Stability, rich talent pool in South-east Asia drive double-digit growth for Citi across inter-Asean trade corridors

THE South-east Asia region is favoured for its relative stability, geographic location and talent pool, which make it a good region for businesses to diversify their supply chains, said Jason Rekate, co-head of corporate banking at Citi.

He noted that South-east Asia has “become a really interesting target” – client activity at the bank is up double digits on the year, across its Asean trade corridors with other markets.

For the first three quarters of 2024, client activity between Taiwan and Asean is up 20 per cent on the year, India-Asean rose 30 per cent, and Japan-Asean increased by 15 per cent.

“We’re seeing big changes, partly because these are interesting markets, but also because they represent new places to diversify supply chain and manufacturing,” said Rekate in an interview with The Business Times.

He said global tensions have raised the desire for multinational corporations to diversify.

It is also some “hard-nosed, practical business sense” to not be fully concentrated in one place.

He added that large multinationals do not want to be totally reliant on one market to produce everything that they need; “that was something that we learnt in Covid”.

South-east Asia stands out as a choice globally, as most economies in the region have made moves to promote infrastructure developments to support the interest.

“(These companies) are interested in new geographies, but they need places that can support them with relative ease of getting permits and infrastructure,” he added.

Among infrastructure developments, access to consistent, reliable and sustainable power is a key factor to consider.

This is especially since data centres have become a hot topic among clients globally, Rekate said.

The region also has good access through shipping to North America, Latin America and the rest of Asia.

“The fact that multiple countries are (shifting their supply chains) all at once creates a synergistic effect, because people are thinking about the region more holistically,” he said.

Among his clients, Rekate noted that Indonesia is a hot location for metals, Malaysia has been supportive of building industrial parks, and Vietnam has had a history of being home to tech manufacturing.

Meanwhile, Singapore’s advanced economy and strong regulatory environment make it a prime spot for multinationals to set up regional headquarters.

The Republic is now one of the places in the world that has become incredibly important because of a concentration of strong expertise, technology and regulation, he said.

Pipeline in South-east Asia

Rekate noted that Citi’s clients in financial services, fintech and shipping usually view Singapore as a good place to start.

But there are also several industrial companies that are engaged across Asia that want to work in Singapore because they like the city-state’s efficiency and transparent frameworks.

The country is thus a good place to base their cash management and treasury operations, especially since it also has a strong talent pool and tech expertise.

Citi also sees a strong pipeline in Singapore’s real estate sector. With rate cuts underway, real estate operators and real estate investment trusts find acquisitions to be more yield accretive, which prompts greater activity in both equity and debt capital markets.

Elsewhere in the region, Rekate sees strong activity in the tech and auto sectors, where he has clients that are thinking more creatively about where they are going to produce and manufacture.

He said that currently, people want access to the US market, so the corridors that are picking up steam involve outbound investment in the direction of the US.

Nevertheless, he said that does not mean that the client needs to be in the US; they just need to be able to reach US businesses and consumers.

Apart from South-east Asia, Mexico is popular among clients due to its access to the US market, while Brazil has had a strong agriculture sector, plus the ability to export energy.

Some of Citi’s fastest-growing trade corridors include countries connecting Latin America and Asia and vice versa, boosted by near-shoring and foreign direct investment.

Meanwhile, the Middle East has come up quickly in recent years due to capital creation and outbound investment.

Looking ahead, Rekate expects the South-east Asia region will benefit from global growth.

US rate cuts should generally benefit borrowers and investors, given that the US dollar has a large impact on other currencies. “I suspect, as the US dollar gets cheaper, it should make it easier generally for people to consider investment opportunities,” Rekate said.

It is also “helpful” that South-east Asia is generally peaceful, unlike other parts of the world where there may be challenges that make things less stable, he said.

Singapore and its close neighbours are good at managing relationships with both the East and the West, which gives the region a stability that is “incredibly attractive”, he added.