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Infrastructure demand and consumerism will boost Asean's investment appeal: IE Singapore
THE bustling South-east Asian market and its heavy demand for infrastructure and consumerism will likely ensure the region remains appealing to Singapore firms that want to invest abroad, said a senior director at International Enterprise (IE) Singapore.
There has been mounting concern in the business community of late over the rise of protectionist measures in the West and fears of a trade war between the US and China, the world's two largest economies.
The Trump administration is barely a month into its new four-year term and already there are efforts to re-shore American companies and tighten trade policies.
"It's clear that should the US impose protectionist measures on China or influence its companies to inshore its operations, the net impact on Asean and Singapore businesses is likely to be negative," said Ivan Tan, IE Singapore's group director for South-east Asia and Oceania.
"However, we should note that South-east Asia as a region remains promising and there will still be good economic growth due to sound fundamentals. This is a market which we think will be a very important one and of high interest to our companies for the next 10 years," he added.
Mr Tan, an IE Singapore veteran of more than 11 years who took on his current portfolio in April 2015, oversees nine of the statutory board's 37 overseas centres.
These offices are in Kuala Lumpur, Jakarta, Surabaya, Bangkok, Hanoi, Ho Chi Minh City, Yangon, Manila and Sydney.
According to figures from the OECD Development Centre, the annual growth for South-east Asia - currently the world's third-largest region for growth behind China and India - is projected to average 5.4 per cent from 2014 to 2018.
By 2020, South-east Asia will have a US$3 trillion economy and a population of over 600 million. Consumer spending is expected to double to US$2.3 trillion a year.
Mr Tan said that this growth was being bolstered by the rise in foreign direct investments, a young and increasingly affluent middle class, the availability of natural resources, as well as urbanisation.
He spoke of how Singapore companies that want to internationalise are likely to look at countries in South-east Asia first, given that many other economies are slowing down in a difficult global environment.
Europe is now in a period of uncertainty, China is expanding at a weaker rate than before, and Japan is dealing with an ageing population.
There are some other promising markets elsewhere such as the Middle East, Africa and Latin America, but these are quite a distance from Singapore and may not be a company's preferred destination.
"Our companies want a place that has a lot of opportunities and isn't too far away. Most of the SMEs also want a place that isn't too costly if they want to go on business trips. As such, South-east Asia is fast becoming a market of choice for them," said Mr Tan.
A recent survey of nearly 700 Singapore companies by IE Singapore found that Vietnam and Myanmar were their key markets in the region when expanding overseas.
There is strong demand for infrastructure development across South-east Asia, with more than US$800 million worth of investments needed in the decade between 2010 and 2020.
"This includes investment in transport infrastructure like road and rail, as well as utilities. Such investments are necessary to support urbanisation and industrialisation, and would likely proceed albeit at a slower pace even with American protectionism," said Mr Tan.
He also cited the rising middle class in Asean - this group is poised to grow to 454 million by 2030, up from 172 million in 2010 - as a key factor that will continue to create demand for goods and services from domestic industries and imports into the region.
Asean countries such as Indonesia, the Philippines, Vietnam, and Myanmar have large, fast-growing and young populations that Singapore firms can market themselves to.
Indonesia, for instance, is on track to become South-east Asia's largest digital economy in the coming years, with around 100 million internet users and many of them engaged in e-commerce and making use of social media.
"As long as these countries continue to be stable and roll out pro-investment policies, the favourable demographics would continue to attract investments into both services and manufacturing sectors to serve domestic needs and for export. American protectionism, to the extent that it slows down global trade, would not derail these fundamentals," he said.
- International Enterprise Singapore
- IE Singapore
- Ivan Tan
- protectionist measures
- trade war
- Singapore companies
- overseas expansion
- southeast asia