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Wharton dean says West underestimates Southeast Asia

The rise of the middle class and the anticipated influx of investment in infrastructure will make Southeast Asia one of the most important drivers of the global economy, but many in the West don’t recognize the significance of the region, the dean of the Wharton School of the University of Pennsylvania said in Bangkok last week.  
 
“Global companies and the rest of the global economies will increasingly look on this region as an engine for growth and the region of opportunity for international firms and exporters from around the world,” said Geoffrey Garrett, dean of Wharton, one of the world’s most prestigious business schools.
 
Recent trends support Garrett’s contention, as the major economies of Southeast Asia drew more foreign direct investment (FDI) than China for the second straight year in 2014, according to estimates released last week by the Thomson Reuters Foundation.
 
The combined FDI of Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam rose to a record US$128 billion last year. That exceeded the $119.56 billion that flowed into China.
 
The economic slowdown and higher costs of doing business in China have led Chinese companies to start looking overseas for manufacturing bases.  Some of the direct investment in Southeast Asia is increasingly coming from China.
 
“Rising wages in China are leading low-end manufacturers to look for other low-cost locations for their factories, with countries like Vietnam and the Philippines looking like attractive alternatives,” said Dan Martin, Asia economist at Capital Economics.
 
Despite the political uncertainties of recent years, Wharton’s Garrett said that Thailand has several solid advantages that should promote economic success over the medium and long term.
 
“Thailand is a crossroads of ASEAN (the Association of Southeast Asian Nations) and Asia.  It's a gateway to Asia.  It's a hub for Asia.  All of those words equate to enormous economic opportunity,’’ Garrett said.
 
Thailand’s growing middle class will be one cornerstone of its economic resurgence, but the dean stressed that the Kingdom must invest more in infrastructure to reach its economic and developmental potential.  That investment should ideally come from public-private partnerships.
 
“The potential here from half a million or more middle-class consumers is incredible, but to realize the full potential I think infrastructure is the key, and the government can unleash the potential of the society by involving the private sector in what we used to think of as public responsibility," Garret said.

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