Only 15 years ago, Southeast Asia was the centre of the emerging world for investors. Its economic miracle was in full swing. Money rushed into local stock markets and real estate. Then the crisis of 1997-98 hit and much of the miracle turned out to be an illusion, built on excessive lending. Financial systems imploded, currencies plummeted, the IMF was called in and foreign money fled.

By the time the region got back on its feet at the start of this decade, the world had moved on. The new buzzword was BRIC and China quickly became the hottest investment story going, with India joining it more recently. Today, Southeast Asia is a footnote in many international investors’ strategies.

But should investments in the region have a more prominent role? Perhaps. Southeast Asia has a number of interesting investment stories, especially if viewed as a whole rather than a group of separate markets. One can make a persuasive case that the Association of Southeast Asian Nations (ASEAN) should be seen as the third part of an emerging Asia strategy, alongside the obvious candidates of China and India.

Let’s look at the background to the investment case. ASEAN includes 10 countries, but the ones that really matter to international investors are Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. (For those with an eye on future developments, Myanmar could do extremely well if its repressive and incompetent military rulers finally decide to open up, while Cambodia is a niche of growing interest to far-frontier investors.)

ASEAN was founded in 1967 as a political and economic cooperation pact. Historically, it has often been dismissed as a talking shop where little gets done. In part this is due to the importance members attach to national sovereignty and non-interference with each others’ internal affairs, reflecting their colonial history. But progress has been made: a free-trade agreement signed in 1992 was slow in making the jump from paper to reality, but bigger tariff reductions are now starting to come in. Other agreements on regional investment liberalisation, services and the air travel market are also on the way. And ASEAN is starting to act more collectively in its dealings with the rest of the world, signing several external free-trade deals, including the ASEAN-China FTA earlier this year.

ASEAN is certainly no European Union-style confederation and there are wide disparities between ASEAN members on almost every score. But in the long term, Southeast Asian countries seem likely to become more closely integrated. Intra-ASEAN trade already stands as the largest single export market for association members. And there are some signs of growing corporate integration in the region, notably in financial services. As the sector consolidates into fewer, larger firms, the more sophisticated Singaporean and Malaysian banks are taking the lead in creating regional groups; in 2009, for example, Malaysia’s CIMB earned 40% of its net interest income from outside its home market, mostly in Thailand and Indonesia.

And if you think of ASEAN as a loose bloc, it starts to look rather significant. No ASEAN country by itself is the size of the Chinese or Indian market, but the total population is around half a billion (Indonesia is the largest member with around 230 million people). True, none of these countries’ economies yet approaches the size of any of the BRIC members. But collectively, ASEAN’s GDP is larger than India’s or South Korea’s.

It could be a mistake to overlook a semi-integrated market of this size, especially given increasing investor interest in the emerging consumer theme, where ASEAN is well-placed in income terms. For example, Malaysia’s GDP per capita is twice that of China’s at purchasing power parity, while Thailand’s is about 20% larger. All major ASEAN economies are wealthier than India by this metric, and they have a greater proportion of ‘middle class’ population; on CLSA projections, around 20% of Indonesia’s population will be middle class by 2014, compared with around 10% in India. Obviously India still offers the larger potential market, but ASEAN’s seems too big to ignore, especially since many economies seem to be hitting the turning point where consumer durables penetration starts to rise rapidly.

Domestic debt levels are generally low at national, household and corporate levels. Banking systems are sound, thanks largely to the shake-out caused by the Asian crisis, with low loan-to-deposit ratios. Most of ASEAN hasn’t really seen a major credit cycle since the crisis. Equally, however, it hasn’t seen a strong investment cycle during that time, with the aggregate investment to GDP ratio dropping by more than 10 percentage points between 1997 and 2003, according to data from UBS. That said, investment does appear to be starting to pick up again. With an obvious need for infrastructure and corporate investment, which many governments are making an effort to encourage, there seems to be a good chance that the region will see an investment boom in the years ahead.

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