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Companies view Asean with renewed optimism
A GROWING middle income class. Increasing regional integration. Strong economic growth. These are some factors that are making South-east Asia an increasingly attractive investment destination. Deloitte’s Global Manufacturing Competitiveness Index last year noted that by 2020, Malaysia, Indonesia, Thailand, India and Vietnam are expected to rank among the top 15 countries in terms of manufacturing competitiveness. Manufacturing labour costs in Indonesia are currently about one-fifth of those in China, while costs in Vietnam and India are about half of China’s level.
“These countries are already featuring in the minds of global executives seeking an alternative to China,” said Deloitte in its inaugural Voice of Asia thought leadership issue in January.
South-east Asia also has longer term competitive advantages over China, it added. For instance, working-age population in Asean is projected to expand by almost 85 million people over the next 30 years; in comparison, China’s working-age population will shrink by about 175 million over the same period.
The Regional Comprehensive Economic Partnership being negotiated between Asean and India, China, Australia, South Korea, Japan and New Zealand – all countries with which Asean has existing free trade agreements – promises to open up even more trade opportunities for the regional bloc.
Indeed, many of the companies featured in the second part of CEO Conversations today are already well established in Asean, and hope to further tap the potential of the region in the years to come. In particular, Vietnam, with its population of 94.5 million, seems to be a favourite investment destination.
Medicated oil giant Borden Company, for instance, has been selling its Eagle Brand medicated oil in Vietnam since the 1960s. Its green medicated oil gained such overwhelming popularity in the country that it became a must-have in every household, and was eventually brought to new shores as the Vietnamese fled the Vietnam War. In time, the group saw rising demand from countries such as the US, Europe and Australia, wherever Vietnamese communities had settled.
Similarly, Singapore-listed Darco Water Technologies is also bullish on South-east Asia, and in particular Vietnam, even as it expands in China through a recent acquisition. The South-east Asia market for environment solutions, whether water or waste, is very big, says chief executive Thye Kim Meng.
Property firms are also eyeing opportunities in Vietnam and other South-east Asian markets. Real estate broker Huttons was one of the first agencies in Singapore to bring in Vietnamese and Cambodian projects to sell to local investors.
Wealth management and real estate services company ZACD Group, meanwhile, notes that the governments in South-east Asia have started to liberalise their real estate markets in recent years.
In 2015, new laws opened up the Vietnamese property market to expatriates. Restrictions on foreign investors in the region will continue to ease and should cause investments to rise, says group chairman Kain Sim.
In this issue, we also speak with Surbana Jurong which is proposing an integrated resort in Vietnam and building hydro-electric dams in Malaysia, while Malaysia’s Sunway Group sees opportunities in the economic integration of Asean, and the consequent lowering of tariff barriers and entry requirements.
“Our smart sustainable city initiative gives us first mover advantage in addressing the region’s growing urbanisation,” says its founder and chairman Jeffrey Cheah.
Supplement editor: Lilian Ang Sub-editor: Lee Kim Siang Cover design: Gareth Chung Illustrations: Alice Ang, Gareth Chung Photographer: Yen Meng Jiin Advertising sales: Tom Yuen 9623 1128; Jaclyn Sim 8333 5665