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Riding on South-east Asia's growth
WITH its proximity to the huge markets of India, China and Japan, South-east Asia is well positioned to benefit from global trade flows. The region itself had a combined gross domestic product (GDP) of more than S$3 trillion in 2013 - the third largest combined GDP in Asia. This has been projected to grow by more than 5 per cent annually from 2014 to 2018.
Meanwhile, South-east Asia is urbanising at a rapid pace, in line with the rest of Asia. Today, just over one-third of the Asean population lives in cities. However, more than 90 million people are expected to move to urban areas by 2030.
Thus, the region provides plenty of opportunities for Singapore-based urban solutions providers such as Ascendas-Singbridge and Surbana Jurong. Both groups, which were created earlier this year as a result of mergers, are looking to grab a larger share of the global infrastructure development market.
"South-east Asia is a market with growing potential and importance to Singapore companies such as Ascendas. We are continually on the lookout for opportunities in the key growth cities in South-east Asia, particularly in Malaysia, Indonesia and Vietnam," said William Tay, CEO of South-east Asia at Ascendas-Singbridge.
He noted that Malaysia, and in particular, the Iskandar Malaysia region in Johor, offers the "best of both worlds" - investors and businesses will benefit from its close proximity to Singapore as well as access to Malaysia's vast natural resources and growth potential.
The proximity of Singapore and Iskandar also provides the opportunity for companies to locate their business and manufacturing functions across both locations, and drive the development of complementary industries.
These include companies in industries such as electronics, precision engineering, pharmaceuticals, medical devices, food processing, and fast moving consumer goods - supported by efficient logistics & warehousing services.
Meanwhile, Surbana Jurong is eyeing opportunities in Indonesia and Myanmar, where optimism about its economic prospects have risen following the conclusion of successful elections.
"We see Indonesia as a key growth market in South-east Asia," said Wong Heang Fine, group CEO at Surbana Jurong, "with high growth potential to develop the regions of Java and Sulawesi; particularly in areas such as affordable housing, infrastructure developments and large-scale urban developments. We also see good future growth in Myanmar after the elections."
An economic powerhouse
Singapore players are also hoping to benefit from the recent formation of the Asean Economic Community (AEC) to promote free flow of goods, services, labour and investments across the region. The initiative aims to integrate the diverse economies of South-east Asia into a single market to create a highly competitive economy.
Analysts expect that Asean as a single economy could become the fourth largest economy in the world by 2030, behind only the United States and China.
"With lower barriers to trade and investment, the initiative opens up new business opportunities for companies and investors to participate in this growing market," said Mr Tay. "Details on the implementation of the regional integration remain to be seen, and businesses should continue to monitor and undertake detailed studies, identify their unique market proposition that will give them a competitive edge in this region."
However, there are challenges for companies operating in Asean. In addition to wide differences in language, culture and people, markets in South-east Asia are at different stages of development and urbanisation.
Yet, this diversity also presents many opportunities in development, infrastructure and services. To capitalise on this phenomenon, Surbana Jurong plans to open an office in Jakarta next year to capture new business as well as serve its existing clients better. "As an Asian-based consultancy for urbanisation and infrastructure developments, we are keen to continue expanding our base across the region," said Mr Wong.
Mr Tay noted that operating in such diverse markets requires an in-depth understanding of the differing needs of each location that Ascendas-Singbridge operates in.
He said: "We align our interests with the development objectives of our host locations, while ensuring that we deliver total business space solutions that are competitive, sustainable and contribute to profitability."