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Asean – the hotspot for foreign direct investments

Asean emerges as FDI inflow magnet

THE South-east Asian region is riding high as global supply chains shift, driven by geopolitical tensions and pandemic-related disruptions that are pushing more companies to adopt China+1 diversification strategies.

According to latest available data, foreign direct investment (FDI) into the region’s six major economies – Singapore, Indonesia, Malaysia, Vietnam, Thailand and the Philippines – surged 5.5 per cent to a record high of US$224 billion in 2022 from the previous year.

Singapore saw the highest increase in value, accounting for over 60 per cent of FDI in the region.

The region’s share of global FDI is also on the rise. From under 15 per cent in 2021, it rose to more than 17 per cent a year later, according to an investment report released last December by the Jakarta-based Asean Secretariat.

FDI for Malaysia, Singapore and Vietnam hit record levels in 2022, while Cambodia and Indonesia’s growth was flat, although levels of investment remained elevated.

The report noted that the inflows to Asean countries surpassed China for the second consecutive year.
A May 29 report by OCBC attributed the shifting trend of investment direction to a diversification of the global and regional supply networks, driven by strategies such as China+1 and friendshoring.

Strong domestic reforms and an encouraging macro environment are also sweetening the region’s proposition as an investment spot.​

FDI inflows into Asean rose to US$236 billion in 2023, a 24 per cent increase from the annual average of US$190 billion between 2020 and 2022, said the OCBC report.

US dominates as Asean’s top investor

Over 71 per cent of FDI inflows to Asean are from the top 10 sources, compared to 63 per cent in 2021, with the US, Japan as well as China and Hong Kong taking the lead.

The US remained the region’s largest investor: investments rose 6 per cent to US$37 billion, with a bulk or around US$20 billion ploughed into the manufacturing and finance sectors.

Japan, the second highest investor (excluding intra-Asean investments), rose nearly 24 per cent to US$26 billion in 2022, focusing on storage, transportation, automotive parts, and activities related to electric vehicles (EVs).

On the other hand, China’s FDI inflows fell nearly 12 per cent to US$15 billion. About half of the investment was channeled to manufacturing, real estate, infrastructure and the digital economy. China was the largest investor in Cambodia and Myanmar.

The FDI inflows from China, said OCBC, indicate the changing backdrop, including geopolitical factors. “Post-pandemic, FDI inflows from China into the Asean region have sharply increased, diversifying from infrastructure development into electronics, resources and food industries,” said the bank.

All in the Asean family

Intra-regional investment rose for the third consecutive year to a record US$28 billion in 2022; it was also the second largest source of investment that year.

The top five industries – financial and insurance, manufacturing, information and communication, real estate, and energy – attracted 87 per cent of intra-Asean investment.​

Indonesia, Singapore and Vietnam received two-thirds of intra-region investment. Singapore was the largest source, with US$18 billion, a 10 per cent increase from 2021.

Despite rising intra-Asean investment, the share of total FDI inflows has remained under 20 per cent since 2017, according to the investment report. The report estimated that the compound annual growth rate of non-Asean FDI inflows between 2015 and 2022 was 9.2 per cent – 2.5 times the growth rate of intra-regional FDI.

Source: The Business Times
Link: Here

South-east Asian economies no longer tethered to Fed’s decisions

MARKET watchers worldwide are eagerly anticipating the outcome of the US Federal Reserve’s next meeting later this week. Closer to home, regional central banks are also gearing up for key meetings. The Bank of Thailand (BOT), for one, will hold its next rate review on Wednesday (Jun 12), just before the Fed’s decision.

Expectations for the Fed’s and BOT’s decisions could not be more different.

While watchers generally expect the Fed to stand pat on its elevated benchmark rate, the word on the street is that Thailand may announce a rate cut. Elsewhere in the world, the European Central Bank last week started cutting rates from record highs, by 0.25 percentage point.

As for Singapore, the central bank has a unique monetary policy due to the Republic’s exchange-rate targeting approach.

Nonetheless, such a divergence between the Fed and the rest of South-east Asia would have, at least, seemed unlikely or even impossible.

After all, the region’s economies including Malaysia, Thailand, Indonesia and the Philippines suffered massively from capital outflows during the Asian Financial Crisis (AFC) in the late 1990s, with deep recessions, soaring unemployment and collapsing currencies as investors pulled money out.

Higher regional rates
Since then, rates in the region have generally stayed higher than rates in developed markets, particularly the US. South-east Asian currencies cannot provide the safety and stability that the greenback offers, so there was a need to offer investors a significantly higher return.

Fortunately, things have changed in recent years. As post-Covid inflation started to bite hard in late 2021, South-east Asian central banks followed the Fed in raising rates.

One big difference, however, was that the quantum of monetary tightening has been far lower. With inflationary pressures less severe in South-east Asia than in developed economies such as the US and Europe, regional central banks have been able to tame price pressures with lower rate increases.

The Fed drove its benchmark rate up by over five percentage points to hit a peak of 5.5 per cent back in July 2023 and has since held it unchanged.

In contrast, the BOT’s rate stands at only 2.5 per cent – a rise of two percentage points for this tightening cycle – while Bank Negara Malaysia’s peak rate stands at 3 per cent, an increase of 1.25 percentage points. On its part, Bank Indonesia’s official rate is at 6.25 per cent, marking a hike of 2.75 percentage points.

The largest hike in South-east Asian interest rates has been in the Philippines, with a jump of 4.5 percentage points to a policy rate of 6.5 per cent. Still, the quantum of the rise was lower than the Fed’s rate increase.

Resilient positions
Indonesia, Thailand, the Philippines and Malaysia now have a higher degree of monetary policy independence because their external balances – including the current account position, foreign exchange reserves and inflows of foreign direct investment – are much stronger and more resilient than in earlier periods.

These four countries ran current account deficits of between 3.4 and 7.9 per cent of their gross domestic product in 1996, the year just before the AFC.

Today, these current account balances are much stronger.

For instance, Indonesia even ran a current account surplus amounting to 1 per cent of GDP in 2022 – and registered a tiny deficit of just 0.1 per cent of GDP last year – amid a boom in key commodity exports.

Thailand will also return to a surplus position of 1.4 per cent of GDP in 2023, having run in deficit for two years in a row since 2020.

Malaysia has run a consistent current account surplus even before the pandemic. The surplus has come down from 3.1 per cent of GDP in 2022 to 1.2 per cent last year, but we expect it to go up to 2 per cent this year.

Meanwhile, post-Covid, the Philippines’ current account deficit has narrowed dramatically from 4.4 per cent of GDP in 2022 to just 1.3 per cent last year.

These improvements have come about due to massive structural changes in each economy. This includes steps to raise productivity and competitiveness, improved supervision of the financial sector and more transparent and liquid capital markets.

These changes are continuing. Indonesia recently embarked on more downstream efforts to boost its value-added exports, while Thailand has loosened its visa restrictions to boost tourist arrivals that will in turn increase its services exports.

As the world enters a cycle of monetary loosening, South-east Asian economies can afford to either ease earlier or by more.

More flexibility
With their improved financial stability, these economies now have more flexibility to adjust interest rates to levels that are optimal in balancing growth and inflation in their respective countries. They no longer need to closely follow the Fed.

For now, the Philippines’ central bank sounds rather neutral or even dovish based on its latest monetary policy decision statement. Interest rate cuts are probably near and its currency, the Philippine peso, is one of the more resilient currencies against the US dollar. The country has the flexibility to cut ahead of the Fed without jeopardising its currency stability, to support its softening growth momentum.

While there are concerns over household debt in Thailand, its strong external position and low inflation mean that it can also undergo monetary policy easing to boost its growth momentum. The first cut could be as early as the BOT’s review on Wednesday.

Malaysia has seen its export growth softening, but the strength of domestic demand means that it can afford to keep its monetary policy stance unchanged for now.

Indonesia will likely be the most cautious in cutting rates, given the risk of escalated imported inflation.

In addition, while the country’s external position has improved significantly over the years, Bank Indonesia will probably err on the side of caution in keeping rates high to attract capital inflows back onshore.

Singapore, though operating not via a direct interest rate mechanism but through an exchange rate policy, could also ease its monetary policy to support growth, as growth momentum is slowing.

Regardless of what each central bank does, they now have much more freedom in adjusting monetary policy than before. The Fed’s influence as the de facto setter of interest rates is waning, at least in this part of the world.

Source: The Business Times
Link: Here

Singapore and other major Asean economies see stronger investments amid supply chain shifts

SINGAPORE - Singapore and five other Asean countries have received most of the investment flows as companies diversify their supply chains and adopt a China-plus-one strategy, economists said.

Foreign direct investment (FDI) inflows into the Asean economies of Indonesia, Malaysia, the Philippines, Thailand, Singapore and Vietnam have been gaining traction, although there are some differences across sectors and countries, they added.

Inflows into the region rose to US$236 billion (S$318 billion) in 2023, compared with the annual average of US$190 billion from 2020 and 2022.

The major contributors were the United States, Japan, Europe, as well as mainland China and Hong Kong, attracted by the region’s strong domestic reforms, which have led to improving macroeconomic fundamentals.

Many firms have diversified their operations away from China, following the Covid-19 pandemic and amid rising geopolitical tensions between Beijing and Washington.

According to the American Chamber of Commerce in Shanghai, 40 per cent of those surveyed in 2023 had redirected investment or planned to redirect investment originally meant for China.

For these companies, South-east Asia was the most preferred destination, with technology hardware, software and services companies looking at Singapore. The US was the second most preferred destination, followed by Mexico, the survey showed.

In its latest report on Asean penned by its economists Lavanya Venkateswaran, Ahmad Enver and Jonathan Ng, OCBC Bank said Singapore received the bulk of the inflows, followed by Indonesia, Vietnam, the Philippines, Malaysia and Thailand.

Most investments into the region went into manufacturing, financial and insurance, transportation, construction and wholesale sectors.

FDI inflows from China into the region, which tumbled during the pandemic in 2020, have since rebounded, but the nature of its investments into Asean has shifted from infrastructure to electronics, resources and food industries. 

The manufacturing, wholesale and retail trade, finance and insurance, real estate and professional services sectors have seen higher FDI inflows from China too.  

China has become one of the top contributors to FDI inflows in Indonesia, surpassing the US and Japan. Indonesia accounted for almost a third of China’s investment in Asean in 2022.

Most of its investments are parked in the manufacturing sector, OCBC economists said. 

In contrast, the Philippines has not benefited as much from Chinese investments. This is not surprising, given geopolitical tensions between the two countries have worsened in recent years, they said. 

Singapore continues to be the largest recipient of FDI from China, reflecting the Republic’s status as a financial hub with strong synergies in the manufacturing, real estate and services sectors. 

Mainland China and Hong Kong’s share of the total FDI into Singapore has been rising in recent years, from almost US$52 billion in 2015 to US$113.2 billion at the end of 2022. 

Chinese tech giants such as Alibaba, Tencent and ByteDance have set up regional offices in the Republic. 

According to Enterprise Singapore, there were over 400 Shanghai companies in Singapore as at end-2022.

Beyond South-east Asia, India and Mexico have also benefited, Nomura’s economist Sonal Varma said, noting that trade diversion and reshoring decisions have shifted to take in production relocation.

Firms in electronics, apparel and toys, automobile and components, capital goods, as well as semiconductor manufacturing, are looking to invest in India, in part due to its large consumer market, she added.

In Vietnam, foreign interest has shifted away from textile manufacturing to other parts of the sector, including automobiles, electronics, solar panels, shipping containers and chemicals.

Gains to the rest of Asean are more mixed, with Thailand drawing more interest in electric vehicles (EVs), printed circuit boards and consumer durables, while Indonesia’s prospects are tied mainly to the development of the EV battery supply chain.

“Among the front runners, we think Vietnam will remain a strong beneficiary. In contrast, given its structural constraints, benefits to Thailand will likely be confined to low-value-added sectors, with the exception of perhaps the EV segment, which could leverage the strong domestic auto supply chain,” said Ms Varma.

In India, Nomura sees investment opportunities in stocks related to the electronics and semiconductors, autos, solar energy, pharmaceuticals and defence sectors. 

In Thailand, opportunities are seen in stocks involved in electronics, automotive and industrial estates, while in Indonesia, those are in the metals and mining space. 

However, Ms Varma warned that equity investors looking to leverage the shift in supply chain trends must be patient as the transition takes time.

Source: The Straits Times
Link: Here

More Singapore firms seeking to expand into Indonesia market

JAKARTA - More Singapore companies are seeking help to enter and grow their business in the Indonesian market, as the gradual recovery from the Covid-19 pandemic in both these nations gives impetus to expansion plans.

In 2022, 297 local firms engaged the Singapore Business Federation (SBF) to take their goods and services to the region’s largest economy – up from 185 in 2021 and 78 in 2020. They were from sectors that included healthcare, education, telecommunications, and food and beverage.

The firms consulted the SBF under its GlobalConnect@SBF scheme, which was set up in partnership with Enterprise Singapore to support companies planning to grow globally.

Under the scheme, which was launched in November 2019, SBF has a centre in Indonesia that firms can turn to for advice and use to meet business partners. The Singapore Enterprise Centre in central Jakarta is staffed by SBF’s local market advisers.

Speaking to members of the local media last Thursday, Mr Hisyaamuddin Abu Bakar, country head for Indonesia at SBF, noted that businesses are drawn by the large Indonesian market. Indonesia’s population stands at almost 280 million, making it the world’s fourth-most populous country.

SBF handles various inquiries from Singapore in areas such as incorporation, compliance and regulations in Indonesia, said Mr Hisyaamuddin.

“So we will facilitate them on a case-to-case basis in what they need. But mainly, most of them are interested in finding business partners, and they are worried about how to enter the Indonesian market.”

He added that the interest in Indonesia from Singapore firms has been high, even during the pandemic.

Singapore’s bilateral trade with Indonesia was $59.1 billion in 2021, a 21 per cent increase from the year before. The total value of Singapore’s investments in Indonesia amounted to US$9.4 billion (S$12.5 billion) in 2021. Since 2014, Singapore has also occupied the top spot on the list of Indonesia’s investors.

Over the past three years, SBF has conducted more than 900 sessions where it advised businesses on how to grow in the Indonesian market, and helped facilitate 36 projects by Singapore firms in Indonesia.

One firm that enlisted SBF’s expertise was International Cancer Specialists, a medical company that provides cancer screening and treatment.

When the company wanted to enter the Indonesian market in 2021, its management was unsure whether it could get credible professionals to help it meet Indonesia’s legal and tax requirements for companies.

Mr Benjamin Tan, the company’s chief executive and executive director, said that with SBF’s help, it managed to hire a good lawyer and tax agent within a few weeks.

“We managed to get everything up and running... within three months,” he said.

IndoPanda, which provides Chinese language lessons as well as services to send students to China for further studies, tapped SBF to find new business opportunities in Indonesia.

CEO Hendri Zhang said that at the end of 2021, SBF helped his business connect with potential clients and partners, including DBS Indonesia.

“The local staff there expressed interest in learning Mandarin, so they connected us with the human resources personnel in the company. And very quickly, we were able to give them a proposal about the courses that we offer,” he said.

DBS Indonesia eventually had 20 of its staff attend some courses, and it became one of IndoPanda’s first major clients, added Mr Zhang.

He highlighted how SBF had advised him to conduct free trials of lessons as well as free webinars to introduce potential customers to his company, as customers in Indonesia prefer to try out a service before spending money on it.

“Through this advice, we make fewer mistakes, because this is the new market, right? So sometimes, the lesson learnt could be quite hard. So with that advice, we are able to avoid some pitfalls,” he said.

Source: The Straits Times
Link: Here

Global trade in electric vehicles booms

Opportunities abound in the electric vehicle (EV) market as industry sales have been rising dramatically in recent years, accounting for more than a third of all car imports last year and signifying a possible new direction in the global trade of transport equipment, according to a new report.

The World Trade Organization (WTO) in a new blog post revealed that import data between 2017 and 2023 show a significant shift towards EVs in general. Initially, hybrid, plug-in hybrid and battery electric vehicles represented a modest fraction of total car imports by value, starting at about 2.5%, 0.8%, and 1%, respectively. However, trade in EVs has grown significantly since then, the post said.

Beyond 2020, hybrids and plug-in hybrids have shown consistent growth, with hybrids initially experiencing more dynamic growth. However battery EVs have begun exhibiting the highest growth, bringing the value of their imports close to that of hybrids, indicative of a significant shift towards fully electric models, said the WTO report.

“By the end of 2023, EVs accounted for more than a third of all car imports in value terms. Although the growth rate appeared to slow down in 2023, the pronounced upward trend for EVs, particularly battery EVs, signifies a substantial change in demand and could suggest the direction in which the global automotive industry may go in the future,” it continued.

In the Philippines, Republic Act No. 11697 or the Electric Vehicle Industry Development Act (EVIDA) lapsed into law on April 15, 2022. EVIDA establishes a comprehensive roadmap for the EV industry designed to accelerate the development, commercialization and utilization of EVs in the country.

The Asian Development Bank early last year noted that like its Southeast Asian neighbors, the Philippines has a huge potential as a market and manufacturing hub for EVs since the country is the world’s second biggest supplier of nickel, which is used to make EV battery cells.

The United Nations Conference on Trade and Development in a report last year urged developing countries like the Philippines to act swiftly to leverage the new opportunities presented by the booming market for green technologies, including those relating to EVs.

“We are at the beginning of a green technological wave in which early adopters of new technologies can rapidly move ahead and create lasting advantages in related economic sectors,” the publication said. “Therefore favourable conditions to catch up technologically and economically are available only for a short time.”

According to the WTO post, the United States was the leading global importer of EVs last year, with battery, hybrid and plug-in hybrid EVs recording imports of US$19 billion, $17.8 billion and $6.9 billion, respectively. “These figures represent more than one-fifth of total US car imports by value and signal an increasing adoption of electric mobility,” said the report.

Imports of EVs have also grown considerably in some European countries and in the Republic of Korea. In Belgium, the Netherlands, Sweden and Switzerland in particular, the import value of electric cars has overtaken that of traditional internal combustion engine vehicles.

“As Belgium and the Netherlands are home to the two busiest ports in Europe, they may act as a transit point into other European countries,” the post commented.

Meanwhile, the total number of EVs exported has remained relatively stable, with over 43 million units sold in 2023 from over 40 million units exported in 2017. However, the types of vehicles exported underwent a dramatic change.

In 2017, Germany and Japan were the top exporters of passenger vehicles, but the proportion of EVs they exported was negligible. In contrast, in 2023 about one-third of the car exports from these countries were EVs. By increasing its emphasis on the export of hybrids, Japan has become the top global exporter of these vehicles, said the report.

In 2023, China became the leading exporter of passenger vehicles overall, with over 5.4 million units exported, of which roughly 1.8 million units, or about a third, were EVs. It exported over 1.5 million battery EVs, meaning that one out of every four battery EVs exported in 2023 originated in China, the post said.

Innovations in climate-resilient natural cosmetic ingredients pushed

Brands need to innovate to future-proof natural cosmetic ingredient supply and avoid shortages as extreme weather events are threatening crop security, according to trend forecaster WGSN.

In a report, Sophie Benson and the WGSN beauty team said controlled environment agriculture (CEAs), such as greenhouses and vertical farms, can grow natural cosmetic ingredients, regardless of season or conditions.

The report said innovative CEAs are creating resilient agriculture spaces where the environment can be controlled and circular farming principles can be implemented to lower crops' reliance on water and energy.

“Partner with farmers who use CEAs to future-proof ingredient supply and offer improved yields and potency of botanicals,” it said.

The report cited contract manufacturer Capsum (France) which found that when controlling growing conditions in its vertical-farmed ingredients, it saw a threefold increase in polyphenols compared to traditional growth conditions.

WGSN said challenging conditions also provide the perfect lab for testing and creating resilient crop strains and ingredients.

It said businesses can collaborate with universities, physicists and space agencies to integrate space technology into climate-resilient ingredient developments and selections.

“Testing products in space and ‘space-mining’ ingredients will raise concerns surrounding sustainability and ethics as human-driven space exploration is polluting the cosmos with space junk. Be considerate of space environments and avoid exploitative approaches in orbit,” the report added.

Brunei poised for stronger recovery led by the non-O&G sector

Brunei Darussalam’s economy is poised for further strengthening this year, driven by a strong recovery in 2023 and robust activities in the non-oil and gas sector, according to a report by the ASEAN+3 Macroeconomic Research Office (AMRO).

The downstream oil and gas industry is expected to remain supportive of growth, with planned diversification into new products. Despite challenges in ongoing oil and gas rejuvenation efforts, activities are projected to improve, leading to enhanced production in the near term. The government’s commitment to accelerating diversification towards less carbon-intensive industries aims to bolster economic resilience.

The report, based on AMRO’s Annual Consultation Visit to Brunei Darussalam in November 2023, and data available up to February 29, 2024, highlights Brunei’s economic developments and outlook. The economy expanded by 1.4 per cent in 2023, with growth expected to strengthen to 2.7 per cent this year, driven by exploration and development activities in offshore oil and gas fields.

Encouragingly, the non-oil and gas sector is anticipated to lead the economic recovery, supported by expansions in downstream activities, agri-food, transportation, and tourism sectors.

Inflationary pressures have eased, reflecting lower commodity prices and supply chain normalization post-pandemic. Headline inflation is projected to increase to 1.4 per cent this year, driven by food inflation.

Source: Borneo Bulletin

Read the full article here

Brunei recorded highest ship traffic in 2023: Minister

In 2023, Brunei Darussalam saw the highest number of inbound and outbound ship traffic coming into its ports, at 12,801 ships. It shows that the shipping sector has been one of the beneficiaries of the growth and developments in the downstream and export-oriented industries.

This was shared by Minister of Transport and Infocommunications Pengiran Dato Seri Setia Shamhary bin Pengiran Dato Paduka Haji Mustapha during the signing of a memorandum of understanding (MoU) and scholarship at The Empire Brunei.

The minister said, “The planned expansion and renovation of Muara Port as well as development of an integrated marine maintenance and decommissioning yard will further grow the shipping requirements in the country as well as attract more traffic into our port and facilities. Undoubtedly, this will also grow the demand for Darussalam Pilotage Services Sdn Bhd (DPS) pilotage and towage services. He added, “The Ministry of Transport and Infocommunications and the Maritime and Port Authority of Brunei Darussalam (MPABD) are tasked to further improve the local content aspects of the maritime sector” .

“The industry has the ability to generate job opportunities for locals. In addition, MPABD also looks at reassessing and sustaining our capabilities, through the Brunei Maritime Academy (BMA), to develop and cultivate a highly-skilled maritime workforce that supports and drive our economic diversification and sustainable development efforts.”

The minister also commended the DPS scholarship programme by saying, “The true measure of an organisation’s potential lies in the calibre of its human capital.

He noted that the DPS’ vision is geared towards nurturing a new generation of maritime pilots, who will not only helm the ships but also chart a course towards a sustainable and innovative future. 

Source: Borneo Bulletin

Read the full article here

Ceremony marks significant milestone for maritime industry

Brunei’s maritime industry marked a significant milestone yesterday with a groundbreaking ceremony for the Integrated Marine Maintenance and Decommissioning Yard at Pulau Muara Besar.

Located strategically at the Pulau Muara Besar, the facility will have the capacity to cater to the needs of both local and international clients.

The Marine Maintenance Yard will provide a wide range of services including vessel repair, modifications, maintenance, refurbishment and certifications and equipped with the latest technologies and operated by a team of skilled professionals.

Minister at the Prime Minister’s Office and Minister of Finance and Economy II Dato Seri Setia Dr Awang Haji Mohd Amin Liew bin Abdullah, Minister of Development Dato Seri Setia Awang Haji Muhammad Juanda bin Haji Abdul Rashid, Minister of Transport and Infocommunications Pengiran Dato Seri Setia Shamhary bin Pengiran Dato Paduka Haji Mustapha, Deputy Minister of Finance and Economy (Economy) Dato Seri Paduka Haji Khairuddin bin Haji Abdul Hamid, Deputy Minister (Energy) at the Prime Minister’s Office Haji Mohamad Azmi bin Haji Mohd Hanifah, senior government officials, ambassadors, as well as local business leaders attended the ceremony.

Source: Borneo Bulletin

Read the full article here

Tech giants start to treat South-east Asia like next big thing

LONG considered a tech hinterland, South-east Asia is fast emerging as a centre of gravity for the industry.

The chief executive officers of Apple, Microsoft and Nvidia are among the industry chieftains who’ve swung through the region in past months, committing billions of dollars in investment and holding forth with heads of state from Indonesia to Malaysia. Amazon just this week took over a giant conference hall in downtown Singapore to unfurl a US$9 billion investment plan before a thousands-strong audience cheering and waving glow sticks.

After decades of playing second fiddle to China and Japan, the region of about 675 million people is drawing more tech investment than ever. For data centres alone, the world’s biggest companies are set to splurge up to US$60 billion over the next few years as South-east Asia’s young populations embrace video streaming, online shopping and generative AI. 

Traditionally welcoming to Western investment, the region’s moment has arrived as China turns more hostile to US firms and India remains tougher to navigate politically. Silicon Valley is setting its sights on business-friendly regimes, fast-growing talent pool and rising incomes. The advent of AI is spurring tech leaders to pursue new sources of growth, laying the digital infrastructure of the region’s future.

“Countries like Singapore and Malaysia are largely neutral to the geopolitical tensions happening with China, US, Ukraine and Russia,” said Sean Lim, a managing partner at Singapore-based NWD Holdings, which invests in AI-based projects and other areas. “Especially with the ongoing wars, this region has become more attractive.”

Take Tim Cook and Satya Nadella, who last month embarked on their biggest tours across Southeast Asia in years. The investments they pledged are set to help turn the region into a major battleground between the likes of Amazon, Microsoft and Google in future frontiers such as artificial intelligence and the cloud.

The region’s growing workforce is making it a viable alternative to China as a centre of talent to support companies’ global operations. As its governments pushed for improvements in education and infrastructure, it’s become an attractive base for everything from manufacturing and data centres to research and design.

“The governments are pro cross-border investments and there’s a deep talent pool,” said NWD’s Lim.

South-east Asia has also become a sizeable market for gadgets and online services.

About 65 per cent of South-east Asia will be middle class by 2030, with rising purchasing power, according to Singapore government estimates. That’ll help more than double the region’s market for internet-based services to US$600 billion, according to estimates by Google, Temasek Holdings and Bain & Co.

Apple, whose pricey gadgets for long remained out of reach for the vast majority in the region, is now adding stores. CEO Cook toured Vietnam, Indonesia and Singapore in late April, meeting prime ministers and announcing fresh investments as the company seeks new growth regions beyond China, where sales have sputtered.

In Jakarta, besides pow-wows with the country’s leadership, Cook met a local influencer with almost 800,000 Instagram followers over chicken satay, and learned enough of the local language to say “How are you” in a video circulated on social media.

On his X account, local customers asked Cook for an Apple Store and better servicing of Apple products in the country. Following the trip, Apple reported its revenue in Indonesia had reached a record, even as total global sales declined.

“These are markets where our market share is low,” Cook said on a conference call last week. “The populations are large and growing. And our products are really making a lot of progress.”

Microsoft CEO Nadella also received an enthusiastic welcome after meeting with the leaders of Malaysia, Indonesia and Thailand last week. In Bangkok, under a ballroom’s shimmering chandeliers, he was seen shaking hands and conversing with high-ranking government officials and the country’s top business elites.

South-east Asia’s draw becomes apparent once you consider slowing toplines in Silicon Valley, which is struggling now to lay the foundations of AI – anticipated to become an industry-defining technology.

Within the next few weeks, two major AI-themed events in Singapore are set to feature top leaders from OpenAI, Anthropic, Microsoft and others to further tout the technology’s promise for South-east Asia.

A specific catalyst for the tech companies is generative AI, with services like ChatGPT rapidly gaining users. South-east Asia’s accelerating AI adoption has the potential to add about US$1 trillion to the region’s economy by 2030, according to a report by consulting firm Kearney.

That means more data centres are needed to store and process the massive amounts of information traversing between content creators, companies and customers.

Data centre demand in South-east Asia and North Asia is expected to expand about 25 per cent a year through 2028, according to Cushman & Wakefield data. That compares with 14 per cent a year in the US. By 2028, South-east Asia will become the second largest non-US source of data centre revenue in the world.

Hotspots include Malaysia’s southern Johor Bahru region, where Nvidia last year teamed up with a local utility for a plan to build a US$4.3 billion AI data centre park. Nvidia is also targeting Vietnam, which CEO Jensen Huang sees as a potential second home for the company, local media reported during his visit in December. Huang was spotted enjoying street food and egg coffee, a Vietnam specialty, as he hung out with local tech contacts in a black T-shirt and jeans.

The company has since reviewed Hanoi, Ho Chi Minh City and Da Nang as potential locations for investments, with Keith Strier, its vice-president of worldwide AI initiatives, touring the cities last month.

A region consisting of about a dozen politically, culturally and geographically disparate countries, South-east Asia isn’t the easiest market for global companies to operate in. Risks include difficulties navigating local working cultures, as well as the volatility of the various currencies, said NWD’s Lim.

But for now, the tech majors are embracing the region’s advantages such as its relatively low-cost yet highly skilled workforce – helpful for building expensive technologies such as large language models that require not just a lot of cash but also skilled engineers. Most of the US firms announced training programs with local governments, with Microsoft promising to train a total 2.5 million people in AI skills in South-east Asia by 2025.

“This shift is influenced by both external and internal drivers,” said Nicholas Lee, associate director in political consultancy firm Global Counsel’s Singapore office. “Besides the intensifying US-China rivalry and policy divergence across major jurisdictions, subdued revenue growth and rising costs also underline the need for companies to manage expenses prudently.” BLOOMBERG


Source: The Business Times

Link: Here

UAE offers export opportunities

Filipino exporters, particularly those of smartphones, jewelry and motor vehicles, can export more to the United Arab Emirates (UAE) given its rising population and income levels.

Panot Punyahotra, Consul (Commercial) at Office of Commercial Affairs at the Royal Thai Consulate General in Dubai, UAE, said these are among the products that UAE imports from the Association of Southeast Asian Nations (ASEAN) and the world. 

Punyahotra also cited data showing other products the Emirates imports from the world, including gold, telephone sets, diamonds whether or not worked but not mounted or set, petroleum oils, and articles of jewelry and parts thereof of precious metals.   

“They import quite a lot of this jewelry. The rest will be mostly the industrial products and interestingly, you will not see food items here but if you combine the small items of food products, it will be a big part also for Dubai imports,” he said during a webinar organized by the ASEAN Access LEARN.

Punyahotra said the UAE has a population of 9.29 million people while it is the logistics hub of the world.

To seize these huge market opportunities, entrepreneurs who are interested in exporting their products to the UAE must conduct thorough research and understand the regulations, measures, and standards that correspond to the customers’ needs. 

Punyahotra said they can contact their embassies in UAE to assist them, adding that every ASEAN country has trade promotion organization in the Emirates which can provide them a list of potential buyers. 

He said documents required for exporting depend on the product the entrepreneurs intend to export, noting that for example, food items containing meat need halal certification.  

“Because if you go to the supermarkets in Dubai, the consumers know that every item they buy, they don’t have to worry (if) it would be halal because otherwise, the government will not allow it to go into the country. But they also have a section which is non-halal,” he said.

“So it doesn’t matter if you export for the foreign workers or for the locals. Once it passes the border, it must comply with the local regulations,” he added.                 
Punyahotra said buyers will also inform the exporters of the documents they have to prepare.

He said going or participating in trade fairs in the UAE also bring benefits to entrepreneurs.

“If you will not go there to exhibit, you can go there to see the products of your competitors. You can see by yourself what kind of competitors you have, you can see the prices…,” he said.

Punyahotra said entrepreneurs can also export from home to customers or distributors in the UAE. 

Transition to digital agriculture calls for stronger government support: study

Strengthening government-led initiatives and public-private partnerships can accelerate the commercialization and adoption of digital agriculture technologies, which are vital to modernize farm production and reduce the digital divide in the agri-food sector, a new study says.

A report published by the Philippine Institute for Development Studies (PIDS) noted how the current Philippine Development Plan (PDP) has identified digital technology as part of the state’s strategy to achieve agriculture and fisheries industry modernization.

“Digital agriculture leads to economic benefit through increased productivity, efficiency, market opportunity, and environmental sustainability. Already, smallholders’ access to information, inputs, and markets are improving with the spread of mobile technologies, remote-sensing services, and distributed computing,” said the report entitled “Transforming Philippine Agri-Food Systems with Digital Technology: Extent, Prospects, and Inclusiveness.”

Digital agriculture refers to “ICT and data ecosystems to support the development and delivery of timely, targeted information and services to make farming profitable and sustainable while delivering safe nutritious and affordable food for all,” the paper said. Digital agriculture represents both a technological transformation in itself as well as a means to accelerate agricultural innovation.

However, digital agriculture is still far from being the choice of most farmers and other stakeholders in the agri-food system, said study authors Roehlano Briones, Ivory Galang, and Jokkaz Latigar. They pointed out that applications such as fintech and some types of automated agricultural equipment are still at the early development stage or at the prototype stage. More widely used, meanwhile, are online retail networks and farm advisory apps.

The document also predicts that elements of digital agriculture that are more likely to be moving into the mainstream within the next five years are decision support; computerization of public services; online advisory and extension services; crop management and monitoring systems; portable equipment; online retail; and online marketplaces.

The discussion paper further observed that based on government priorities and stakeholder interest, there are promising prospects for the expansion of digital agriculture tools, including decision support systems and online marketplaces.

In the medium term, government priorities and willingness to allocate budgets are crucial to underpin the healthy prospects for the wider dissemination of decision support and computerization of public services, the authors said.

“Meanwhile, on the demand side, there is strong interest among stakeholders, such as farmers, fisherfolk, and agribusiness companies, in information, advisory and extension services, as well as in portable equipment such drones, sensors, lasers for land leveling,” they added.

But the digital divide also ups the risks for worsening inequities between urban and rural areas, further leaving vulnerable populations behind. To bridge this divide, the paper suggests implementing strategies that include community organizing, developing rental markets, and investing in rural connectivity.

The report identified key policy recommendations to support PDP strategies aimed at transitioning to digital agriculture. These include harmonizing government data and advisory services in view of the conflicting data and advice from decision support systems deployed by different agencies on crop suitability, land and climate characteristics, base maps, parcel maps, and other relevant information.

Also suggested are creating a single government portal for digital agriculture to address the proliferation of farm advisory apps and provide links to the various advisory tools provided by government; and integrating digital solutions to standardize farm management in the Department of Agriculture’s clustering and consolidation program.

Other major recommendations are expanding decision support systems in efforts toward diversification and climate resiliency, and establishing a centralized e-commerce platform catering to MSMEs to resolve the inefficient rise of e-commerce platforms under various state agencies.

Also proposed are investing in traceability, food safety, registration and certification, and good agricultural practices to upgrade the agri-food system; exploring entry points for private sector participation; and engaging in skills enhancement programs to assist smallholder farmers and target the landless agricultural workers. 

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