-sector organizations will first need to address the immediate COVID-led health and umanitarian crisis and its implications, while finding longer- term solutions to structural problems of income inequality, ease of doing business, sustainability and job creation.

It would be an understatement to describe 2020 as a challenging year Like their counterparts around the world, government and business leaders in ASEAN face uncertainty as the COVID-19 pandemic disrupts economic activities and causes drastic changes in consumer behavior. As a sign of the huge impact, the Asian Development Bank (ADB) adjusted South-East Asian growth projections down to 1 % for 2020, although annual growth is expected to rebound to 5% in 2021, supported by positive macro-economic fundamentals.

As we look further into the future, ASEAN growth will be propelled by four mega-forces: favorable demographics; rising income levels; geopolitical shifts; and digital tailwinds. Over the next decade, ASEAN will see 140 million new consumers, representing 16% of the world's consumers - many of whom will make their first online purchase and buy their first luxury product. Income levels are rising, with regional GDP per capita expected to grow by an annual 4% (similar to the US) to $6,600 in 2030, causing many product categories to reach inflection points where consumption takes off. ASEAN will be a popular destination for foreign investment as multinationals rebalance supply chains to diversify geopolitical risk and make the most of the region's low-cost labour.

Rapid digital adoption in ASEAN will continue, spurred by digital native consumers, investor funding in technological innovations and government programs to support digital transformation. By 2030, there will be nearly 575 million internet users in the region, and digital will be ubiquitous in the daily consumption journey. As digital reaches the rural and low-income communities, it will remove barriers that inhibit small business growth and enable delivery of basic services such as healthcare, education and financial services. The COVID-19 pandemic has highlighted the urgency in providing under-served communities with digital access for obtaining health-related information and ordering essentials. It also has created a shift in government focus.

For example, two weeks after launching a program to reskill recent graduates and the unemployed, Indonesia's government shifted the focus to aiding workers who lost their jobs due to the pandemic.

There will be eight major consumption themes in ASEAN in 2030, such as the doubling of consumption and the blurring of the boundaries between premium and value shopping. Some of these themes will be accelerated by COVID-19, including digital adoption and shifting retail channels.

As the consumption landscape evolves over the next decade, public and private-sector leaders will face numerous opportunities and challenges. To unlock the region's full potential, stakeholders need to get a few things right:

1. Ensure efficient and effective recovery from COVID-19: On the health front, being vigilant with testing, effective prevention (including vaccination, when available) and treatment (including capability building for future pandemics). On the economic front, helping small businesses struggling to get back on their feet and providing stimulus and support to restart the devastated economy.

2. Focus on talent development and socio-economic inclusion: The next decade in ASEAN will see 40 million people reach working age, with digitalization disrupting the nature and number of jobs. An estimated 65% of children entering primary school today will end up doing a job that does not exist today." The COVID-19 pandemic will expedite the switch to automated services. It will be critical to create new jobs, reduce the skills gap, and provide access to education, healthcare and nutrition to ensure a competitive and healthy future workforce.

3. Upgrade infrastructure to support urbanization and resource management: Rapidly growing demand is pressuring ASEAN resources. Urban consumers struggle with heavy traffic, a lack of affordable housing and low security, while rural communities deal with poor logistics networks and connectivity. As sustainability concerns grow, ASEAN will also need to find alternative energy sources to coal and oil. Stakeholders will need to invest in hard and soft infrastructure and develop efficient resource-management capabilities.

One of the biggest sustainability issues facing ASEAN involves the huge accumulation of plastic waste. The region is the world's largest producer of mismanaged plastic waste, generating a staggering 30 times more than the US. For example, Singapore recycled only 4% of its plastic waste in 2018. As economies recover from the COVID-19 crisis, governments and businesses are likely to prioritize economic goals and the health and well-being of their citizens and employees over the environment. However, the recovery opens up the opportunity for creating a new vision for economic growth, one that considers the environmental consequences of every corporate and government action.

4. Push for open and integrated regulation, with a hyper-local approach: The region stands to gain from a more interconnected ASEAN with improved intra-regional flows of goods and services, investments, knowledge and human capital. However, stakeholders must bear in mind that there is no "single ASEAN". Macro and consumption themes will play out differently in each market, with product and policy localization a powerful differentiator. Achieving ASEAN's full potential growth in 2030 requires that all stakeholders deeply understand each market, build strong public-private partnerships and strike a hard balance between technology advancement and job creation, economic development and sustainability, as well as scale advantages and concentration of power. Businesses and governments have a unique opportunity to shape ASEAN's exciting growth story if they thoughtfully steer the region towards inclusive and sustainable consumption while also navigating the turbulence of the next decade.