Traditional financing avenues in Southeastern Asia have tightened up in the face of global economic headwinds in recent years. However, the region has also proved particularly resilient, with growth across sectors from textiles to tech and increased exports and intra-region trade. While traditional lenders have remained hesitant in a high-interest rate environment, alternative financing solutions, such as the equities-based options offered by EquitiesFirst, could help grow businesses in the region.
Economic Growth and Resilience Across the ASEAN
According to a recent McKinsey & Company report, countries across the Association of Southeast Asian Nations have experienced significant growth in 2024, displaying the potential that has led experts to predict that the region will be the world’s fourth-largest economy by 2030.
Vietnam’s economy in particular has surged ahead, posting 6.9% year-on-year growth in the second quarter of 2024. This acceleration from the previous quarter’s 5.6% growth brings the country closer to its ambitious target of 6% to 6.5% for the year. The manufacturing sector has been a critical driver, expanding by 11%, while the industry and services sectors have also shown robust performance, growing by 8.3% and 7.1% respectively.
Vietnam’s export sector continues to be a strong performer, growing at 12.5% in Q2 2024. However, the country still faces challenges, including rising inflation, which reached 4.08% year on year in Q2, up from 3.77% in the previous quarter.
The Philippines has also shown strong economic performance, with gross domestic product growth accelerating to 6.3% year on year in Q2 2024, up from 5.7% in the previous quarter. This puts the economy back on track to meet its full-year growth target of 6% to 7%. Government spending and investments have been key drivers, growing by 10.5% and 11.5% respectively.
Indonesia has maintained its growth momentum, posting a 5.05% year-on-year growth in Q2 2024. This marks the third straight quarter of above 5% expansion for Southeast Asia’s largest economy. Strong performance in industrial production and exports, coupled with steady private consumption, has supported this growth.
Malaysia recorded a solid second quarter as well. Economic growth accelerated to 5.9%, the highest since the start of 2023. Unemployment remains at a low of 3.3%, while industrial output expanded.
Singapore’s GDP grew at 2.9% year on year in Q2 2024, closely mirroring its first-quarter growth of 3.0%. The services sector, particularly finance, and insurance, wholesale trade, and info-comms, were top GDP contributors.
Thailand’s economy, while lagging behind its regional peers, showed signs of improvement. GDP growth accelerated to 2.3% in Q2, up from 1.6% in the previous quarter. Exports and production both returned to positive territory, growing at 4.5% and 0.2% respectively.
The Financing Crunch and Alternative Solutions
While these are encouraging signs, numerous businesses in Southeast Asia are currently facing a significant financing squeeze that threatens to hinder further expansion. Traditional financial institutions are notably hesitant to provide financing, as evidenced by a sharp drop in syndicated loan volume, which fell almost 40% year over year to a decade low in the second quarter of 2024.
Regional central banks have remained relatively cautious despite signs of growth, raising interest rates in response to the U.S. Federal Reserve’s rate increases in recent years. This financing squeeze can be felt especially acutely by small and medium-sized enterprises, which have historically faced significant funding gaps in the region.
In this challenging environment, alternative financing solutions could become an option for listed companies looking for short-term capital to ride the growth wave and further establish their companies moving forward.
For example, EquitiesFirst’s model allows founders and shareholders to leverage their equity holdings in publicly traded securities to obtain financing. This can enable listed companies to free up the liquidity needed to scale their operations while maintaining long-term exposure to equity positions.
The Potential Impact of Alternative Financing
The impact of alternative financing options like those offered by EquitiesFirst could be far-reaching.
They could play a role in bridging the financial inclusion gap in ASEAN. In offering flexible terms and considering nontraditional assets like equity holdings, these solutions could extend financing to businesses that have been historically underserved by traditional banking systems. This could lead to a more diverse and robust business ecosystem across the region, supporting economic diversification efforts such as the transition of resource-dependent economies toward knowledge-based and service-oriented sectors.
This transition is already underway. According to the annual e-Conomy SEA report by Google, Temasek, and Bain & Company, digital economy revenues in ASEAN’s six major economies — Indonesia, Thailand, Singapore, Vietnam, Malaysia, and the Philippines — hit an estimated $218 billion in 2023, with projections to climb to $600 billion by 2030. Malaysia now stands as the top microchip supplier to the U.S., while Vietnam is seeing increased production capacities from major tech companies like Samsung and Apple.
And as Southeast Asia moves toward greater economic integration, businesses are increasingly looking to expand across borders. Alternative financing could provide the quick and flexible capital needed for such expansions, supporting the growth of pan-ASEAN businesses and strengthening regional economic ties. Over the next decade, intra-ASEAN trade is projected to increase by $1.2 trillion due to rising demand in multiple consumer-oriented sectors such as education, health care, electronics, and automobiles.
This could be particularly beneficial in the context of the region’s urbanization, infrastructure development, and growing middle class. By 2030, it’s anticipated that 70% of the region’s current population, exceeding 670 million, will reach middle-class income levels, which is expected to boost the consumer market to a projected $4 trillion.
Finally, alternative financing could play a crucial role in funding green initiatives, providing capital for businesses looking to adopt sustainable technologies. This should be a key concern for the region’s long-term development, as over half of the world’s largest companies are committed to net-zero emissions initiatives.
