The Singapore Summit gathers key stakeholders that share a common interest in Asia's continued forward progress. Like you, I have an unwavering faith in its future. Many people remain anxious about short-term, global headwinds and their impact in the region. But commitment to a 'Rising Asia' requires we pivot away from "state of the markets today" thinking and instead focus on the fundamentals. By doing so, we drown out unnecessary noise and uncover real opportunity. Financing that opportunity with patient capital and with investment return goals that include the long-term advancement of inclusive economic growth is critical to the region's future. In the end, a more holistic investment approach will take us from simply looking for ways to capitalize on opportunities today, to helping seed future opportunities in one of the most dynamic parts of the world.
As an investor in ASEAN and Subcontinent growth markets, my conviction about the potential of Emerging Asia rests first and foremost on its undeniable fundamentals. Real economic growth, no matter the geography, is driven by long-term structural factors including a growing population, favorable demographics, and urbanization. Asia is blessed with an abundance of riches in this regard.
For example, if ASEAN were a country, its young population would be the third largest in the world (only behind China and India), and its economy the seventh largest in the world. ASEAN is set for robust GDP growth of over five percent between now and 2025, higher than almost every OECD country. Over 280 million people will join the middle class between 2010 and 2030, representing more than a two and half times increase. As with many global growth markets, the economic map in ASEAN is about cities and not countries. Cities are the locus of economic activity, and especially, consumer activity, in the modern world. They drive economic growth for the entire region. Not surprisingly, just five cities across the ASEAN 5 - Jakarta, Kuala Lumpur, Bangkok, Manila, and Ho Chi Minh City - represent 33% of the region's total GDP.
Similarly, positive fundamentals in South Asia related to demographics, hyper-urbanization, and a burgeoning consumer class suggest a very positive environment for investment. South Asia has been the fastest growing region in eight out of the last ten years. Nearly 50% of South Asia's population is under 25, and the region is set to add more than 125 million people to the global labor force over the next 10 years, more than any other region. Private consumption in South Asia is growing eight to ten times faster than the OECD and represents 67% of total GDP. India and Pakistan are emerging amongst the top ten middle income contributing nations and South Asia's urban population is poised to grow by 250 million people by 2030.
Investing for the Long-Term
Where does this lead us? I believe that too much of investment and business decision making around the world is driven by short-termism and the need to maximize returns as quickly as possible. Viewed from that lens, shallow public markets in Emerging Asia and their volatility are drawbacks. But public markets do not conclusively reflect the state of the underlying economy. We have seen from our investment experience that fast growing sectors in Emerging Asia that are under-represented in public markets, including financing, transport & logistics, healthcare & education, and food & beverage, present real opportunities. Consumer-facing businesses in these areas are ideal for long-term, partnership capital investment.
Long-term investment not only rewards the patient investor but it is valued and goes further because it helps address persistent problems in the economy. It may seem obvious but patient capital unlocks investment in product improvement, ensures fair wages for employees, and drives research and development, all of which leads to more inclusive growth. This type of approach can have an outsized influence in Asian growth markets. When we think of India, the same demographic dividend that provides a booming consumer class also includes one million people in India who turn 18 every month, all of them searching for economic opportunity. Extracting investment returns from a growing consumer class must go hand in hand with ensuring this young, working-age population is productively employed. Private sector investment in these countries, if channeled properly, has a key role to play in this endeavor. Investments that employ these populations and put money in their pockets will naturally lead to more consumers. Consumers that will be loyal customers for a generation and one investors should expect to engage for a generation.
Arif Naqvi is the Founder and Group Chief Executive of The Abraaj Group, a global investor operating in Asia, Africa, Latin America, Middle East and Turkey.