NEW YORK – By the end of this decade, ASEAN is projected to become the world’s fourth-largest economy, a shift driven by a youthful population, fast-urbanizing cities and accelerating digital adoption. Economists at the World Bank and the International Monetary Fund have pointed to Southeast Asia as one of the few regions likely to deliver above-average global growth amid slowing economies elsewhere.
At the center of that optimism is the region’s digital economy, expected to more than double to $560 billion by 2030, according to regional forecasts cited by governments and multilateral lenders. But leaders and investors increasingly agree that favorable demographics and technology alone will not be enough.
Beyond Growth Projections
ASEAN — comprising Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Viet Nam — faces a defining challenge: how to convert headline growth into durable, inclusive prosperity. With global politics tilting toward fragmentation, regional cooperation has taken on new urgency.
“Scale matters,” said a senior Southeast Asian policymaker at a recent regional forum. “An inclusive economy is how we build companies, jobs and innovation that last.”
That emphasis has shaped policy debates around harmonizing regulations, reducing non-tariff barriers and boosting intra-ASEAN trade. Business groups have also renewed calls for an ASEAN Business Entity framework, which would allow companies to operate more seamlessly across borders — a move analysts say could materially raise productivity and investment.
A Testing Ground for Leapfrogging
Southeast Asia’s ability to leapfrog older technologies has already become a hallmark of its development path. In Malaysia, YTL AI Labs recently introduced ILMU, a large language model developed in Bahasa Malaysia, signaling how domestic innovation can be built for local markets rather than imported wholesale.
Regional officials argue that such homegrown technologies, paired with stronger digital protections, could help governments, schools and businesses modernize while preserving data sovereignty.
The MSME Bottleneck
Nowhere is the need for coordinated action clearer than among micro, small and medium-sized enterprises. MSMEs account for more than 97 percent of businesses and about 85 percent of employment across Southeast Asia, according to the Asian Development Bank. In Malaysia alone, they contribute roughly 40 percent of gross domestic product.
These firms are also central to social mobility. By 2035, seven ASEAN countries are expected to be predominantly middle-class societies, creating a feedback loop between small-business growth, job creation and consumer demand.
Yet access to capital remains a persistent obstacle. As many as 60 percent of MSMEs in the region report difficulty securing financing, often because they lack formal credit histories or digital identities.
Capital, De-Risked
In response, private and public institutions have begun experimenting with blended-finance solutions. The Mastercard Impact Fund pledged $5 million in 2024 to help unlock up to $1 billion in lending through the Asian Development Bank, an approach designed to de-risk loans and bring more small firms into the formal financial system.
Development economists say such initiatives, while modest in headline terms, can have an outsized effect if replicated at scale. “Credit access is not just about money,” an ADB official said. “It’s about building trust, data and long-term participation in the economy.”
A Regional Bet
For ASEAN, the coming decade represents a test of whether inclusive growth can be engineered across diverse economies at once. The ingredients — youth, technology and entrepreneurial energy — are already present. The question, analysts say, is whether governments and businesses can align fast enough to turn promise into permanence.
If they do, Southeast Asia may not only become a larger economy, but a model for how growth can endure in an increasingly uncertain world. (hb)