Finalist-PhilBlogAwards 2010

Finalist-PhilBlogAwards 2010
Finalist for society, politics, history blogs



Monday, January 20, 2014



Erle Frayne D. Argonza

Good day to you fellow global citizens!

ASEAN’s planned economic integration next year is getting too near for comfort. Excitement from diverse quarters concerning the unification in ASEAN and across the globe is growing, so let me share a note on the subject by focusing on its middle class.

Association of Southeast Asian Nations or ASEAN comprises a total population approaching 670 million as of end of 2013. Of that total, approximately 160 million belong to the Middle Income classification. Since the middle income families comprise the consumer base of a developing country, it is normally extendable to an entire region such as ASEAN to evaluate whether that region possesses the demand base for a truly prosperous and economically powerful region.

Middle Income classification for developing countries or DCs is pegged at U.S. $6,000-$30,000 annual family income. Earning beyond the $30,000 annual income in a DC is considered a fortune, qualifying the family thus for a ‘wealthy family’ status. While this middle income bracket is lower than those in the OECD countries, it is crucial for testing the future waters and catapulting a region to an economic power.

The approximate middle income composition of each member country of ASEAN is as follows:

Country                      Middle Income Persons (In Millions)
Singapore                                  5
Thailand                                     35
Malaysia                                    20
Philippines                                  20
Indonesia                                   60
Brunei                                       0.7
Vietnam                                     12
Myanmar/Burma                         5
Kampuchea                                1
Laos                                          0.5
TOTAL:                                      159.2 Million      

That total of 159.2 million is just rough, conservative estimate, based on my stock knowledge of previous reports about the region from the Asian Development Bank, UNDP, and thinktanks. Let’s round off the figure to 160 million for simplification.

The totality can actually easily move to 165 million with updated data on the subject. The 160 million alone suffices ASEAN’s middle class to be numerically at par with the USA’s middle class that stood at 160 million when the last presidential electoral campaign raged there.

The big challenges for the ASEAN and its member nations are (1) to increase the per capita or per family income of the middle income persons, and (2) to increase the number of middle income persons and/or families across the coming years, until at least half of the region’s population turns Middle Class. 

160 million is indeed large enough already as an aggregation of all the 10-member nations’ prosperous middle income earners. However, that is merely 1 out of every 4 ASEANian persons. Which means there are still vast numbers of families and persons down the income pyramid, hundreds of millions in the D & E classes in particular.

The good news is that ASEAN comprises of 1 Dragon Economy (Singapore), 1 Tiger Economy (Malaysia), and 4 Emerging Markets (Indonesia, Philippines, Thailand, Vietnam). Such dynamic economies more than offset the laggards in the region, namely Myanmar, Laos, and Kampuchea. Brunei is a special class that belongs to the wealthy Petro-dollar economies, with almost its entire people sufficiently provided for by the ruling dynasty.

Meeting the target of the Millenium Development Goal or MDG for poverty alleviation is indubitably the most urgent thing to accomplish. The neighboring countries can compare notes and share experiences on how to redistribute wealth equitably in vast quantities to the poor, a departure from the ‘trickle down’ approach that breeds more paradoxes of mass poverty amidst prospering economies.  

I will not hazard a recommendation such as adoption of Philippine’s Cash Transfer Program in the region. Such a strategy worked well in Brazil which now has over 50% of its families above the middle income threshold, but whether it will indeed work for the ASEAN poor is another thing.

Meantime, what is less risky a forecast is that the 160 million middle class will be a sustained base for consumption in the region. Sustained consumption at this juncture equates to Big Opportunity for any market interest group or person to surf the ‘economic sea’ here.

Direct Foreign Investments from all over the globe can surely be poured now in even colossal amounts with lesser risk and surefire gains. The ASEAN’s high levels of foreign exchange, banking & finance resources, and big middle class altogether comprise a formidable fortress that can easily hedge against volatilities in the North & West that cause capital flight from short-term capital, which should all the more magnetize investors from elsewhere.

[Manila, 20 January 2014]

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