Investing in ASEAN Asean

Investing in AssociationASEAN of Southeast Asian Nations asean 2013|2014

• one vision • one identity • one community •

Allurentis is delighted to have been involved in partnership with ASEAN on this, the third publication and would like to thank all sponsoring organisations for their kind contributions. We are confident that it will raise awareness with all readers and prove to be an invaluable resource, especially for those wishing to become involved in the extraordinary business opportunities and growth prospects within the Region. Electronic copies of this publication may be downloaded from Allurentis Limited's website at www.allurentis.com, provided that the use of any copy so downloaded, complies with the terms and conditions specified on the website. Except as expressly stated above, no part of this publication may be copied, reproduced, stored or transmitted in any form or by any means without the prior permission in writing from Allurentis Limited. To enquire about obtaining permission for uses other than those permitted above, please contact Allurentis by sending an email to [email protected]

Photos courtesy of: www.istockphoto.com | www.123rf.com S N O I T A

Contents N N A I S Introduction A T S

ASEAN is on track for economic integration 6 A E H Messages T U O

H.E. Le Luong Minh: Secretary General 8 S F

US-ASEAN Business Council 9 O N

EU-ASEAN Business Council 10 O I T A

UK-ASEAN Business Council 11 I C O

Business - Finance - Legal S S

ASEAN: An opportunity for treasury - HSBC 13 A Integration will widen the reach of banking 17 Protecting & investing in ASEAN’s bright future - Prudential Corporation Asia 23 Expanding into ASEAN - TMF Group 27 Riding the ASEAN elephant: How business is responding to an unusual animal - Baker McKenzie 29 Challenges facing ASEAN corporates in a globalised world - Kroll Associates 35 SICPA supporting governments in Asia to combat illicit trade and increase tax revenues - SICPA Asia Development 38 Energy Oil exploration moves to deeper waters 41 Towards a greener ASEAN Economic Community - DFDL 46 Industry & Manufacturing ASEAN manufacturers move to advanced technology 50 50 years of growing within ASEAN - Jebsen & Jessen (SEA) Pte Ltd 53 Infrastructure Region’s infrastructure needs take centre stage 58 Developing water resources presents major challenge 60 ASEAN’s roads and rails experience new dawn 63 Ports investment will transform ASEAN economies 68 GE in ASEAN - General Electric 72 Aviation Aviation sector set for further expansion 76 Aviation engineering - Maintenance Repair & Overhaul (MRO) 79 IT & Telecommunications Mobile technologies drive Region’s internet connectivity 82 Mining Glittering mining prospects need careful management 86 3 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Agriculture Integration provides vast agricultural opportunities 89 Healthcare ASEAN states move to universal healthcare 93 Education ASEAN commits to education and new skills 98 Touching lives, improving life - Procter & Gamble 102 Real Estate Real Estate investment opportunities throughout the Region 106 Sport Regional focus on sports industry development 108 Tourism ASEAN seeks to broaden tourism’s benefits 112 Country Reference Member country profiles 117 Useful contacts 138 Inside back cover ACE Insurance 139

asean www.asean.org

4 S N O I T A N N A I S A T S A E H T U O S F O N O I T A I C O S S A

• one vision • one identity • one community •

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Introduction: ASEAN is on track for economic integration

ASEAN’s economic performance continues to outpace the rest of the of intra-ASEAN certificates of origin and customs declarations world with the Asian Development Bank predicting that GDP in ASEAN documents. The system is now being expanded to include other types of countries will grow 5.3% in 2013 and 5.6% in 2014. This impressive data and will do much to end cross-border delays. performance and the even greater prospects that will emerge following Over the next 20 years, Southeast Asia will be one of the world’s fastest the introduction of a single market resulting from the introduction of the growing consumer markets with ASEAN members’ GDP forecast to rise ASEAN Economic Community (AEC) at the end of 2015, are shaping the more than fourfold to US$10 trillion by 2030. The combined GDP of Region as a key investment opportunity. member nations is already significantly larger than India’s economic Member states are already making good progress towards economic output and by 2018, it will exceed that of Japan according to US industry integration. ASEAN Secretary General, H.E. Le Luong Minh, has said that analyst IHS Global Insight. almost 80% of the measures in the ASEAN Economic Community The AEC will unleash a new era of growth by creating a competitive Blueprint agreed in 2007, have now been implemented. market of more than 600 million people in the ten member An important landmark has been reached in 2013, with the ASEAN countries comprising Brunei Darussalam, Cambodia, Indonesia, Lao Agreement on Movement of Natural Persons which eases entry by PDR, Malaysia, Myanmar, the Philippines, Singapore, Thailand citizens of member states to other Southeast Asia countries and provides and Vietnam. agreement on their length of stay. Economic integration through a range of measures including tariff Of equal significance is the completion in 2013, of pilot tests of the reductions and streamlining of administrative procedures, aims to online ASEAN Single Window customs data transfer system, following enable an easier movement of goods, services, investment, capital and agreement on its final design in 2011. The Single Window connects people across the Region. This will open up new markets for companies individual countries’ computerised systems and supports the exchange in member states and new ways to operate supply chains. 6 N O I T C U D O R T N I

Intra-ASEAN trade is steadily improving and is likely to gather pace in social progress. ASEAN countries are as a result, likely to play a far more the next few years. The Region is already Thailand’s largest market, for significant role in the global economy as the 21st century unfolds. example, absorbing 23% of the country’s exports. Myanmar’s geographic position, for example, could in the long term According to former ASEAN Secretary General, Dr Surin Pitsuwan, the prove as important a factor as the opening of its economy to greater movement of goods and services among ASEAN countries foreign investment. The country provides the only land bridge represented 25% of the total US$2.8 trillion trading volume in the between South Asia and Southeast Asia via its borders with India, Region during 2012. After the implementation of the AEC in 2015, he Bangladesh and China, Thailand and Lao PDR. expects that intra-ASEAN trade will increase to 30% and touch 35% ASEAN, longer term, is looking to become an even more dynamic and five years later. mainstream global supplier. It wants to ensure that its internal market The momentum is seen in the growing number of cross-border will remain attractive to foreign investment. In view of this need, investments as well as merger and acquisition activity seen in banking, member states are already looking beyond the bounds of the manufacturing, transport and communications sectors. forthcoming AEC. For international as well as regional investors there are many In addition to its focus on economic integration, ASEAN member opportunities opening in an area that will be able to be addressed as states, Brunei Darussalam, Malaysia, Singapore and Vietnam are a single market. Integration of the diverse economies promises to negotiating a Trans-Pacific Partnership (TPP) Free Trade Agreement make ASEAN much more competitive in attracting global investment with seven countries comprising the US, Canada, Chile, Peru, Mexico, and as a location for establishing manufacturing operations. Australia and New Zealand. The Region’s increasing focus on infrastructure including major Negotiations are also continuing to set up the Regional telecoms developments, roads, railway and ports projects also promised Comprehensive Economic Partnership (RCEP). This is designed to link to nurture a much improved environment for export industries. ASEAN’s ten member countries with New Zealand, Australia, South Korea, India, Japan and China into one regional Free Trade Astute pathfinder investors from the mining sector, manufacturers and Agreement. Together, these countries account for almost half the technology industries are already flowing into the area. In 2012, the global population and about a third of global output. Region was the only part of the world to experience an increase in The TPP and RCEP are very ambitious regional trade arrangements that Foreign Direct Investment (FDI). This followed a record inward flow of will involve complex negotiations. Alongside the inauguration of the FDI in 2011. ASEAN Economic Community, a successful conclusion to these This is a time of positive and accelerating change, as new growth and additional negotiations will propel ASEAN countries into an era of development strategies are implemented to sustain economic and growing prosperity and opportunity.

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asean H.E. Le Luong Minh: Secretary General of ASEAN

ASEAN is, indeed, on track towards the ASEAN stature to attract more investments in the Region. Economic Community (AEC). Solid economic, trade and To have greater awareness and ensure broad investment figures show the Region growing by 5.7% in stakeholder support, we are also actively undertaking 2012, against the backdrop of weak global growth key promotional measures, which include: a website, an performance. For 2013, ASEAN is expected to continue updated compendium of investment rules and with its resilient and robust economic growth. regulations of Member States and three publications namely the ASEAN Investment Report 2013, ACIA This can be further seen in our Foreign Direct Guidebook for Investors and the Handbook on ACIA for Investments (FDI). ASEAN figures reached a record the Investment Promotion Agencies. H.E. Le Luong Minh, US$108.1 billion in 2011 and continued to maintain Secretary-General, ASEAN its FDI level in 2012, bucking against the trend of Forming part of ASEAN’s grand plan to create a declining global FDI inflows, particularly in developing single market and production base and a single economies. Intra-ASEAN FDI net inflows also soared investment area, our initiatives, especially under significantly, reaching US$20 billion in 2012. ACIA, are all designed to provide greater transparency, instil confidence and support greater industrial All these achievements are the results of the individual complementation and specialisation among ASEAN and collective efforts of our ASEAN Member States, Member States. These should, in turn, not only generate reflecting our commitment and resolve to achieve the more opportunities and redound to the benefit of the AEC in 2015. ASEAN business sector, but also to the rest of our For many years now, ASEAN has been undertaking Community as well. various initiatives to promote ASEAN as a single Working more closely and together with the private investment destination. With the ASEAN sector, ASEAN will pursue the enhancement of the Comprehensive Investment Agreement (ACIA), investment climate of the Region, building an ASEAN covering the four pillars of liberalisation, protection, Community that is competitive, fully integrated and facilitation and promotion, we aim to increase ASEAN’s networked into the global economy.

8 S E G A S S E M

US-ASEAN Business Council

The US-ASEAN Business Council has worked for nearly Numerous engagements throughout the year in each 30 years to advance the business relationship between ASEAN country help create a mutually beneficial climate the United States and Southeast Asia, and I can honestly of cooperation in the Region. say the relationship has never been stronger than it is ASEAN and its members have thought deeply about right now. Every year, trade and opportunities continue their economic future, and put into place plans designed to grow. US-ASEAN bilateral trade in goods and services to sustain and support this environment of growth. The continues to expand, passing the US$200 billion mark in ASEAN Economic Community, an ambitious effort slated 2012. The ASEAN Nations together make up America’s to take effect in 2015, will create a single market of over fourth largest export market, supporting over 437,000 Alexander Feldman, President, 600 million consumers, linked by the ASEAN Free Trade jobs here in the US US-ASEAN Business Council Area and the ASEAN Single Window to create a free flow US companies continue to grow their business in of goods and services. The ASEAN Connectivity ASEAN. ASEAN hosts over US$150 billion in US Foreign Masterplan will create and develop cross-border Direct Investment, the largest US commitment in linkages, helping to bring regions and countries together Asia. As the business environment evolves, more and narrow the gaps in economic development. opportunities will continue to be discovered. As ASEAN grows and comes together, opportunities The ASEAN nations are strongly focused on creating exist across a broad variety of sectors. ASEAN needs investment friendly business environments, and billions of dollars in infrastructure investment; not just responding to the needs of investors both large and traditional roads and bridges but broadband access, small. The Council just completed our annual education, and healthcare networks. ASEAN is building participation in the ASEAN Economic Ministers Meeting, its financial framework and creating a greater system of where the Ministers take the time to engage with business to business linkages. Growing incomes create companies, exchange ideas, and form real partnerships opportunities for export. I encourage you to take the aimed at improving the economic environment. time to learn what ASEAN can offer you.

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EU-ASEAN Business Council asean EU-ASEAN Business Council

ASEAN is no longer seen as a Region plagued with between senior level representatives and officials. distress but rather one of promises and tenacity. It’s Recommendations issued included the development of synergistic and diverse market has crafted a favourable the regional Automotive sector, ASEAN Connectivity, business environment for foreign investors. The Information, Communications and Technology (ICT), optimistic profit outlook in the Region has seen an Agri-Business and Financial Services. It is our firm belief upward trend of EU trade and investment gravitating that the information made available from the business towards ASEAN to tap onto the multiplicity of resources summit would be useful for EU and ASEAN enterprises. the Region has to offer. As the formation of partnerships continues to grow, Stefano Poli, Chairman, In 2011, the EU was ASEAN’s third largest trading the EABC will carry on its efforts to enhance the EU-ASEAN Business Council partner, accounting for 10.5% of ASEAN’s trade. This transparency of business practices in ASEAN. Pragmatic percentage is set to grow as markets quietly rebound and principled approaches would be adopted and from a sluggish global economy. The affirmative tailored to the needs of the Region to tackle complex business relations between ASEAN and the EU bring challenges. The business parameters of ASEAN are forth the transactions of business concepts and dynamic and with a clearer frame of business standards, technology transfer. Just a year shy of the ASEAN there will be greater development between ASEAN and Economic Community 2015, ASEAN will soon become a the EU trade and investment ties. hub of centralised opportunities for EU businesses to To build resilience against economic unpredictability flourish with a consumer base of 600 million. and fluctuations, the EABC is ready to prepare the The EU-ASEAN Business Council (EABC) continues to be right tools to capitalise on the strengths of ASEAN. the point of anchor for commercial and economic It will continue to spearhead economic and commercial collaborations between ASEAN and the EU. Following strategies for the prosperity of investment in the the success of the third ASEAN-EU Business Summit Region. 2014 will certainly be a very exciting and 2013 in Hanoi, Vietnam, the Council has proven auspicious year for the next phase of EU-ASEAN effective in facilitating public-private dialogues business relations.

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UK-ASEAN Business Council

The ten ASEAN member states currently have a assistance on how to do business in this diverse market combined GDP similar to the UK’s, and by 2030, the to UK companies. ASEAN economy is predicted to be the fourth largest In the past year, the UKABC has worked with over 500 single market after the EU, US and China. UK-ASEAN UK businesses looking to win business in ASEAN. It has trade already exceeds US$30 billion and with a large received business delegations headed by senior political and young population, ASEAN is the next great market. figures from almost every market in ASEAN and linked There are an increasing number of Free Trade them with interested UK companies. For UK companies, Agreements (FTAs) being negotiated between the EU from Manchester to Manila and from Birmingham to Lord Davies, Chairman, and ASEAN, with the EU-ASEAN Free Trade Agreement Bangkok, the UKABC is there to help to provide practical UK-ASEAN Business Council and its associated benefits a key goal to strive for. advice, information and links to the key delivery US$30 billion in UK-ASEAN trade is a solid foundation. partners including, UK Trade & Investment and British However, the UK’s market share across the Region Business Groups overseas. remains low compared with other countries and this ASEAN is an exciting market, alive with opportunities was why the UK-ASEAN Business Council (UKABC) was for UK companies. The UKABC is the business partner established. The UKABC’s role is a simple one: to help for UK companies considering entering the ASEAN drive up the US$30 billion two-way trade figure by market or expanding their presence, and so there has raising awareness of the vast array of commercial never been a better time for UK companies to do opportunities across ASEAN; and provide practical business in ASEAN.

11 In the future, there will be no markets waiting to emerge.

By 2050, it is forecast that 19 of the 30 largest economies by GDP will be countries we now call ‘emerging’*. But how will this new world order stack up for your business?

At HSBC we understand emerging markets – 150 years ago we were set up to facilitate trade between China and Europe. Our Trade teams, on the ground in over 60 countries, can help you navigate local markets while keeping your eye on the bigger picture.

There’s a new world emerging.

Connect to the latest international business insight at www.hsbc.com/globalconnections

*Source: HSBC “The World in 2050”. Jan 2011.

Issued by HSBC Holdings plc. on behalf of the HSBC Group members which are regulated in the jurisdictions where permitted. AC22830

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- S S E N I ASEAN: An opportunity for treasury S U B

The Association of Southeast Asian Nations (ASEAN) is scheduled to companies taking a strategic approach to ASEAN and splitting design, establish the ASEAN Economic Community (AEC) by 2015. This will manufacture, sales and service across countries in the bloc. represent not only a major step forward for ASEAN, but also a The proximity and activity of China and India is also likely to boost considerable opportunity for businesses both inside and outside the activity and growth in ASEAN, as well as potentially allowing companies bloc. Nick Gandolfo, Head of International for HSBC Bank in Indonesia, from other countries to benefit indirectly from Chinese and Indian outlines the parallel opportunity it presents to corporate treasuries. investment in infrastructure. ASEAN is attractive to Chinese investors As ASEAN has continued to develop, a growing number of companies because of its rich commodity resources, which as China's activity around the globe have begun to appreciate its importance to their elsewhere (such as Africa) illustrates, often triggers infrastructure business plans, which has led to a change in their thinking. As a result, it investment. Furthermore, as Chinese domestic labour costs rise is now increasingly common for companies of all sizes to have a strategy and China attempts to move away from low cost to added for ASEAN, as opposed to multiple individual strategies for its members. value manufacturing, the low cost and high availability of labour in certain ASEAN countries (such as Vietnam and Cambodia) look While the forthcoming AEC is obviously a factor in this thinking, there is particularly interesting. the more general consideration that it is now increasingly possible for all or the majority of a company's business cycle to be entirely contained Furthermore, while the current situation in ASEAN is already appealing within ASEAN, because of the complementary characteristics of its from a business perspective, the longer term view is potentially even members. This thinking has important implications for treasury; if a more attractive because of the AEC. If this single market and production company has a business strategy for ASEAN, its treasury should have its base is to be become a reality by 2015, "four pillars" will have to own supporting strategy in parallel. be satisfied: ASEAN: the business opportunity 1. The emergence of a single market and production base In aggregate, ASEAN countries represent the eighth largest economy in 2. The creation of a sound, affluent and competitive economic region the world, with 2011 GDP of US$2.1 trillion and recent collective growth 3. Even handed economic development second only to China and India. 4. An enhanced level of integration with the global economy via Free For companies outside Asia that are seeking to compensate for

C Trade Agreements and comprehensive economic partnerships, as well

B depressed domestic demand, the growth rates which are potentially S as increased participation in global supply chains.

H achievable in these markets are understandably appealing. Low labour

: Y

D rates in some ASEAN markets and high skill levels in others are also a However, the overriding objective is to promote the free flow of goods, U

T source of interest. ASEAN countries are also developing distinct services, skilled workers and capital within the Region. To this end a set S E

S specialisations, ranging from call centres in the Philippines, to shoe of detailed integration projects, known as the AEC Scorecard, is being A

C manufacture in Vietnam, to R&D and finance in Singapore. This facilitates monitored. For a more tangible example of the benefits of ASEAN one 13 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

As ASEAN has continued to develop, a growing number of companies around the globe have begun to appreciate its importance to their business plans, which has led to a change in their thinking.

only has to look at the situation regarding trade tariffs. Since the early reinforced since 2008, as Multinationals have focused increasingly on 1990s there have been substantial trade tariff reductions throughout risk and cash flow management, as well as seeking a venue to tap long ASEAN, with general tariffs declining from an average of 13% to term funds and hedge portfolios. While Singapore has been the natural approximately 1%, with positive implications for export volume growth. choice for these activities, it is equally suited to companies looking for a treasury centre for any new ASEAN operations because of its advanced The ASEAN treasury environment financial infrastructure, strong service sector and stable legal system. It is While the formation of the AEC is clearly beneficial in terms of also positioning itself as ASEAN’s regional hub for Renminbi cross-border consistency that will assist business development, ASEAN is still relatively trade settlement and investment with China. fragmented from a treasury perspective. Any treasury operating across ASEAN member countries has to be able to cope with a variety of “The importance of Singapore is emphasised by the fact that corporate regulations, currencies, clearing systems and business practices. treasurers want to be close to the opportunities and risks that their business activities face in the Region. Centralising treasury operations in In terms of currency controls and ease of regional/global treasury one place simplifies monitoring of all types of risks, including foreign operation, the ASEAN countries broadly fall into four descending groups exchange, interest rate and counterparty risks to name but a few. In turn in terms of openness of currency and regulatory framework: this makes it easier to gain visibility and control over liquidity, which 1. Singapore otherwise may end up lying idle in different markets around ASEAN”, says John Laurens, Regional Head of Global Payments and Cash 2. Indonesia, the Philippines, Malaysia, Thailand and Brunei

C Management at HSBC.

B 3. Vietnam S

H Neighbouring Malaysia however, is also vying to become a centre of

: 4. Lao PDR, Cambodia, Myanmar Y

D excellence for treasury management activities, as a step up from its U

T Singapore's ease of operation from a treasury perspective has made it recognised pedigree in Shared Services centralisation. The government, S E

S almost the de facto location as a treasury management hub for the with support from its investment arms, Central Bank and global financial A

C Region. Although this status pre-dates the financial crisis, it has been services firms, have launched public initiatives to create greater 14 L A G E L

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awareness on this initiative, as part of Malaysia's larger Economic Transformation Programme (ETP). The collaboration between multiple stakeholders is aimed at creating a cohesive Treasury ecosystem, to attract Multinationals to perform more strategic financial functions, such as Treasury, Liquidity and Working Capital management in Malaysia. ASEAN financial infrastructure hurdles... It seems inevitable that the financial infrastructure in ASEAN will change appreciably over the next few years. The underlying growth in ASEAN payment traffic is already significant. According to SWIFT figures, all ASEAN countries (with the sole exception of Lao PDR) saw growth in SWIFT message volumes between both 2010-11 and 2011-12. Even in markets such as Indonesia and Thailand that already had multimillion message volumes, growth exceeded 10% over both periods. John Laurens continues to explain, “Although correspondent banking networks satisfy the traditional need for cross-border fund transfers, new and regulatory changes. As global foreign exchange activity increases in payment systems will develop regionally across ASEAN as it deepens its line with ASEAN trade growth, the need to manage foreign exchange financial integration in the longer term. Among other things this will settlement risk will become more acute, necessitating the development enable corporates to unlock the potential of technological advances. For of risk-reduction features in payment systems. A more general issue is example, the diffusion and use of more sophisticated retail payment the growing need for regional oversight frameworks as systems become schemes, such as cashless payments, will make the Region as a whole increasingly interconnected and interdependent. more competitive”. ...and how to avoid them Nevertheless, the evolution of more regionalised payment structures for In the long term, all these components will fall into place, but in the ASEAN will require surmounting a number of obstacles. The creation of meantime treasuries have to deal with ASEAN environment as it stands cross-border and multi-currency payment systems could potentially today and as it changes over the intervening period. Fortunately, many proceed by interlinking existing ASEAN real-time gross settlement of the issues that may arise can be addressed through the right choice systems and then enlarging these later. Another consideration is that of banking partner. For example, a bank with comprehensive network legal harmonisation would need to keep pace with rapid technological coverage in ASEAN can effectively act as a middleware layer that 15 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

insulates corporate treasury from many of the complexities and likely implications for the corporate business model and how best to variations that otherwise increase costs and reduce efficiency. respond. The value of such guidance is appreciably enhanced if the bank has an in depth understanding of the client's business and can A similar scenario applies in the case of liquidity management. While therefore put any upcoming changes into relevant context. Having the corporation may have a treasury centre in Singapore, the extent to access to this sort of meaningful dialogue puts treasury in a strong which it can actually directly control and optimise local corporate position when it comes to advising the business and maximising its liquidity varies widely from country to country across ASEAN. The ideal opportunity in ASEAN. remedy is a banking partner that can offer the most effective liquidity solution at both a country and regional level. This may result in a Conclusion mixture of techniques including interest optimisation, physical pooling ASEAN's development represents an attractive prospect for and notional pooling. The key is whether they can be delivered as a corporations of all sizes. Nevertheless, the highly varied financial complete solution that maximises visibility and return for corporate landscape in ASEAN means that the net return these corporations can treasury while minimising complexity and cost. actually achieve will be even more dependent than usual upon the performance of their treasuries. That in turn depends upon a number The bigger picture of other factors. Corporate treasury's own strategy for ASEAN will be However, while these technical capabilities are undoubtedly important heavily influenced by the technical capabilities of its banking partners for treasuries' ASEAN strategies, there is a bigger picture that is equally and more specifically how effectively those capabilities can be if not more important. The ASEAN treasury environment is continually deployed to maximise financial efficiency across the enterprise. shifting and evolving. Regulations are changing, payment infrastructures are being upgraded, new hedging tools are emerging, But the dynamic nature of ASEAN as it progresses towards the launch and so on. Treasuries already have to keep pace with the evolution of of the AEC, means that any such treasury strategy is likely to need frequent revisions. An important influence on the success of those their corporation's ASEAN strategy, without having the additional revisions and the results achieved, will be awareness of pending burden of tracking and responding to myriad environmental changes

C changes and their implications for the corporation. Obtaining and

B as well. S processing the market intelligence relating to those changes is an H

Y Again, this is where a suitable banking partner can reduce the area where the right choice of bank can hugely influence the chances D

U workload, not just in notifying changes, but also in explaining their of success. T S E S A C

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Integration will widen the reach of banking U B

Southeast Asia is a vast area with wide variations of development and The fast moving commercial environment continues to fuel appetite for levels of prosperity. These variations have the potential to be narrowed loans as well as a rising demand for wealth and insurance products, through regional economic integration. However, finding ways to factors that are encouraging domestic and foreign banks to expand their provide funds for sustained investment and development will be the key business operations in the area. element in providing the growth necessary to benefit the entire Region. Thomson Reuters Data forecasts that mergers and acquisition bank deals This task is demanding major regulatory changes to the restricted ways alone in Southeast Asia in 2013 could be worth more than US$21 in which ASEAN country’s banks have previously operated in order to billion, overtaking the previous record of US$16.9 billion recorded stimulate competition and encourage institutions to expand beyond their in 2001. domestic markets. Moody’s Investment Services and Fitch ratings now rank debt in The Region’s banks are already heavily involved in wealth creation Indonesia, the largest ASEAN economy, as investment grade. This is but need to expand services and extend their operations in order to be allowing corporate issuers considerably greater access to international a dynamo of future development to compete against bigger financial markets than before. international institutions. The Philippines has also recently been awarded a similar rating. This has There is certainly no shortage of money within Southeast Asia. The helped stimulate activity in the country’s stock market which has risen question is how to mobilise and retain this wealth within the Region. In 20% in the first half of 2013, following strong growth in 2012. a region of more than 600 million people, a growing middle class element is seeking sophisticated financial services. Individuals earning Equity capital market deals in Southeast Asia overall rose 54% to US$10 million, or more, already outnumber those in Europe and are US$22.5 billion in the first half of 2013 while stock offerings in Singapore, expected to exceed those in the US within the next ten years. the Philippines and Indonesia more than doubled. According to Swiss banking group Julius Baer, Southeast Asia is expected The trend is also witnessed in less developed parts of the Region. to have nearly 500,000 dollar millionaires by 2015. As wealth grows, Cambodia’s Acleda Bank, which saw profits rise from US$50 million companies are also growing in size and ambition and are seeking to to US$66 million in 2012 also launched its first IPO on Cambodia’s expand beyond home markets. stock exchange. It is not surprising that given rising corporate and personal wealth, ASEAN Three of the five biggest IPOs in the Asia-Pacific region in 2013 have countries have for the most part defied a global slowdown in investment come from Southeast Asia. These include a US$2.1 billion listing for BTS banking. The Region’s steady economic growth has been underlined by Rail Mass Transit Growth Infrastructure Fund in Thailand and a US$2.6 record bank revenues and a series of successful Initial Public Offerings billion IPO for Mapletree Greater China Commercial Trust which (IPOs) in addition to mergers and acquisitions transactions. represents Singapore’s largest ever real estate investment trust listing. 17 OPENING DOORS ANYWHERE

MALAYSIA IN ASEAN. INDONESIA

SINGAPORE THAILAND BRUNEI MYANMAR

LAOS CAMBODIA PHILIPPINES VIETNAM

MALAYSIA INDONESIA SINGAPORE THAILAND L A G E L

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While the Region’s banks are playing a greater role in corporate finance, there is still room for growth. In spite of ownership restrictions, foreign banks still have a significant role in the Region. While non-Malaysia interests are prevented from taking over the country’s banks (with exceptions for Islamic institutions) foreign institutions still handle around 22% of the country’s bank assets. Neither have foreign investment banks been prevented from building up their teams in the Region. JP Morgan, for example, in 2012, created a new team of bankers based in Singapore to handle its Southeast Asia debt capital markets business. At the end of 2012, Vietnam’s Commercial Bank for Industry & Trade Another prominent deal has been the US$1.4 billion sale of shares in (VietinBank) sold a 20% stake to Bank of Tokyo Mitsubishi UFG Financial Matahari Department Store, Indonesia’s largest department store chain. Group, Japan’s largest bank, for US$740 million. The deal represented the largest ever mergers and acquisition transaction in Vietnam’s 2012 also saw a boom in Malaysia where a series of IPOs saw Bursa banking industry. Malaysia (formerly the Kuala Lumpur Stock Exchange) become one of the most active bourses in the whole of Asia. Other major banks from Asia, Europe and the Middle East are looking for investment opportunities in a sector that is showing substantial growth One of the largest flotations was Astro Malaysia Holdings’ US$5.1 billion throughout the Region. listing. Others included a US$3.2 billion listing for Malaysia’s palm oil producer Felda Global Ventures Holdings and a US$2 billion Most of Indonesia’s main banks have reported healthy increases in IPO for hospital operator IHH Healthcare on the Kuala Lumpur and profits and portfolio size in the last year. Bank Central Asia increased its Singapore exchanges. mortgage lending by nearly 50% in 2012 and saw its transaction business increase more than 19%. There was also a multibillion battle for Singapore conglomerate Fraser & Neave with the winning US$11.2 billion bid financed by Singapore Bank of Philippines Islands (BPI) also posted rising profits which lenders United Overseas Bank and DBS Bank. increased 27% to US$400 million in 2012. The bank also saw its 19 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Siam Commercial Bank, which is Thailand’s main retail bank and has the biggest lending portfolio, set record results for the third consecutive time with net profit up 29% US$1.4 billion.

internet and mobile banking services expand rapidly with the latter According to a recent Asian Development Bank (ADB) report, there is a expanding 290%. growing awareness that the Region’s banks and its corporations are too Singapore’s main banks – DBS, United Overseas Bank and Overseas- small to be competitive outside their borders. Chinese Banking Corporation (OCBC) also experienced solid growth Southeast Asian companies also borrow heavily from overseas. As a with OCBC recording a profit increase of 24%. result, international investors are taking hold of an increasing portion of Siam Commercial Bank, which is Thailand’s main retail bank and has the local currency debt with 40% of Indonesian bonds and 30% of biggest lending portfolio, set record results for the third consecutive time Malaysian bonds estimated to be in foreign hands already. with net profit up 29% to US$1.4 billion. The integration of ASEAN banking institutions will create an environment However, most of ASEAN’s banks need to expand substantially to be able conducive to the emergence of larger and stronger banks in the Region. to compete internationally. The Region as yet has no domestic global It will build up a customer base large enough to support the growth of brands or globally recognised multinationals. sizable competitive banks with a foothold in global banking through mergers and the acquisition of small banks, ADB believes. This consideration and a lack of regional financial integration has led to national savings and foreign exchange reserves being parked in US and The proportion of working age individuals with bank accounts in European government securities, rather than being retained within Southeast Asia is little more than 20% in Indonesia and Vietnam and the Region. 10% in Cambodia says the US Agency for International Development. 20 L A G E L

- E C N A N I F

- S S E N I S U B

This compares with almost 100% for example in Western Europe with a crowded and mature domestic market leaving the country’s or Australia. banks little choice but to develop business abroad. Access to bank credit services varies considerably across Southeast As a consequence, Maybank and CIMB are developing into regional Asia. Most of Myanmar’s population is not served at all, whereas in players through a range of acquisitions. Maybank which ranks as the Thailand a majority of the population has access to banking services third largest global underwriter of Islamic bonds, posted record profits and Singapore provides 100% access. Only around an estimated 20% of US$1.8 billion in 2012 and is steadily increasing its presence in other of Indonesia’s adult population is served by formal financial services parts of the Region. The bank has recently entered Lao PDR according to the Organisation for Economic Cooperation and and Cambodia and has also developed investment business in Development (OECD) estimates. the Philippines. Rural areas are particularly ill served in the Region but the situation is CIMB also has a presence in Myanmar and Singapore and also owns changing. Acleda Bank, is a specialist in providing micro-finance and is majority shares in Indonesia’s Bank Naga and Bank Thai in Thailand as using cellular phone technology to widen its reach. The bank, in which well as 10% of the Philippines Bank of Commerce. the World Bank’s International Finance Corporation has an interest, is There is still some way to go before local banks catch up with global playing an innovative role to widen the country’s financial accessibility commercial banks in the Region. Standard Chartered, Citibank and through mobile only bank accounts. These allow customers to pay HSBC, for example, each operate subsidiaries in seven of the bills, conduct person-to-person payments as well as buy phone credit ASEAN states. via their mobile phones. The Region’s banks will be in a much better position to compete The bank has extended its services to Lao PDR where 25 branches through an enlargement of the market base which will bring have opened and has also started up an office in Myanmar where it is opportunities for economies of scale and reduction of costs. seeking to develop micro-credit services. While financial integration remains a challenge the potential rewards Cross-border development is a growing priority for many of the are huge. The stability of the Region’s banking industry will be Region’s banks seeking room to expand business beyond their enhanced as a result of larger, competitive banks emerging in own borders. Southeast Asia. This will promote closer cooperation among individual As the 2015 date for ASEAN integration draws near, a number of member states which will in turn be better served to strengthen the Malaysian institutions are among those poised for regional expansion, Region’s financial stability.

RHB BANKING GROUP DELIVERS MORE ACROSS ASEAN. Top 5 Malaysian Banking Group Retail Banking, Corporate & Investment Banking, Business Banking, Islamic Banking, Global Financial Banking, Group Treasury and Group Transaction Banking 3122* delivery channels in 7 countries across ASEAN plus Hong Kong and China

* As of May 14 2013.

L A G E L

- E C N A N I F

- S S E N I S U B

Protecting & investing in ASEAN’s bright future

2013 marks the 165th year in Prudential’s history and its comes a corresponding commitment to protecting and 89th year in Asia. From its first Asian operation in Malaysia investing in ASEAN’s future. in 1924 to this year’s commencement of Prudential We believe that the insurance and asset management Cambodia, Prudential has witnessed and participated in industry has a key role to play in building the future of Asia’s rise, and today Asia represents the largest share of ASEAN in five ways: the Group’s new business profits. In Asia today, more than 18,000 Prudential employees and 400,000 agents • By providing security for work, consumption, and bring insurance and asset management services to over commerce; 15 million customers. Our Asia asset management firm, • As an employer and income provider to thousands of Donald Kanak, Chairman,

A employees, agents and other distribution partners; I Prudential Corporation Asia Eastspring Investments, manages about US$94 billion, S

A over 90% of which is invested in Asia. Today we are as • By providing long term savings and investment N O

I much an Asian company as a British one. The seven products and services for families and institutions; T

A ASEAN countries in which we operate represent the R • As long term capital investors in ASEAN’s growth, in O

P majority of that Asian miracle for Prudential, with a R government bonds, debt and equity for businesses, and O leading presence in life insurance in five markets C in infrastructure; and L (Indonesia, Vietnam, Singapore, Philippines, and A I

T • As good citizens and volunteers serving the

N Malaysia). Our commitment to the ASEAN Region was E communities and the countries in which we work. D further demonstrated in 2013, when we launched U R

P Prudential in Cambodia, and with the acquisition of As we look into the next 10 or 20 years, we see two issues

: Y

D Thanachart Life in Thailand, which increases our business which could undermine the success of the ASEAN Region. U

T scale and expands our distribution for further growth in The first big issue is the need for long term capital S E

S Thailand’s insurance market. In short, we see our future as investment, and the second is the Region’s extraordinarily A

C intertwined with the future of ASEAN. With our optimism rapid aging. 23 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

ASEAN has huge opportunities: a growing middle class, with large Figure 1. Birth rate 2012 increases in working population, a favourable regulatory climate for business, and competitive economies. To mobilise all of these Italy 1.40 > Singapore 0.78 advantages will require a stunning amount of long term capital to invest in infrastructure, debt and equity. According to the Asian Development Sweden 1.67 > Thailand 1.66 Bank more than US$8 trillion of infrastructure investment will be required in Asia between 2010 and 2020 and over US$800 million of UK 1.90 > Vietnam 1.87 that for ASEAN. While banks are typically the source of short and medium term lending, it is the insurance, pension and asset Source: CIA World Factbook management sectors that are the providers of long term capital. Fostering a favourable climate for the growth of insurance and pensions years! (See Figure 2) Even the ASEAN economies that still have growing A I S in ASEAN will mobilise pools of capital that will be reinvested in the populations only have a decade or so to prepare for this rapid aging. A

N ASEAN countries to build infrastructure, form new businesses, and grow That is a very narrow window of time to establish policies and promote O I

T the economic base. the penetration of insurance, and other long term savings and pension A R

O systems, that will accumulate sufficient assets and earn sufficient

P ASEAN’s second major issue is yet still under appreciated. Improvements R returns so that the people of ASEAN will be able to live their senior years O in healthcare, medicine and nutrition are leading to longer life C in security. L

A expectancy throughout the Region. At the same time, birth rates are I T

N falling dramatically. Birth rates today in ASEAN are surprisingly lower At Prudential, we are committed to strengthen our industry throughout E

D than in many parts of Europe (See Figure 1). This combination of rising the ASEAN Region, cooperating with governments, the private sector, U R

P life expectancy and falling birth rates is resulting in Asia aging about three and civil society. We bring products and services which provide security

: Y

D times faster than in the West. It took the United States 54 years to go and build long term assets, deploying investments productively to fund U

T from 10% of the population to 20% of the population over 65, but ASEAN’s growth. That involves working hand in hand regionally and S E

S Singapore will achieve the same fate in only 18 years. Surprisingly, nationally to develop deeper and more efficient capital markets, and A

C Vietnam and Indonesia will travel the same path in between 17 and 19 improve financial education. 24

ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Figure 2. Number of years for older age population (+65) to go from 10% to 20% of total population

Period

16 1982 - 1998

Vietnam 17 2020 - 2037

Singapore 18 2004 - 2022

Indonesia 19 2024 - 2043

Thailand 22 2006 - 2028

2025 - 2054 Malaysia 29

2038 - 2068 Philippines 30

1950 - 1991 United Kingdom 41 A I 1950 -1996 S Germany 46 A N O I

T 1965 -2019 A United States 54 R O P R O 0102030405060 C L A I

T Source: UN population statistics database N E D U R P

: Y D U T S E S A C

26 L A G E L

- E C N A N I F

- S S E N I S U B Expanding into ASEAN

We can help Our expert teams of local professionals are readily available to take Foreign investment is pouring into ASEAN, keen to capture the care of all administrative difficulties involved with moving across opportunity. The ten nations that make up ASEAN are attracting record borders, leaving your company free to focus on its global ambitions. levels of Foreign Direct Investment (FDI). On a per capita basis, ASEAN They have in-depth knowledge of the requirements necessary is pulling in seven times more FDI than India, and almost the same to establish and maintain fully compliant operating, holding and amount as China. finance entities. To expand into ASEAN, it helps to be familiar with the unique business Our worldwide operations and strong presence in the Region means environment including the political and business systems, cultural we can provide you with a single point of contact to coordinate the characteristics, management practices, social structures, legal day-to-day management of your outsourced operations, and ensure frameworks, government priorities. clear communication across multiple jurisdictions, while reducing risk, controlling costs and simplifying operations. Agility sets us apart Legal uncertainty is a major concern when doing business in ASEAN. From specialised financial, corporate secretarial and administrative Governments change leglislation frequently. services to corporate structures, financial vehicles and investment funds, our 25 years of global experience in 75 countries can help your TMF Group has the experience and expertise to guide through sudden businesses navigate through complex local administrations and change. This approach has been practised by TMF Group from reporting requirements globally. projects in America, Europe, Middle East and Africa to Asia Pacific. Therefore, you can stay focused in growing your business while we

P ASEAN or WORLDWIDE - TMF Group is a global expert

U help you expand seamlessly across borders, into ASEAN and the

O TMF Group is present in six of the ten ASEAN nations. We have R unfamiliar territories of Myanmar, Cambodia, Brunei and Lao PDR. G

dedicated specialists in our offices in Indonesia, Malaysia, the F

M Philippines, Singapore, Thailand and Vietnam, to help you expand into Please contact us today, business across borders is easier than you think T

: these countries smoothly, safely and efficiently. [email protected] | tmf-group.com Y D U T S E S A C

27 ASEAN or WORLDWIDE TMF Group is here to help

TriedTrriedied and ttestedested worldwideworldwide withwith close ttoo 22,000,000 SSpeakpeak ttoo our eexpertxpert businessesbusinessseses acracrossoss alalll indusindustries,triestries, TTMFMF GrGroupoup is yyourour ttoo finfindd out mormoree about trustedtrusted parpartnertnerr in outsouroutsourcedceded operoperations,ations, eevenven in vventuringenturing iintonto AASEAN:SEAN: unfamiliarunfamiliarr grounds.grounds. [email protected]@ ttmf-group.commf-group.com TheThe secretsecret toto our successsuccess is our commitmentcommitment toto provideprovide anan independenindependentt global solution basedbased onon outsoutstandingoutstanding quality,qualityy,, servserviceservice and vvalue:alue: whereverwherever youyou are.are.

ttmf-group.commf-groupoup.com L A G E L

- E C

The article below is a summary of the management brief " Riding the ASEAN elephant: How business is responding to an unusual animal ", an Economist Corporate Network N A N (ECN) report sponsored by Baker & McKenzie and published in February 2013. I F

- S

Justin Wood, the ECN Director for Southeast Asia, was the author of the report. The findings and views expressed in this report are those of the ECN alone and do not necessarily S E

reflect the views of Baker & McKenzie. A full copy of the report is available from http://ftp01.economist.com.hk/ECN_papers/ridingASEAN.pdf N I S U B

Riding the ASEAN elephant:

How business is responding to an unusual animal

Introduction Region against a backdrop of deepening integration. The report also The Association of Southeast Asian Nations (ASEAN) is enjoying a golden incorporates interviews with a handful of business leaders working in period, with high-growth and resilient economies. Foreign investment is the Region. pouring in, keen to capture the opportunity. Much of the investment is Key report findings

E directed at specific opportunities in individual markets. But some is also I The reasons for investing in Southeast Asia vary by sector, but high on Z

N being made in the belief that Southeast Asia is becoming more integrated. E the list are impressive rates of economic growth, and a powerful K The ASEAN organisation aims to create an ASEAN Economic Community C consumer spending story. Southeast Asia also has a strong

M (AEC) by the end of 2015, a single market and production base that

R manufacturing story, given that China is becoming expensive, and it has E stitches together the bloc’s ten economies into a coherent whole. K

A a growing investment story in fixed assets such as infrastructure. B

: The report “Riding the ASEAN elephant: How business is responding to Alongside these factors, companies are also being attracted by the Y D

U an unusual animal,” is based on a survey of 147 large multinationals possibilities for greater integration in ASEAN, the stitching together of ten T S operating in Southeast Asia, asking them about their strategies in the smallish markets into one large one of 617 million people. E S

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No (6.1%) B Yes, by 2015 (6.3%) Not important at all (19%)

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Source: Economist Corporate Network Source: Economist Corporate Network Top-down policies from the ASEAN Secretariat are only part of the The survey also shows a clear picture of two sub-groups of markets in integration story. Just as important, are the bottom-up integration Southeast Asia. Six economies, Singapore, Malaysia, Thailand, Indonesia, dynamics. Local companies are pushing into their nNeig hbouring m ar kets. the Philippines and Vietnam, have attracted high levels of foreign Investment flows across ASEAN borders are picking up. And people are investment. The remaining four, Cambodia, Myanmar, Brunei and Lao moving across the Region in ever greater numbers. In banking, for PDR, have attracted much lower levels of interest. In the years to come, example, even though the ASEAN Banking Integration Framework is yet it is quite likely that Myanmar will join the ranks of the larger six nations. to be ratified, some banks in Singapore and Malaysia are already And where do global multinationals put their ASEAN management building a pan-ASEAN presence. Companies know they will benefit from teams? Some 74% of firms choose Singapore, followed by Malaysia with ASEAN integration agreements, but they aren’t waiting for them to arrive 17%. Only 5.4% of respondents run the ASEAN Region from a base before they act. outside ASEAN. Because ASEAN is diverse, many companies are also forced to adopt a “multi-local” strategy across the Region . Sales and go- What sort of presence do companies have in the Region? Stripping out to-market strategies are highly localised and tailored to individual local companies from the survey, the results show that Singapore has markets. This means companies are unable to cluster markets into attracted the greatest level of foreign interest. Some 84% of global meaningful groups. companies in the survey have set up their own operations in the city state. Malaysia comes a close second, with 76% of companies opening ASEAN diversity can act as a barrier to achieving scale. While 28% of their own operations there. companies see “big potential” for achieving scale across ASEAN markets, 31 3 2 CASE STUDY : B AKER MCKENZIE A a p a s A C v o 5 w u a

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n a l t c s I i i l s ’ h n n d e a k c s s s s s . . 3 3 BUSINESS - F INANCE - L EGAL Fluency in business and law — Combining ASEAN insights with a global perspective

If you are doing business in the ASEAN region, you want business partners with deep local knowledge and a broad global perspective. Baker & McKenzie offers unrivalled breadth and reach in the Asia Paciﬁc market: on-the-ground presence in six of the ASEAN economies and 50 years of experience advising companies on their local and cross-border investments in the region. No other law ﬁrm is better placed than Baker & McKenzie to help companies navigate the complex legal environment and cultural nuances of doing business in Southeast Asia.

To learn more, please visit us at www.bakermckenzie.com/AsiaPaciﬁc. L A G E L

- E C N A N I F

Challenges facing ASEAN - S S E N I S U

corporates in a globalised world B

The end of the 2000s spelled the end of an age. Two separate dynamics probably have a more nuanced and sophisticated reading of the local coalesced to ensure that the world would not be the same again. First, cultures in these Regions as well. the global economic crisis hit the Western economies. This had an But this view is short term and ignores the true globalised nature of immediate effect of curtailing outflows of capital from the West. business in 2013. To play at the global level, Asian companies will need Concurrently, it became obvious for the first time that economies in to pay as much attention to compliance and governance as businesses South and Southeast Asia had outgrown their domestic markets and are in the West. For example, consider a Thai or Malaysian company becoming new global players. These two symbiotic dynamics have expanding into Myanmar or PNG and developing its business in the fundamentally recast the world economy. new Region in a way that ignores compliance concerns. Maybe in three Corporates from India, Malaysia, Indonesia, Vietnam and Thailand are years, that company’s headquarters decides that the time is right to list now competing in the same space as the old economies of North on AIM. In order to do so, that company will have to undergo a America, Europe and Japan. Indeed in many sectors, particularly thorough due diligence exercise by an independent third party. Part of infrastructure and the extractive industries, corporates from Asia are that exercise will certainly focus on how the business operates in establishing themselves as world leaders. But as Asian corporates move frontier markets. Failure to comply will abort any potential listing. Or, out of their traditional homes into new and sometimes alien consider that same example but with the chronology slightly geographies, are there special risks that exist for them? And if there are, rearranged. The Malaysian or Thai company lists in the UK or US and what mitigating steps might these companies take? then expands into a frontier region. Now the company will come under the purview of the FCPA or UK Bribery Act. In a worst case scenario It could be argued that Asian corporates may have a more robust and where the company is investigated and charged under the UKBA, that bullish attitude toward risk than their Western counterparts. The Asian company would then be banned from participating in government corporates are, relatively speaking, new and were often born out of quite contracts throughout the EU; if its business is pharmaceuticals or S

E recent political and socio-economic change. Some of the largest players T defence, this could be catastrophic. The principle here is that the ethos A

I in the Region are now in their second generation of management. As a C and culture of compliance that defines a company needs to be a O

S consequence, corporates in the Region are more familiar than their S the same high level whether operating in Kuala Lumpur, London or A Western competitors in dealing with a lack of regulation, handling L Port Moresby. L

O corrupt officials or assertively leveraging business, family and political R

K connections. Hence a corporate from a developed Asian country would, Outside of Asia - in frontier markets in Africa, for instance - Asian

: Y

D in many respects, have a natural advantage over a Western corporate companies will be facing the same level of difficulty as their Western

U T when bidding for business within Asia - for instance, within the frontier competitors. Nigeria’s population is set to explode, and the Region is S

S markets of Myanmar, Papua New Guinea (PNG) or the less accessible awash with natural resources and infrastructure challenges: exactly the A

T C areas of Indonesia. Singaporean, Thai and Malaysian companies would areas in which many of Asia’s largest corporates excel. Transparency in 35 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Africa is amongst the greatest challenges. Understanding who your political leverage, particularly in Scandinavia. NGOs and advocacy potential business partners are and how they operate before moving groups live and die by their relationships with the media. Asian forward into a joint venture or committing to a large scale investment corporates considering moving into European markets need to pay is critical. As with frontier markets in Asia, this cannot be done by very careful attention to workers’ rights, environmental issues and local visiting a government registry. Understanding a potential partner’s social issues. Failure to do so would almost certainly lead to negative connections, political leverage and status could be the difference media coverage and reputational damage, which could affect a between a successful entry into Africa or a legal, compliance and company’s ability to expand further. reputational disaster. In summary, Asian corporates’ expansion to join the global players Finally, at the other end of the scale, the move of an Asian corporate marks the beginning of a new age. But challenges exist within the into a highly regulated country in Northern Europe would also present globalised economy, be they from global regulatory and compliance risks of its own. Whilst corporate transparency regarding a future obligations, lack of transparency in frontier markets or a misreading of partner may not be a problem, risks most certainly exist within the cultural concerns in some existing markets. Forewarned is forearmed context of other cultural aspects of Europe. For instance, the and having access to as much well-sourced information as possible environmental and human rights lobbies in Europe have significant ahead of an investment in a new market is critical.

Richard Dailly is based in Singapore responsible for high level case management and business development in South and Southeast Asia. With 25 years of professional experience, Richard has managed a wide range of risk mitigation engagements including numerous sophisticated investigations, intelligence gathering and complex problem solving assignments, often focusing on compliance issues, fraud and corruption. He is an experienced interviewer and is confident operating in hostile environments. A former British diplomat with experience in counter terrorism, Richard brings in depth knowledge of operating in the Middle East, Eastern Europe, the Balkans, South and Southeast Asia. He has a deep understanding of Richard Dailly Managing Director, Kroll South investigative and intelligence gathering, assessment and analysis techniques in support of complex corporate and Southeast Asia investigations, political risk projects, litigation support, and sophisticated multi-jurisdictional cases. S

E Tel: (+65) 6645 4521 T A

I Email: [email protected] About Kroll C

O Kroll, the global leader in risk mitigation and response, delivers a wide range of solutions that span investigations, S S

A due diligence, compliance, cyber security and physical security. Clients partner with Kroll for the highest value L L intelligence and insight to drive the most confident decisions about protecting their companies, assets and people. O R K

: Kroll is recognised for its expertise, with 40 years of experience meeting the demands of dynamic businesses and Y D

U their environments around the world. T S

E Learn more at www.krolladvisory.com S A C

ASSOCIATION OF SOUTHEAST ASIAN NATIONS

SICPA supporting governments in Asia to combat illicit trade and increase tax revenues Philippe Amon, Chairman and CEO of SICPA

SICPA is delighted to be associated with the ‘Investing in ASEAN’ Illicit trade is a serious problem for members of ASEAN and regional publication. As a company we have been investing in and partnering trading partners, costing governments billions of dollars in lost revenues. with member governments of ASEAN for many years providing It damages government sovereignty by creating a parallel economy that solutions and services to support key economic objectives and fiscal compromises government legislation, erodes legal trading channels and policies and enable regional cooperation. We have operating centres in sustains criminal behaviour. It undermines economic development and a number of countries in the Region and our Government Security growth and weakens the impact of government policies in areas such as Solutions Division recently established a regional HQ and consumer protection and public health. It is a global phenomenon which demonstration centre in Singapore in order to be as close as possible exploits the mismatches between national approaches and any to our current and future government partners in the Region. weakness in international connectivity - the solutions are thus both national and multi-lateral. SICPA’s focus is to enable trust by providing SICPATRACE ® projects have resulted in significantly increased these solutions. tax revenues SICPATRACE ® is a platform to secure the supply chain, which can be SICPA has a long history starting 86 years ago in Lausanne, Switzerland. implemented flexibly and in a modular cost effective way according to Innovation has always been at the heart of our business. In the late specific government needs. It is inter-operable with national and regional 1940’s we developed unique expertise in security inks becoming the T systems, can handle a wide range of products and adapt to changing N

E leading global provider of security inks and security features for

M requirements such as new international standards. The key elements are P banknotes and value documents. More recently SICPA has diversified, O robust authentication and secure traceability, which ensure that all L

E combining this strong basis in material based security with sophisticated V stakeholders can check that a product is genuine and know whether or E IT to develop integrated security solutions based on secure track and D not the correct tax has been paid. A

I trace technology. These solutions provide the tools to combat illicit trade S A

and enhance tax revenue collection, notably for excise goods. Systems The starting point is to securely mark each unit of product, such as a pack

A ® P based on the company’s SICPATRACE platform are operating in of cigarettes, bottle of spirits or pack of medicines, in a way that is very C I

S countries across the world, protecting almost 80 billion products difficult to counterfeit. The mark ideally combines material based security

: Y

D annually and securing over US$40 billion per year in excise tax and VAT features using security inks (which can be visible or invisible) with digital U

T revenue. SICPA’s Government Security Solutions Division partners technology, e.g. using a secure 2D matrix, linked to data confirming the S E

S exclusively with governments, providing them with solutions over which product type, place of origin etc. The individual identity assigned to each A

C they have full control and which are independent of industry. unit is stored in a government owned and controlled database and 38 a i e C f s e u i r S m s o e u g n n I n a

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a N a a a s s n n o a a k ) t t . l l l l , 3 9 BUSINESS - F INANCE - L EGAL Enhance Government revenue Prote consumer health

SICPA enables Governments to ﬁght illicit trade

SICPA enables Governments to prote tax revenues and deliver associated policy obje ives by providing unique and secure authentication and traceability solutions. SICPATRACE® combines material based security with ate-of-the-art information technology which enables our partner Governments to secure revenue and prote consumers. As pioneers in this ﬁeld, we are the only indury independent company to have successfully implemented and operated ate and national level track and trace solutions exclusively dedicated to Governments.

SICPA Asia Development Pte Ltd, 10 Marina Boulevard, #13-03, Marina Bay Financial Centre Tower 2, Singapore 018983 www.sicpa.com [email protected] O u R i A e s f T O t p s i T g m M T 1 a e d T l n n i h o i t t r s h h r h x h 9 p e r e r g r t n d

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Deepwater is considered the next challenge and is expected to account for up to 40% of Malaysia’s oil output by 2020. In 2002, Murphy Oil was the first to discover and develop large scale deposits in the Kikeh field, 110 kilometres off the coast of Sabah. In order to fully exploit the reserves, new oil frontiers are being opened up in deeper and more remote waters in under explored parts such as, the Philippines and Myanmar. New offshore developments are set to boost long term production for Vietnam, whose 4.7 billion barrels of proven crude reserves are among the highest in the Region. The extra output will certainly be needed since the country’s oil demand is forecast to rise from 396,680 barrels per day (bpd) in 2013 to 581,070 bpd in 2022. Previous peak production of 400,000 bpd was reached in 2007. Current oil production of 338,400 bpd places Vietnam as the fourth largest producer in the Asia-Pacific region behind Indonesia, Malaysia and Thailand. While Southeast Asia’s largest states are multi-faceted economies, oil & Expansion of exploration, particularly in deeper areas and more gas above all else defines Brunei’s economy and accounted for almost complex geological structures will also expand the market for oil & gas 68% of GDP in 2011. industry support services and marine engineering businesses. These There are hopes that new field developments offshore by principal are steadily growing in scale and technical sophistication in Singapore operators such as Brunei Shell Petroleum and the French multinational and elsewhere such as Malaysia, which is keen to develop a Total, will raise production and reserves. The Government has set an shipbuilding role. Singapore has been particularly adept in providing a ambitious target to double oil & gas production to 800,000 bpd of oil range of incentives for shipping companies. These include financial equivalent, which equates to 130 million cubic metres of natural gas a assistance for companies seeking to introduce innovative products and day, by 2035. various tax concessions. This will require intensive exploration efforts involving opening up new Southeast Asia’s gas market expands blocks and boosting production incentives for marginal reserves and ASEAN is in a strong position to become a hub for global gas increased use of new technologies. The Government is emphasising the development over the next few years, with at least 30 deepwater gas use of enhanced oil recovery programmes to achieve its goals. fields expected to come on stream in the next four years. 42 Integrated services

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MALAYSIA IS A FAST GROWING OPERATIONAL CENTRE FOR PETROFAC AND WE EMPLOY OVER 2000 PEOPLE IN THE SOUTH EAST ASIA REGION. WE HAVE HAD A PRESENCE SINCE 2004, ESTABLISHING A FOCUSED OFFSHORE CAPABILITY WITH A TRACK RECORD COVERING THE CENDOR AND BERANTAI FIELD DEVELOPMENTS FOR PETRONAS. WE HAVE RECENTLY BEEN AWARDED A CONTRACT WITH PETRONAS TO DESIGN AND BUILD INDUSTRY LEADING TRAINING FACILITIES IN MALAYSIA. ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Since the first regional gas pipeline linking Malaysia to Singapore was commissioned, several regional gas pipelines have been completed and more are being designed and constructed.

Six new gas fields with combined estimated reserves of 0.2 trillion cubic 2015. Most experts predict however, that future exploration will need to metres (tcm) have been discovered in Malaysia and have been placed be carried out in more difficult areas at greater depth. among the ten largest discoveries made in Southeast Asia. The country’s most productive gas fields are located offshore in the Gulf State owned Petronas, Swedish oil firm Lundin Petroleum and US based of Thailand. New concessions due to come on stream in the next few Murphy Oil are among the most active prospectors. The latter’s three years include the Arthit field off the coast of Songkhla in which Chevron fields off Sabah are estimated to hold some 17 billion cubic metres has a 16% interest. (bcm) of gas reserves. Malaysia has introduced a number of fiscal Chevron, and other major international oil companies such as Mitsui Oil incentives to stimulate exploration and awarded 13 production sharing Exploration, Hess, Total and China Petroleum & Chemical Corporation contracts in 2012. are also extensively involved in Thailand’s hydrocarbon sector. Gas field In addition, production from the Malaysia-Thailand Joint Development development is also expected in the 7,250 square kilometre offshore Area and projects such as ExxonMobil’s Bintang field in the South China Malaysia-Thailand Joint Development Area in the Gulf of Thailand. Sea are likely to mean continuing growth in the country’s gas production Further regional cooperation could substantially boost prospects for gas and exports. output. A 27,000 square kilometre offshore area with overlapping claims Gas has also been identified as a major energy resource elsewhere in the from Thailand and Cambodia is estimated to hold 0.3 tcm of gas in Region. In Vietnam, proven gas reserves have increased from 192.5 bcm addition to crude oil deposits. to 610 bcm. Other potentially significant producers are emerging. By the end of 2013, With activities such as Chevron’s Block B project expected to increase gas Myanmar is expected to be pumping 400,000 bpd of crude oil and production by at least 5 bcm and significant discoveries in Nam Con Son, 11,200 cubic metres a day of gas by pipeline from the Bay of Bengal the Government hopes to increase gas production to 15 bcm a year by to China. 44 I p I a e B A a s d E d T h I A o n t T A M T t S c a A M S n n n h h u o

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Towards a greener ASEAN Economic Community David Doran, Partner and Chairman, DFDL & Matthew Christensen, DFDL

Fueling accelerated regional growth through reliable sources of energy Successful implementation of the APAEC goals anticipates the redesign remains an overriding concern for ASEAN. Energy requirements will of national energy laws and policies in a number of ways: more than double by 2030, and energy security necessitates a • Incentivise RE projects through subsidies (primarily feed-in tariffs); diversification away from fossil fuel imports to maintain stable socio- • Facilitate financing RE projects through special government funds economic growth. 1 The ASEAN Plan of Action for Energy Cooperation and incentives; (APAEC), adopted as the energy component of the ASEAN Economic Community Blueprint, outlines the fundamental role envisioned for • Set aggressive RE growth targets; renewable energy (RE). APAEC’s renewable energy programme is • Streamline administrative and licencing procedures; designed to strengthen cooperation in RE development by facilitating • Provide easy access to expertise (human resources) from ASEAN and infrastructure investment to improve rural electrical access, promoting beyond; and open trade and the sustainable production of biomass, geothermal, • Liberalise restrictions on Foreign Direct Investment. hydro, solar, and wind energy, while mitigating greenhouse gas emissions by focusing on energy efficiency and conservation. Significant progress has been made to date and additional steps will be Specifically, the following goals have been set: taken by ASEAN members in future years. • Increase the development and utilisation of RE sources to achieve the Feed-in Tariffs (FIT) are the most essential component of any national 15% target share of RE in the ASEAN power generation mix; programme to reach renewable energy goals. Thailand has had a robust • Enhance awareness and information sharing and strengthen networks; FIT system in place for many years, so robust that a number of RE sectors L

D have been oversubscribed, and at least one (solar) required a FIT

F • Promote intra-ASEAN cooperation on ASEAN made products and

D reduction. Other countries have been slower to implement a FIT system.

: services; Y

D Vietnam only provides FITs for wind energy, while Myanmar has no

U • Promote renewable energy financing schemes; T published plans to implement a FIT system for RE. Given the large S

E • Promote the commercial development and utilisation of biofuels;

S riparian resources in Myanmar, government strategy is focused on A

C • Develop ASEAN as a hub for renewable energy. hydropower rather than other renewables, and FITs are not necessary to 46 Y G R E N E

render a hydropower project economically viable (except micro-hydro). Indonesia instituted a comprehensive FIT system in 2012 and the Philippines has approved a similar programme to be rolled out in 2014. Malaysia also has a comprehensive programme in place. On the financing side, ASEAN members have established RE investment funds that offer incentivised loans at below market interest rates; most notably Indonesia, where multiple funds target specific types of RE. They, alongside nations such as Thailand, also provide government guarantees to purchase all electricity generated during the project lifecycle. Vietnam recently moved to incentivise RE development by providing grants and subsidies with a particular focus on offshore wind energy. A key goal of ASEAN is to remove national restrictions on investment from other ASEAN members. While foreign ownership restrictions have been eased, caps in the energy sector remain a major constraint on greater FDI cash flows into and within ASEAN. Both the Philippines and Malaysia restrict foreign ownership in RE projects to a minority share. In Lao PDR, the Government is required to hold an equity stake in private power projects, which in practice is between 5%-20%. Brunei and permitted to work throughout ASEAN in collaboration with designated Indonesia allow foreign majority ownership, but they, too, fall behind engineers in the host country but not as independent practitioners. countries like Cambodia, Myanmar, and Thailand, where foreign Although this is a step forward, other technical professions related to RE companies can own their RE projects outright. Under the new foreign project construction such as environmental assessment specialists, legal, investment law and regulations in Myanmar, RE projects are not listed as and risk analysts remain restricted for the time being. To achieve this one of the sectors available for promotion or investment, nor is it a goal, additional liberalisation will be needed. prohibited sector. This means that approval for foreigners to undertake Hydropower 2 RE projects is dependent on the discretion of the relevant authorities. Hydropower dominates RE in ASEAN as capacities have doubled in the One of the main APAEC goals is for ASEAN to become a “hub” of past decade to over 25,000MW or 85% of total RE output in 2012. This renewable energy, which requires the free flow of industry experts is most strikingly observed in Lao PDR, where hydropower has grown at (scientists, engineers, etc.) among ASEAN member countries to build an annual rate of 30% in recent years and generates up to 98% of the research and development facilities and energy service centres. Of the total energy supply. Lao PDR is recognising its newfound role as the seven professions whose qualifications have been standardised, (hydro) battery of Southeast Asia in large part due to investments by engineers are the most vital to RE development. Under the Mutual ASEAN’s top energy importer, Thailand, to whom much of the electricity Recognition Arrangement, engineers who are ASEAN nationals are is being sold. 47 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Hydropower also has enormous prospects in Myanmar, where nearly also begun issuing a FIT to further compensate companies three quarters of the population lives without electrical access. 3 Home contributing RE to the national grid. to four major river basins with a potential of more than 40,000MW, Biomass 6 Myanmar has identified over 200 sites where small and micro Rural populations in ASEAN rely on biomass, the organic waste hydropower projects can meet the basic energy needs of rural byproducts of agricultural production, more so than any other fuel communities for the first time. Plans to increase from 2,594MW of source. In Vietnam, where nearly 70% of the population lives in rural current capacity to 35,578MW in the coming decades signal that areas, approximately one third of total energy consumption comes hydropower is the most fundamental component of Myanmar’s from traditional biomass, a large percentage of which is outside the 4 energy infrastructure development. national grid. 7 Waste-to-energy projects are underway in major cities Geothermal 5 like Hanoi to simultaneously address electrical production and waste ASEAN boasts two of the world’s top three geothermal energy management. Taken together, the Government plans for a ten fold producers, though current capacities represent a small fraction of increase in biomass capacity by 2030, as a way to replace a regional geothermal potential. The Philippines, at number two, plays percentage of fossil fuel consumption. host to countless untapped sites along the ‘Ring of Fire,’ and as 40% Thailand's recently revised 2030 targets include generating 25% of its of its primary energy supply comes from a variety of RE sources, is total energy consumption through RE, in part by doubling biomass considered one of the most developed RE nations in ASEAN. The capacity to more than 3,000MW. To achieve this goal, the National Renewable Energy Programme targets a 60% increase in government has implemented several support schemes, including geothermal capacity by 2030, while the Renewable Energy Act one of Asia’s first FIT programmes, an eight year income tax holiday, provides a number of financial and regulatory incentives. and direct RE sector subsidies. Ranking third, Indonesia is home to the largest number of active Founded in 1994, DFDL is a leading international law firm specialised volcanic sites in the world. Indonesia plans to triple current RE output in emerging markets with pan-regional legal and tax expertise with a by 2025, acquiring 15% of its total energy from non-fossil sources. focus on ASEAN. DFDL has 12 offices in eight countries, including Foreign ownership in RE projects has been increased to 95%, and a seven ASEAN member countries, with over 120 lawyers and legal “fast track plan” has been implemented that includes projects totalling advisors providing legal, tax and consulting services and solutions to nearly 4,000MW of new geothermal capacity by 2014. Indonesia has local and international investors across the Region. L

D Sources: F 1-2

D ASEAN Centre for Energy

: 3

Y Asian Development Bank http://www.adb.org/sites/default/files/pub/2013/new-energy-architecture-mya.pdf

D 4-6

U Respective National Energy Ministry websites

T 7

S US EIA E S A C

48 ϭϵzĞĂƌƐĂƐWŝŽŶĞĞƌƐŝŶƚŚĞ&ƌŽŶƟĞƌDĂƌŬĞƚƐŽĨƐŝĂ

&ŽƵŶĚĞĚŝŶϭϵϵϰ͕&>ŝƐƚŚĞĮƌƐƚůĞĂĚŝŶŐŝŶƚĞƌŶĂƟŽŶĂůůĂǁĮƌŵƐƉĞĐŝĂůŝǌĞĚŝŶĞŵĞƌŐŝŶŐ ŵĂƌŬĞƚƐǁŝƚŚƉĂŶͲƌĞŐŝŽŶĂůůĞŐĂůĂŶĚƚĂǆĞǆƉĞƌƟƐĞ ĚĞǀĞůŽƉĞĚƚŚƌŽƵŐŚŽƵƚƚŚĞDĞŬŽŶŐ ƌĞŐŝŽŶ ;ĂŵďŽĚŝĂ͕ >ĂŽ WZ͕ dŚĂŝůĂŶĚ͕ DǇĂŶŵĂƌ͕ sŝĞƚŶĂŵͿ͕ /ŶĚŽŶĞƐŝĂ͕ ^ŝŶŐĂƉŽƌĞ͕ ĂŶĚ Bangladesh, with a dedicated focus on ASEAN and the Middle East. tŝƚŚĂƚĞĂŵŽĨŽǀĞƌϮϱϬƐƚĂī͕ŝŶĐůƵĚŝŶŐϭϮϬнůĂǁǇĞƌƐĂŶĚ ĂĚǀŝƐĞƌƐ͕ ǁŽƌŬŝŶŐ ĐůŽƐĞůǇ ƚŽŐĞƚŚĞƌ ǁŝƚŚŝŶ Ă ĨĂƐƚ ŐƌŽǁŝŶŐ Emerging Markets ŶĞƚǁŽƌŬŽĨϭϮŽĸĐĞƐŝŶƐŝĂ͕ǁĞƉƌŽǀŝĚĞƉĞƌƐŽŶĂůŝǌĞĚĂŶĚ >Ăǁ&ŝƌŵŽĨƚŚĞzĞĂƌ ĐŽƐƚͲĞīĞĐƟǀĞůĞŐĂů͕ƚĂǆĂŶĚĐŽŶƐƵůƟŶŐƐĞƌǀŝĐĞƐĂŶĚƐŽůƵƟŽŶƐ ǁŝƚŚƉĂƌƟĐƵůĂƌĞǆƉĞƌƟƐĞŝŶ͗

ŶĞƌŐǇ͕DŝŶŝŶŐΘ/ŶĨƌĂƐƚƌƵĐƚƵƌĞ Myanmar ZĞĂůƐƚĂƚĞΘŽŶƐƚƌƵĐƟŽŶ >Ăǁ&ŝƌŵŽĨƚŚĞzĞĂƌ ŽƌƉŽƌĂƚĞΘŽŵŵĞƌĐŝĂů DĞƌŐĞƌƐΘĐƋƵŝƐŝƟŽŶƐ dĂǆĂƟŽŶ ŶŐůŝƐŚ>ĂǁŐŽǀĞƌŶĞĚƚƌĂŶƐĂĐƟŽŶƐ Project Finance ĞĂůŽĨƚŚĞzĞĂƌ

Excellence . CreaƟǀŝƚy . Trust www.dfdl.com Since 1994 Contact: ŝŶĨŽΛĚĨĚů͘ĐŽŵ

E'>^,ͮDK/ͮ/EKE^/Ύͮ>KWZͮDzEDZͮ^/E'WKZͮd,/>Eͮ s/dED Ύ/ŶĞǆĐůƵƐŝǀĞĂƐƐŽĐŝĂƟŽŶǁŝƚŚDĂƚĂƌĂŵWĂƌƚŶĞƌƐ ASSOCIATION OF SOUTHEAST ASIAN NATIONS

ASEAN manufacturers move to advanced technology

In the last 25 years, ASEAN countries have become established as a pre- In addition, an expanding ASEAN role in the global aerospace eminent destination for global manufacturers seeking a well resourced, industry is seen in the UK’s Rolls-Royce US$560 million plant recently cost effective manufacturing base for garments and textiles, electronics commissioned in Singapore’s Seletar Aerospace Park, to assemble the and a huge variety of branded goods that stock the shelves of retailers company’s Trent engine and wide chord fan blades. in Europe and North America. Rolls-Royce’s Director for Southeast Asia, Jonathan Asherson, says that ASEAN nations experienced a 2% increase in Foreign Direct Investment the engine maker chose to expand its presence in Singapore because it (FDI) inflows in 2012, the only region of the world to have seen an believes the country has one of the highest skilled talent pools available increase in the last year. Indonesia, Malaysia, Philippines, Singapore, globally and offers a business friendly environment conducive to high Thailand and Vietnam received a total of US$111.3 billion according to value manufacturing, research and innovation. the 2013 World Investment Report published by the UN Conference on Government initiatives have been important in the development of Trade and Development (UNCTAD). Singapore’s technology manufacturing. As a result of continuing high levels of investment, the contribution from This is seen in the Singapore Biomedical Sciences initiative launched in industry and manufacturing to economies throughout the Region 2000, to develop clusters of industries to be a pillar of the country’s continues to grow. In Indonesia, the sector’s contribution to GDP has manufacturing sector alongside electronics, engineering and chemicals. reached 47%, 40.2% in Malaysia and 31.1% in the Philippines, and Singapore’s services dominated economy industry still accounts for 26% Collaboration between Public Sector researchers and industry can help of its GDP. ( CIA World Factbook ) facilitate the translation of research discoveries into a flow of industry ready products, according to Singapore Health Minister, Gan Kim Yong, While Singapore has none of its own oil & gas resources, it has become who notes that more than 100 global biomedical sciences firms have the Region’s main refining centre and a flourishing maritime support since set up operations in Singapore. hub. It has also become a leading manufacturer of drilling rigs and offshore support vessels. Keppel Offshore and Marine, which has its Establishment of the Malaysian Biotechnology Corporation as a base in Singapore, is the world’s main manufacturer of jack-up rigs, government agency to promote investment in the country’s agricultural, essential for offshore oil exploration. healthcare and industrial biotechnology sectors, is also leading to new industries, with investments totalling US$1 billion in 2013. There is a developing strategy among many ASEAN states to move from low cost manufacturing and become providers of value-added products One of the largest projects is due to come on stream at the end of 2013 in many sectors. Indonesia in particular, is keen to progress from a and involves a US$616 million joint venture between France’s Arkema primary producer of ores and to process the country’s vast mineral and South Korea’s CJ Cheil Jedang. The joint venture is developing what resources through its own smelting and refining operations into is described as the world’s first bio-methionine plant located in finished products. Malaysia’s Terengganu State at Kerteh. 50 a c T B t a T t w A R S d A d c c b l A a c i h h l o o o n d d h h e k e e e e i n s g u h o e e n e r

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Honda is investing in a new US$337 million plant adjacent to its existing site at Karawang Industrial Park near Jakarta. It is due to open in 2014 and will triple the company’s car production to 120,000 units a year.

Suzuki is also reportedly planning to increase production in Indonesia Efforts to meet this target are being helped by the investments with a new assembly plant and engine plant. ( Nikkei Business news ) underway by leading manufacturers. In 2012, Ford opened a new US$450 million Thai plant in Rayong Province with an initial Honda is investing in a new US$337 million plant adjacent to its existing production capacity of 150,000 units a year. ( Ford PR may 2012 ) site at Karawang Industrial Park near Jakarta. It is due to open in 2014 and will triple the company’s car production to 120,000 units a year. Nissan is also developing a second assembly line in Thailand near its These and other investments are establishing Indonesia as a rival existing facility in Samut Prakam Province. The new US$358 million to Thailand, which is regarded as the main car producer. ( Honda plant is due to commence production in 2014. The company is the PR 4/6/12 ) largest car producer in Southeast Asia and assembles some 400,000 vehicles a year in Indonesia, Malaysia, the Philippines, Vietnam and However, Thailand is not complacent and also continues to expand its Thailand. ( Reuters 2/11/12 ) automotive industry. Many of the world’s largest car and truck manufacturers and component suppliers have established a presence Toyota has announced plans to invest US$400 million in a second including all the major Japanese producers. plant in Chachoengsao’s Gateway City Industrial Estate. This will increase capacity to 300,000 vehicles a year. Foreign investors are also being attracted to the Thai automotive sector’s supporting industries. Manufacturers are able to obtain up to Suzuki Motor also intends to produce its new Swift low carbon 80% of components locally. The manufacture of auto parts also earns emission diesel car in the Gateway City Industrial Estate at a new the country US$5 billion in exports according to US market research US$250 million plant that at peak capacity will turn out 200,000 cars company IHS. a year. ( Reuters 2/11/12 ) The latest five year plan drawn up by the Thailand Automotive Institute As manufacturing operations in ASEAN countries steadily orientate envisages the country becoming one of the top ten auto toward more advanced activities, a growing challenge will be to manufacturing nations. The plan focuses on increasing output to 3.3 maintain the Region’s competitive edge and attractiveness as an million vehicles a year by 2020 from around 2.43 million projected in investment destination. Achieving economic integration and 2014. By 2020 a production of 4.5 million units a year is anticipated. establishing greater connectivity are likely to be key elements in (Thailand Automotive Institute ) achieving this.

52 CASE STUDY : J EBSEN & J ESSEN F 5 J t e 1 t 1 A i i e b m w t g n t r h e e o s

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A S E A N 5 3 INDUSTRY & M ANUFACTURING ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Jebsen & Jessen began this decade of swift growth opening operations in the Philippines, in partnership with a local firm, a model for market expansion that would also successfully bring them into Myanmar more than twenty years later.

Becoming regional chemicals business other business lines were introduced. Today, Within a couple of years Singapore and Malaysia had become separate packaging manufacturing operations are established alongside independent nations and by 1967 they would be ready to come cables distribution. together with Indonesia, Thailand and the Philippines to create ASEAN. Recession hit in 1997, having ridden through these waters before the Responding to the economic potentials of the other nations beyond Group was able to turn momentum inwards. They invested in SAP the peninsula, Jebsen & Jessen expanded into Thailand and Indonesia based regional corporate platform and rolled out a new corporate in the early 1970s. platform across the Region. As the dreaded Y2K arrived the company sailed through - ready to take on its fifth decade. It was at this time that the Group moved beyond trading and into manufacturing, under license for German materials handling giant The Group continued its geographic expansion with entities in Demag. With factories in Singapore and Malaysia, this company went Cambodia, 2010; Myanmar, 2011 and Brunei, 2012. on to become a 50:50 joint venture called MHE-Demag in the 1980s. Reflecting economic and civil growth A business unit of the Group, MHE-Demag today has eight factories The shifting story of industrialisation is not only about wealth but also and 36 service centres across the Region. a change in corporate citizenship. Jebsen & Jessen was at the forefront

N 1990s: New markets of the environment, health and safety (EHS) movement in the 1990s, E S

S Jebsen & Jessen began this decade of swift growth opening operations implementing ISO across its member companies. Then in 2012, it E J in the Philippines, in partnership with a local firm, a model for market became one of the first industrial Southeast Asian enterprises to be &

N expansion that would also successfully bring them into Myanmar more carbon neutral, offsetting its emissions for all operations. E S

B than twenty years later. E J

The story of this industrial group grew alongside and within ASEAN. : Y

D As Vietnam got ready to join ASEAN, Jebsen & Jessen was exploring Both are a story about the success of diversity brought together for a U T the market through a rep office. Having developed a successful singular goal. S E S A C

ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Region’s infrastructure needs take centre stage

Southeast Asia has enjoyed decades of strong growth but even with This new track will extend through Myanmar and then south to Bangkok, recent economic gains, its infrastructure lags behind the Asian average where a spur will traverse Malaysia to Singapore. From Bangkok, the line and is only a fraction of that of advanced economies. will run east through Cambodia and north through Vietnam to Hanoi, then through Lao PDR and back to Kunming in China’s southwest It is now catch up time for the Region. According to Manila based Asian Yunnan Province. Development Bank, at least US$600 billion is to be spent by members of ASEAN over the next decade on roads, ports, railways, telecoms, and in The recent opening up of Myanmar to increased global investment will a host of other areas such as power, water and sanitation, flood defences lead to development of additional trading connections. Proposed and airports in order to maintain the Region’s competitiveness in global projects include a Bangladesh-India-Myanmar gas pipeline. This could economic development. tap into the latter’s vast natural gas reserves which estimate at up to 2.55 trillion cubic metres. Investment whether in ports, airports, roads, railways, power, water and sanitation or ICT serve as a catalyst for expansion in the economy by In Thailand a US$1.5 billion highway is already being built to the border lowering the costs of conducting business and as a result contributing to with Myanmar. The two countries, in addition, have plans to develop a GDP growth. US$50 billion industrial and logistics hub centred on a new deepwater port at Dawei which would further link with the Indian sub-continent. Improved connectivity within the area and constructing physical links to China and South Asia is crucial. Some of the cross-border projects are Domestic infrastructure requirements are also high on the agenda of huge, long term and challenging. They include the ASEAN Highway every ASEAN member state. Capacity constraints, for example, are Network as well as a new Regional railway. increasingly being felt in Indonesia, especially in transportation. Logistics 56 E R U T C U R T S A R F N I

often cheaper to source goods from outside Indonesia than transport them internally. Indonesia has said it intends to emphasise building infrastructure projects on its eastern islands in 2013 as it seeks to spread development across the archipelago to boost economic growth. According to President Susilo Bambang Yudhoyono, Indonesia’s infrastructure development has become the main priority. Under the country’s masterplan for acceleration and expansion of Indonesia’s economic development 2011-2025, as many as 135 projects have begun with investments of more than US$50 billion. The masterplan to accelerate economic development known by its Indonesian acronym MP3E1 has three main pillars: developing six economic corridors, improving connectivity both within the country and internationally, and strengthening workforce skills and installing more technology. The corridor developments largely overlap with the country’s main island groups of Sumatra, Java, Kalimantan, Sulawesi, Bali-Busa, Tenggara and Papua-Maluku. costs in Southeast Asia’s largest economy, now account for around 30% Thailand and the Philippines are also beginning to focus on their mega of retail prices. infrastructure programmes, some of which has had to be accelerated. Faster economic growth is stretching the capacity of roads and ports as In response to the devastating floods in late 2011, the Thai Government goods flow through the world’s largest archipelago which covers 5,300 announced investments including an US$11 billion package for a three kilometres across more than 17,000 islands along the equator. year flood prevention programme. At present a lack of internal connectivity also means prices of basic goods In 2013, the Government approved a US$70 billion infrastructure budget can vary substantially in different parts of the country. Much of over the next seven years that will allow the Ministry of Finance to issue Indonesia’s existing infrastructure is concentrated in Java and Sumatra, long-dated bonds to finance investment in high-speed railways and leaving the eastern part of the country relatively isolated. As a result, it is other transportation projects including airport upgrades. 57 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

The recent opening up of Myanmar to increased global investment will lead to development of additional trading connections. Proposed projects include a Bangladesh-India-Myanmar gas pipeline.

Singapore is planning to extend its urban rail system while the first phase Several ASEAN countries have already announced that they intend to of a US$13.5 billion subway line is due to open in 2019. A new rapid apply for AIF financing, for projects which include Indonesian shipping transit system to link with Malaysia is also in the planning stage. and a cross-border power grid in Indonesia and Malaysia. Malaysia has started construction of a US$10 billion mass transit However, much more capital needs to be mobilised. According to Kunio system while US$18 billion is also being spent on new roads, railways Senga, Head of ADB’s Southeast Asia department, the Region’s needs and hospitals. are well beyond the funding capacities and fiscal resources of governments and multilateral development banks. “It is crucial to involve The Philippines is expected to spend US$9.8 billion on infrastructure the private sector in infrastructure financing if ASEAN is to continue improvements in 2013. In 2012, the country received a boost with building and growing,” he says. receipt of investment-grade credit rating from leading ratings agency Fitch. President, Benigno Aquino anticipates this will result in lower ASEAN states are going to have to draw on a variety of public and private interest rates on national debt and stimulate investment. sector investment sources to realise their ambitious programmes. There is no doubt the necessary resources can be found. Prudential An important source of future investment for the Philippines and other Corporation Asia’s Chairman, Donald Kanak says “Financing most regional states will be the ASEAN Infrastructure Fund (AIF). This was infrastructure needs with domestic savings is well within the reach of established in 2012 with the support of the Asian Development Bank ASEAN as a Region”. (ADB). Based in Malaysia, the AIF has received all first tranche equity contributions from shareholders, completion of legal exemptions and Funding requirements can also be met from the Region’s growing concluded administrative arrangements for full operations. US$700 billion foreign exchange reserves, which the AIF is expected to draw on. ASEAN countries can tap into the Region’s banks and unlock The AIF is expected to lend up to US$4 billion by 2020, with six new billions of dollars in private savings through bank loans. infrastructure projects a year receiving help. With projected 70% co- financing by ADB, it is expected to leverage more than US$13 billion in Underdeveloped capital markets can also help fill the gap. The most infrastructure financing by 2020. sustainable and viable source of long term lending is through debt 58 E R U T C U R T S A R F N I

ADB and International Enterprise Singapore have signed a letter of commitment to launch a PPP initiative to help stimulate infrastructure development within the ASEAN area. This initiative will work with governments in the Region to structure PPP projects, tapping into ADB’s regional operations and outreach to ASEAN member countries. It also aims to explore ASEAN’s capital markets to finance or refinance projects. In May 2013, CapAsia, a private equity fund management company announced completion of an investment in an Indonesian toll road operator PT Margatama Nusantara. The fund has also taken significant minority holdings in toll road operators in Thailand and Malaysia. A Malaysia-Chinese joint venture including China Railway Construction Group and Beijing based Urban Construction Group, is issuance, attracting both domestic and international investors also financing a US$2 billion Build-Own-Transfer (BOT) road through the sale of long term bonds. This would allow liquid construction project in Penang. institutions such as pension funds and insurance companies to The growing interest in large scale infrastructure projects is also provide the required funding. illustrated in Bangkok Sky Train operator, BTS Group Holdings Integration of ASEAN member states’ capital markets would help to successful initial public offering this year which raised US$2.13 billion. create a robust bond market. Securities regulators across the Region Core purchasers of the new shares were Morgan Stanley Investment also need to work towards a common legal jurisdiction for securities Management and Schroder Investment Management. documentations to facilitate a smooth entry for international investors. The BST Mass Transit Growth Infrastructure Fund (BSTGIF) intends to If Public Private Partnerships (PPP) can be improved and further use the proceeds from the International Public Offering (IPO) to developed they can provide a further means for investment. extend the 23 kilometre downtown Bangkok rail system by building additional feeder lines. Singapore has adopted the UK’s PPP structure for long term management agreements on schools, hospitals and social Effective infrastructure for carrying both people and goods is critical in infrastructure including sports facilities. The Philippines is also helping ASEAN economies move progressively into more complex and seeking to develop a regulatory framework to attract offshore partners higher value manufacturing and production, with a positive situation in PPP ventures. for all concerned.

59 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Developing water resources presents major challenge

Water management issues will become increasingly important across the in the Region, in a market forecast to rise to US$2.89 billion by 2016. Region over the next 20-50 years, as cities expand and competition for According to the global industry experts Frost & Sullivan Consultant, water resources from these growing communities, as well as industry Melvin Leong, “bottled water in Indonesia is a safer alternative and the and agriculture intensifies. Overall its demand for water could increase majority of the population considers it more affordable than residential by a third over the next 20 years says the 2003 ASEAN Long Term water treatment equipment”. Strategic Plan for Water Resources Management Desalination plants are already in general use throughout the Region, A strategic plan of action on water resources management was especially in Singapore where around 10% of the city state’s demand for subsequently drawn up with Australian government assistance by ASEAN water is met from seawater treatment. Its first desalination plant was in 2005, to advance better practices for water management in the commissioned in 2005 with a capacity to treat 136,380 cubic metres a Region. Issues include problems of food security, improving access to day (cmd) of seawater. safe and affordable drinking water and sanitation facilities for all, and Hyflux, the operator, is building a second plant designed to produce addressing the degradation of the environment in vulnerable 318,500 cmd. By 2030, it is estimated that up to 30% of Singapore’s catchments including freshwater and coastal waters. potable water requirement is expected to be met by desalination. As existing resources are depleted, expanding urban populations could (southeastasiainfra.com/asolution-for-water-challenge ) face supply shortages of drinking water as surface water and Singapore has also been a pioneer in constructing a system of flood groundwater resources reduce. defences for the city. The threat of flooding is growing throughout the In some areas there is growing use of bottled water. A 2009 survey Region. A third of the agricultural areas in ASEAN countries is estimated found that Indonesia was the second largest consumer of bottled water to lie in potential flood zones. 60 E R U T C U R T S A R F N I

Extensive flooding occurred in Thailand in 2011 and 2012 and the severe economic impact of this on industry has raised water security considerations high on the country’s agenda. Its 2011, floods affected 13.5 million people and caused more than 800 deaths, with 66 of the country’s 77 provinces declared disaster areas and more than 20,000 square kilometres of farmland damaged. The floods also halted production in the country’s key electronics and automobile sectors. Parts of Bangkok were also inundated. In 2012, floods returned again to cause havoc in a quarter of Thai provinces. The people living near the three deltas of the Mekong, Irrawaddy and Chao Phraya rivers are particularly at risk from typhoons which have become more frequent and severe, with agriculture, fisheries and tourism the most exposed economic sectors. The Mekong Delta produces around 50% of Vietnam’s total agriculture production and contributes significantly to the country’s rice exports. A sea level rise of 30 centimetres, which could occur as early as 2040, could result in the loss of about 12% of rice production, The impact of extreme climatic events and their increasing frequency, added to climate change and variability are of growing concern to Major cities including Bangkok, Ho Chi Minh City, Manila and Yangon governments in the Region. with their large and fast growing populations and manufacturing assets are also highly exposed to increased storm intensity, long term sea level Indonesia and the Philippines and others with large coastal populations rise and sudden onset coastal flooding. are particularly vulnerable to any sea level rise, increases in heat extremes and the intensity of tropical cyclones and ocean warming. A World Bank report observed that most countries in Asia and the Pacific (Turn Down the Heat Climate Extremes: Regional Impacts and the Case are still in the early stages of making strategic investments to increase for Resilience World Bank 2013 ) climate resilience. This effort is needed to improve early warning 61 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

systems, formulate improved drought management plans, and Mekong Basin by 2030. ( Asian Development Bank Water implement upgraded data collection and monitoring systems. Development outlook 2013 ) Accessing reliable data will be important for future decisions A ground breaking ceremony for the US$3.5 billion Xayaburi dam concerning development of the Region’s major rivers, especially the took place in November 2012 with a reported project completion Mekong. Running from its source in China through Myanmar, Lao date set for 2019. As with the Nam Theun development, the electricity PDR, Thailand and Cambodia to the Mekong Delta in Vietnam, it is produced will go mainly to Thailand which is funding the planned one of Asia’s longest rivers. new dam’s construction. The Mekong is also home to more than 800 species of freshwater fish The impact of the Xayaburi dam elsewhere, is uncertain but could be and a source of livelihood for some 60 million people living in its felt most in Cambodia and Vietnam. Reduced sediment and nutrient proximity. However, the demand for electricity in the Region could flow could adversely affect crops in these countries rice growing areas, change things. Lao PDR, Myanmar, Vietnam, China’s Yunnan Province says Ame Trandem, Southeast Asia Programme Director for and Guangxi Zhuang Autonomous Region, account for about 94% of environmental group, International Rivers. the hydropower resources in the Greater Mekong Sub-region. ( Asian According to Stuart Orr, Freshwater Manager at World Wildlife Development Bank - ADB ) International, if all currently planned dams are developed, Mekong This is leading some of the riparian nations to focus on building many communities would be faced with sourcing close to 40% of lost fish more dams to fuel their economic development, in a move that some protein from other sources. He says that to replace fish protein with fear could ultimately damage the ecological system of the river. domestic livestock protein, would require up to 63% more pasture land and up to 17% more water. ( Global Environmental Change- There are already four dams in the Upper Mekong Basin in China. In SciDev.Net SE Asia Desk ) addition, Lao PDR with the backing of the World Bank and Asian Development Bank has completed a 1,070MW hydropower plant on The use of hydropower resources is expanding rapidly to support the increasing energy demands in the sub-region. However, there is a the Nam Theun River, which is a tributary of the Mekong. need for knowledge, capacity building and dialogue based on accurate However, what is now envisaged with the 1,265MW Xayaburi dam is a data. Balancing planned expansion with the needs of other step change in hydropower development in Lao PDR. The dam is just stakeholders and protecting the environment is a considerable the first of 11 similar projects envisaged on the principal downstream challenge. A successful outcome will be an important determining segment of the Mekong, with plans to build a further 77 dams in the factor of overall water security for the Region as a whole.

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ASEAN’s roads and rails experience new dawn

Railway developments promise to do much for the future of ASEAN countries, even though for now the Region’s roads remain the principal mode of land transport. In Indonesia, ASEAN’s largest and most populous country, more than 80% of travel is by road with 70% of the country’s freight carried by trucks. Domestic truck transport accounts for a similarly high percentage of total freight transport in Vietnam, Thailand, Malaysia and the Philippines. In 2010, Thailand’s Department of Business Development recorded more than 3,800 registered road freight operators with 135,996 trucks in use. However, the condition of highways and levels of maintenance varies considerably across the Region and this is constraining economic development. According to the Organisation for Economic Cooperation and Development (OECD), only 21.7% of roads in the Philippines are paved compared to 57.6% in Indonesia and more than 90% in Thailand. (OECD Southeast Asian Economic Outlook 2013 ) Myanmar’s roads stretch over 140,000 kilometres though only 30,000 kilometres of the network is paved. Less than half the country’s main roads are all weather, and outside the largest urban centres only 10% of secondary roads are usable. ( ASEAN Japan Transportation Partnership ) Pot-holed and poorly maintained, many routes are dangerous and involve lengthy journeys. Road traffic accidents in the Region are among the highest in the world according to World Health Organisation statistics. The impact of inadequate roads is felt especially by rural communities in less developed areas. In order to transport one tonne of rice over a 63 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

100 kilometre distance, Cambodian farmers must spend US$15, while China is financing a series of road improvements as part of Yunnan their counterparts in Thailand and Vietnam pay US$4 and US$7.50 Province’s bridgehead strategy. This includes a 250 kilometre expressway respectively. ( The Diplomat 9/3/13 ) in Vietnam that will help cut journey times between Yunnan and Hanoi to six hours, a 50% reduction. Corridors are also being sought by China Not surprisingly, road development remains a large part of transport to connect with Thailand and Myanmar. ( China Daily 10/6/12 ) improvement plans in the Region, since the economic and social results from enhanced highway links can be transformational. However, ASEAN countries’ long term aspiration is to build an integrated railway network in the Region that would eventually stretch from The ASEAN Highway Network (AHN) provides a framework strategy Kunming in southern China to Singapore. aimed at eventually creating a denser network of intra-regional highway. Some 38,400 kilometres have been identified for development to The Region’s transport budget plans are already being weighted toward improve land transport connectivity within member states. railway development. Thailand, for example, has plans for US$72 billion of transport projects of which 64% will be railway developments and Much of the Region’s roads, particularly cross-border routes, need to be 24% for road projects. ( Thai Board of Investment ) upgraded. There are 4,069 kilometres of missing sections or sections that require repair, in Cambodia, Lao PDR, Malaysia, Myanmar, Thailand and Some of the world’s most ambitious railway projects are now underway Vietnam. ( ASEAN Masterplan on Connectivity www.mfa.go.th/asean/ in Southeast Asia, including the modernisation and electrification and contents ) double tracking of existing networks as well as high speed projects. Highway development programmes are seen as an essential ingredient According to the Masterplan for Acceleration and Expansion of of plans by Malaysia, Indonesia and Thailand to develop economic Indonesia, development of high speed railway links between Jakarta and corridors in the Region. The aim of these is to link transport Bandung, and from the capital to Surabaya, are regarded as key enhancements to industrial and trade development opportunities. In infrastructure projects that will support the corridor’s economic Indonesia, corridors overlap with major island groups in the archipelago development. ( Jetro - Japan External Trade Organisation ) comprising Sumatra, Java, Kalimantan, Sulawesi, Bali-Nusa Tenggara and Export-Import Bank of China is discussing the provision of a US$7.2 Papua-Maluku. billion loan to Lao PDR for a long awaited high speed rail project Corridors are also designed to stimulate cross-border trade. Thailand between the two countries. If negotiations are successful, the 420 plans an east-west corridor linking Mawlamyine in Myanmar through kilometre railway link will connect Kunming in southern China with the Thailand via Phitsanulok and Kohn Kaen to Savannakhet in Lao PDR and Lao PDR capital Vientiane. ( Financial Times 9/6/13 ) Da Nang in Vietnam. Another major high speed rail project has been proposed for Lao PDR A north-south corridor development would see transport links between which at present has virtually no rail links. The reported US$5 billion China’s southern Yunnan Province, Thailand and Lao PDR. A further venture would involve the construction of a 220 kilometre track southern economic corridor is aimed to improve connections between connecting Lao Bao near the border with Vietnam to Savannakhet on the Bangkok, Phnom Penh and Ho Chi Minh City. Thai border. 64 E R U T C U R T S A R F N I

A US$12.8 billion high speed train project has also been proposed in The benefits of these improvements to local services and industries are Thailand which would involve building a 240 kilometres track to link expected to have a significant long term multiplier effect on economic Bangkok with Phitsanulok, Nakhon Ratchasima and Hua-Hin. A second development, especially in the country’s four northern states of Perak, stage would see the proposed line connect Bangkok with Chiang Mai, Penang, Kedah and Perlis. Nong Khai and Hat Yai. ( www.railwaytechnology.com/news/news Indonesia’s plans to accelerate the construction of a double track railway thailand-start-bid-high-speed-rail-project ) line between Jakarta and Surabaya in Java and increasing rolling stock Singapore and Malaysian officials have agreed to back a Public Private and locomotives are expected to raise the amount of freight capacity on Partnership (PPP) project to build a high speed rail link between Kuala the line threefold, cutting logistics costs and time taken to transport Lumpur and Singapore by 2020. The proposed venture would allow goods and materials. ( ASEAN-BAC 8/8/13 ) trains to travel up to 250 kilometres an hour, reducing journey times between the two cities on the existing 300 kilometre track from six hours A range of new rail projects linked directly with economic development to 90 minutes. ( Investvine 20/2/13, BBC ) projects are being promoted in Indonesia which is expected to rely mainly on PPPs to finance up to 70% of the proposed investments. There is considerable work to be done, before a seamless rail network is established in the Region. The UN Economic and Social Commission for Another 300 kilometres of track designed to connect three coal mining Asia and the Pacific has identified more than 2,000 kilometres of missing centres in central Kalimantan from Puruk Cahu to Bangkuan is sections in railway connections in the Greater Mekong Sub-region expected to be undertaken as a US$2.08 billion PPP project. ( Jakarta between Myanmar and Thailand, Cambodia, Lao PDR and Vietnam. Post 14/11/12 ) The pace of railway development has now started to increase. Malaysian Ten PPP railway development schemes are being considered as part of Group for High Technology has set up a Rail Centre of Excellence to a Kalimantan Railway Masterplan for completion by 2020. A number of support development of the country’s public transport system. A number foreign bidders have expressed interest including Russian Railways. In of international railway specialists are providing assistance including February 2012, they signed a Memorandum of Understanding to France’s Thales, the Spanish Railway Foundation and Metro Madrid. develop an estimated US$2.4 billion project to build a railway between east and central Kalimantan. ( Jakarta Post 8/2/12 ) Meanwhile, a US$5 billion railway electrification project to improve the lines running through four states in Peninsular Malaysia, is nearing RAK Metals and Minerals Investments, a Sharjah based company, is completion. When completed in 2014, electrified double tracks promoting a US$1 billion railway project in east Kalimantan to transport will run 968 kilometres from south to north to Perlis State close to the coal 139 kilometres to a proposed new export terminal. China Railway Thai border. Group has been awarded a US$4.8 billion contract to build and maintain 65 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

A range of new rail projects linked directly with economic development projects are being promoted in Indonesia which is expected to rely mainly on PPPs to finance up to 70% of the proposed investments.

a 300 kilometre line in southern Sumatra connecting coal deposits to a of Kuala Lumpur in Batu Gajah in Perak State. The new US$131 million new port. ( Reuters News 20/1/12 ) factory due to come on stream in 2014, is to build a range of wagons for Malaysian railways and other customers in the Region. China Railway Group is also associated with a potential project to build and maintain a 307 kilometre railway connecting Indonesia’s largest CSR believes that demand for rail transport over the next ten years will open-pit mine at Tanjung Enim in southern Sumatra to a new port in the require more than US$10 billion of new rolling stock. An expansive note Sunda Strait. is also struck by Malaysia’s Prime Minister, Najib Razak, who comments that “there is much room for growth and expansion in the largely The PPP route is also favoured in the Philippines to fund a US$2.5 billion untapped rail industry in Southeast Asia and beyond”. ( Peoples Daily upgrade of the railway system on Luzon, the country’s largest island. online 10/3/13 ) According to the Government’s PPP Centre, the project covers both north and south networks operated by the state owned Philippines Fast expanding cities invest in mass transit solutions National Railways. The Region’s cities and urban communities are expanding faster than ever before and major investment in the latest mass transit rail systems How far the PPP model will be adopted in the Region remains to be seen technology is seen as the only viable means to avoid gridlock. but its role in railway development is likely to be influential. Myanmar’s extensive though outdated system is a possible candidate. Much of the Malaysia’s Klass Valley Mass Transit Project (MTP) involves three lines 2,400 kilometre network is in poor condition. ( Asian Development bank- totalling 150 kilometres of new track, much of which will be built ASEAN-Japan Transport Platform Project ) underground to connect surrounding areas of Greater Kuala Lumpur with the centre of the capital. A Japanese funded study has completed a feasibility project on a proposed US$1.07 billion upgrade of the 640 kilometre Mandalay- The first of the lines is under construction and will provide 51 kilometres Yangon line. Other initiatives include the setting up of a diesel locomotive of track running from Sungai Buloh northwest of Kuala Lumpur to plant in Nay Pyi Taw and a wagon building centre in Mandalay. Kajong, 21 kilometres to the east of the city centre. The new dawning of the Region’s railway age has encouraged China The MTP project is seen as underpinning the economic development of South Locomotive and Rolling Stock Corporation (CSR) to develop its Greater Kuala Lumpur, where the population is predicted to increase first manufacturing facility outside of China, some 200 kilometres north from nearly seven million to ten million by 2020. The cost of the first line 66 E R U T C U R T S A R F N I

has been estimated up to US$15 billion. ( Oxford Business Report Malaysia 2012 ) Singapore’s fourth Mass Rapid Transit (MRT) line, the 35.7 kilometre Central Circle route with 31 stations, cost US$4.8 billion. A fifth MRT line is currently under development which will extend the system by 42 kilometres and serve another 34 stations. As with other parts of the system the track will be underground and feature driverless trains. Thailand also wants to emulate these projects. Bangkok at present has about 79 kilometres of railway serving the urban population. The Government wants to expand track lengths to 508 kilometres, with new surface and underground lines. New systems are already alleviating the city’s chronic congestion. The Bangkok Mass Transit System, known as the Skytrain, and built as an elevated railway, recently launched a successful Initial Public Offering (IPO) to raise US$2.13 billion. The money is to be used to expand and extend the system with new feeder lines. Other cities have similar plans. Vietnam’s transport plans include a number of new urban railway lines for Hanoi and Ho Chi Minh City including monorail and light transit systems. Meanwhile, in the Indonesian capital, plans have been revived for a US$1.08 billion monorail project for which Singapore’s main MRT operator is a partner. ( Straits Times 30/6/13 )

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Ports investment will transform ASEAN economies

ASEAN members are located at the heart of the world’s most important more. These ships can only be accommodated at ports that have deep global trading routes and it is vital for the Region’s communities, and draughts, longer quay lengths, the latest crane technology and sufficient export industries, that countries in the area have sufficient port logistics capacity. infrastructure and well managed maritime services. Such facilities also need to be highly productive and well managed to In some countries, notably Singapore and Malaysia, port facilities are ensure efficient turn around times. However, many in ASEAN are unable among the best in the world but this efficiency is not yet reflected in to accommodate the largest container ships. other countries. The extent of the problem is reflected in the latest Liner Shipping Many ports in ASEAN member states need to expand their handling and Connectivity Index compiled by the UN Conference on Trade and logistics capacities in order to accommodate the potential growth in trade. Development (UNCTAD), which assesses how countries are connected to global shipping networks. In addition to physical infrastructure, issues such as customs protocols and the introduction of computerised standardised systems also need The criteria includes the number of ships using ports and their container addressing. As manufacturing systems become more global, delays in carrying capacity, the size of vessels, range of services and the number of formality procedures will impact on the capability of countries to companies deploying ships in the ports of individual countries. become a single integrated production base. ( Toward a Roadmap for ASEAN countries, with the exception of Singapore and Malaysia, still rank Integration of the ASEAN logistics sector-ASEAN-US Technical Assistance low down the Index in terms of international maritime trade volumes. and Training Facility ) Singapore and Malaysia have the highest world rankings at 113.2 and The Region’s major ports also have to address global shipping trends 99.7 respectively. Vietnam scores 48.7, Thailand 37.7, Indonesia 26.3 and that emphasise much larger vessels, able to carry 18,000 containers or the Philippines 17.2. Cambodia 3.5 ranks and Myanmar 4.2. 68 E R U T C U R T S A R F N I

However, the administration continues to invest and has launched an expansion of its Pasir Panjang container terminal. This investment will result in the terminal being capable of handling up to 50 million TEUs, a 40% increase on present capacity. The MPA says that its US$2.9 billion project will add 15 new berths, an automated container yard and unmanned rail mounted gantry cranes at the port. An additional 6,000 metres of quay will be added while the harbour will be deepened to a draught of nearly 18 metres. ( Marine & Port Authority of Singapore )

Singapore has become a template for global excellence in ports Malaysia’s ports are also steadily enhancing their competitive position as management and the handling of containers. The container throughput a hub in the Region. An estimated 95% of its trade by volume is carried was a record 31.6 million twenty foot equivalent units (TEUs in 2012), a by seaborne trade through its largest container ports of Port Klang and Port Tanjung Pelepas. 5.7% increase on 2011. Total cargo tonnage handled, also rose by 1.2% to reach a record 537.6 million tonnes. Work to expand Port Klang will double its container handling capacity to 20 million TEUs by 2020, while investment at Tanjung Pelepas is due to Singapore also ranks as the leading port in the World Bank’s 2012 increase the port’s handling capacity 25% to 10.5 million TEUs. Logistics Performance Index, an analysis that measures the ease of customs formalities in ports of 155 countries, the state of infrastructure, Elsewhere in the Region the picture is more mixed. In a number of logistics competence, tracking and tracing goods as well as the time countries the constraints on seaborne trade are increasingly apparent, taken by ships to load and unload. with decades of under investment in ports threatening to hold back economic growth. According to the Maritime and Port Authority of Singapore (MPA), their ports contribute about 7% to the country’s GDP and employs 170,000 Indonesia Port Corporation announced a US$2.47 billion project to people. More than 120 shipping companies are also headquartered in extend Tanjung Priok port. Located in North Jakarta, it handled 6.2 Singapore. The total tonnage of ships registered grew by 13.2% in 2012 million containers in 2012 and is the country’s principal maritime to reach 65 million gross tonnes, putting Singapore among the top ten hub which around 70% of Indonesia’s containerised exports and of the world’s ship registries. imports passes. 69 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Indonesia’s East-West Pendulum plan aims to improve maritime transport links through the country’s main sea corridor connecting the ports of Belawan, Batam, Jakarta, Surabaya, Makassar and Surong.

Seven new container terminals are being planned by 2023 in addition to Vietnam is hoping to attract investors with the partial privatisation of two petroleum products terminals, with the aim of increasing handling three of the country’s main ports by 2014 including Quy Nhon, Da Nang capacity at Tanjung Priok to 18 million TEUs. and Hai Phong. Progress is being made and in April 2013 a US$1.2 billion Public Private Partnership (PPP) project to build the Hai Phong Another challenge is that most of the country’s existing infrastructure is International Gateway Port, in joint venture with Japan’s Official concentrated in Java and Sumatra, leaving the eastern part of the country Development Assistance programme, was announced. relatively isolated. Outside of the capital no ports are capable of receiving trans-oceanic vessels. This means that much of Indonesia’s cargo has to The development at Hai Phong will allow vessels up to 100,000 tonnes go through Malaysia and Singapore. to dock, establishing a logistical system that will allow Vietnamese exports to reach Europe and the US without the need to go via other According to a 2012 McKinsey report, the challenge for the Government ports in the Region. and business is to connect smaller but rapidly growing cities on islands off Java, such as Balikpapan and Pontianak in Borneo, Pekanbaru in A partial privatisation of Vietnam’s biggest port in Saigon is also expected Central Java and Makassar in Sulawesi. to commence after it is relocated to a new industrial zone on the outskirts of Ho Chi Minh City. Indonesia’s East-West Pendulum plan aims to improve maritime transport links through the country’s main sea corridor connecting the ports of The Philippines, an archipelago of 7,100 islands, flanked by the Pacific Belawan, Batam, Jakarta, Surabaya, Makassar and Surong. Each is due to Ocean and South China Sea, also has pressing reasons to develop not be developed with greater draughts, ICT systems and container handling only its ports but also to improve inter-island maritime connectivity. As equipment in order for them to act as the country’s gateway ports. in other parts of the Region PPP projects are being promoted. 70 E R U T C U R T S A R F N I

In 2010, the Philippines Ports Authority, the industry regulator, said Impact Assessment of the Philippines Nautical Highway System and that at least five state controlled ports would be de-nationalised and Lessons for Southeast Asia,” ADB, 2010 ) handed over to PPPs. While Ro-Ro networks are seen as an effective means of targeting One of the most innovative developments in recent years has been the underserved areas, rather than a replacement of existing shipping introduction of the Philippines Nautical highway in which trucks and networks, they could also play a significant role in developing passenger vehicles can drive straight on and off Roll-on, Roll-off (Ro- the Region’s 51,000 kilometres of navigable inland waterways. Ro) vessels. (Asia Foundation ) Introduced in 2003, the Ro-Ro services allow ports that do not have Myanmar’s ports have the potential to become regional transportation facilities to accommodate ocean-going container ships to transport hubs serving markets in China, India, as well as Southeast Asia. One of smaller cargoes and passengers. the biggest potential projects involves building a new deepwater port Regular sailings are linked to truck and bus schedules and connect the at Dawei to connect eastwards to Bangkok via a double lane highway. main island of Luzon through the island provinces of Masbate, Cebu, From the west of the proposed new port, shipping lanes could be Bohol and Camguin to Mindanao in the southern Philippines. Where established to link Dawei with Kolkata and Chennai in India and services have been introduced transport costs for goods have been therefore able to compete with Singapore, 1,600 kilometres south, as reduced up to 40%. the main route for India-ASEAN trade. Dawei and other potential new It is this type of integrated system that other ASEAN countries can ports in the Region could cut costs and the journey times between emulate and its impact has been likened to the introduction of low- major transit hubs significantly, helping to forge a new era in global cost airlines on transport systems. ( Bridges Across Oceans: Initial maritime trade.

71 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

GE in ASEAN

With over a century of history in ASEAN, GE is, until today, a partner for power generation to be exported worldwide. Every 38 seconds, an sustainable growth in the Region. A partner that continues to support the aircraft equipped with GE technology takes off in ASEAN. In 2012 alone, development of the Region’s infrastructure and people. A partner that one in five people in ASEAN flew on such aircraft. Lifesaving medical has helped transform this Region when, in April 1890, it installed the first technology is now within reach for millions of people with GE's modern electric street lights in ASEAN on Real Street in Manila, the Philippines. and affordable medical solutions. Our longstanding support for Indonesia's railway infrastructure, which has lasted over six decades, Since then, we have grown to more than 7,500 employees in ASEAN now moves 200 million Indonesians annually. with offices in Indonesia, Malaysia, Vietnam, Thailand, Singapore, the C I R

T Philippines, Cambodia, Brunei and most recently Myanmar, bringing us We keep our promises not only through solving local challenges but by C E

L closer to our local customers. This has not only helped us to deepen our offering solutions that bring this Region to the World and the World to E

L relationships with them but it has also enabled us to localise our this Region. A

R solutions to address their challenges. E

N Modern healthcare solutions delivered E

G Building, Powering, Moving, and Curing to make the world better Indonesia has far fewer hospital beds and fewer physicians per 1,000

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D has been a GE promise in ASEAN people compared to either Vietnam or Lao PDR. With a severe lack of U

T How have we delivered in this respect? Let us consider a few examples. investment to build healthcare infrastructure especially in rural areas, S E

S Our energy efficient wind turbines generate 15MW of energy in Bac Indonesia has a long way to go in meeting its Millennium Development A

C Lieu Vietnam, and our Haiphong facility manufactures components for Goal target to reduce maternal and mortality rates. 72 u I t L u E V R e 1 i A p m c N s e g A G t t a n n h r h h a e p q s x r . l l r s u u v a E a 3 t t

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i c o t o t o e y r f 7 3 INFRASTRUCTURE ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Building, Powering, Moving, and Curing to make the world better has been a GE promise in ASEAN

Generating Authority of Thailand (EGAT) for use at its Lan Krabue power protect the environment of the region, known as the “rice basket” of the plant. Since then, EGAT's gas turbine fleet has grown to over 100 units country, which accounts for the largest amount of Vietnam’s seafood with a combined production of 8,000MW. Besides EGAT, GE also exports. The ten wind turbines in Bac Lieu output 16MW of power and supplies other Thai energy producers like PTT, Ratchaburi, and Tri Energy it joined the national grid in June 2013. The second phase of the project with combined-cycle gas turbine equipment. will involve the construction and installation of more than 50 GE wind turbines. EGAT's Saha power plant uses two GE LM6000 Aeroderivative gas turbines each rated at 44MW. The gas turbines, which began producing The Hai Phong wind turbine facility manufactures generators for 1.5MW power in early January 1999, provide power to EGAT and other wind turbines with components sent to service centres around the globe. manufacturing companies in the Saha Industrial Park. The Rojana power The facility employs about 600 young Vietnamese. With total export plant also features two LM6000 gas turbines supplied by IHI and these volume in excess of US$271 million, the wind turbine facility is amongst C I units began commercial operation in late February 1999. the best performing industries in Hai Phong. R T C E

L Thailand’s largest chemical producer, PTT Utility, has a 13 year Rice, Asia's wonder crop E

L contractual service agreement with GE to ensure its Rayong power plant Currently, only 50% of rural villages in Cambodia have access to A R

E operates smoothly. The gas turbines there generate more than 300MW electricity with demands for power growing at 25% a year. Located in N

E of power to power more than 15 petrochemical plants. the country’s rural rice milling region of Kamphong Cham, the SOMA G

Y Group selected GE’s Waukesha gas engine technology to power its Hak

D Vietnam's energy revolution is in the wind

U Se mill. T Located about 200 kilometres southwest of Ho Chi Minh City, in the S E

S Mekong Delta region, the Bac Lieu project was the first wind farm in Cambodia produces about 400,000 tonnes of concentrated rice husks A

C Vietnam. Built using GE's wind turbines, the project was designed to annually, which can be used as a reliable source of biogas to produce 74 E R U T C U R T S A R F N I

local grid, providing an economical power supply and improving the living standards of people in the area. This project helps meet the goals of Cambodia‘s Rural Electrification Programme which are focused on supplying electricity to every village by 2020 and to connect 70% of the country’s households to the grid by 2030. How clean can a glass of water be? The GE Singapore Water Technology Center at the National University of Singapore (NUS) is a key part of our Global Technology network that develops advanced water technologies to solve some of the world’s most pertinent water challenges. Singapore’s vision and commitment to innovation in the field of water makes it an ideal location for our centre and our partnership with NUS enables us to undertake collaborative projects of mutual interest in the field of water purification. The Technology Center brings talented scientists and engineers together to work on state-of-the-art technologies such as advanced renewable energy. After the rice husk has been converted into biogas, membrane technology, advanced analytical technology, membrane the two GE VHP 5904 Waukesha engines burn it to generate 1.5MW chemicals, and systems engineering. We are working to develop new of renewable electricity. Less than two kilogrammes of husk can solutions for low energy seawater desalination, water reclamation, and produce one kilowatt-hour of electricity. Part of the power will support more efficient water reuse that constitute advancing fundamental the rice mill’s operations while surplus electricity will be sold to the research and innovation in water treatment.

75 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Aviation sector set for further expansion

ASEAN’s airlines are investing heavily to expand and modernise their Tony Tyler, Director General of the International Association of Air fleets in order to meet an unprecedented growth in air travel that is Transport (IATA), has said that by 2015, 37% of all passengers will travel being spurred by the Region’s economic expansion and surging demand on routes to, from or within the Asia-Pacific region compared to 29% for for low-cost air travel. Europe and North America. Philippine Airlines has ordered 100 aircraft including 20 wide-body The trend will be accelerated after 2015 when the ASEAN Economic Airbus A330-300s, eight of the manufacturer’s A340s, five A300s in Community comes into being. As current bilateral restrictions on addition to 44 Airbus A321s, 15 A320s and four A319 single-aisle operations between countries in the Region end, opportunities will open airliners. Indonesia’s flag carrier Garuda is also receiving new aircraft up for a further burst of growth. In particular an open skies policy including wide-body Boeing 777s. will allow low-cost carriers the flexibility to operate international services outside their own country bases, without having to operate through These new aircraft will permit non-stop services to operate on joint ventures. intercontinental routes such as Jakarta-London. Thai Airways is also deploying its new super jumbo Airbus 380s to connect Bangkok and Airlines will have the freedom to serve all capital cities in each member London on a daily basis for the first time. country without restrictions. A single aviation market will help regional tourism markets to grow and stimulate competition between low-cost However, it is the surge in domestic air travel that is driving investment carriers across the Region. in the Region’s aviation sector. Air travel in Indonesia, for example, has nearly doubled since 2008 reaching 72.5 million passengers in 2012, There is substantial room for services to expand in a region under-served with the number predicted to rise to 100 million by 2015 and 180 by aviation services. Con Korfiatis, Vice President of the low-cost Citilink million in 2018, according to the Sydney based Centre of Asia Pacific airline, points out that in Indonesia there are not much more than 300 Aviation (CAPA) . single-aisle airliners to serve a country of 17,000 islands with a 76 N O I T A I V A

The biggest order from regional carrier has come in the last two years from Indonesia’s Lion Air, who has placed US$45 billion of orders for 234 Airbus A320 single-aisle airliners and 230 Boeing 737s for delivery over the next decade. In less than a decade, LCCs have gone from a few small scale operations to providing a majority share of the market. CAPA estimates that budget carriers now have a 52% share of air travel in the Region, double that of five years ago. Their share of traffic is likely to grow further in the years ahead as air travel becomes increasingly accessible to the Region’s expanding middle income customers. As the new budget airlines continue to generate traffic, sustain their load factors and yields, a new market sector has been established according to Campbell Wilson, Chief Executive of Singapore Airline’s subsidiary Scoot, which has been set up to address a growing market for budget medium to long haul services. There are concerns that even with multibillion dollar investment in fleet expansions, the Region’s plans may be delayed as a result of inadequate investment on the ground, in airport and transport infrastructure. The Region contains some of the world’s busiest international population of 230 million. This number compares to the estimated 3,000 airports including Jakarta’s Soekarno-Hatta International, Bangkok’s aircraft operated by carriers in the US to serve 310 million people. Suvarnabhumi, Singapore’s Changi and Malaysia’s Kuala Lumpur There is clearly substantial potential. Ambitious airlines in the Region are International. They and others are operating beyond the capacities they looking to emulate the rapid and sustained success that budget airlines were originally designed for. have experienced elsewhere such as Southwest Airlines in the US as well Served by more than 6,000 flights a week, Singapore’s Changi as Ryanair and Easyjet in Europe. airport has won numerous international awards for passenger and This is a key factor in ASEAN’s continuing investment in new aircraft. airline satisfaction. In addition, the airport handles nearly two million Malaysia based Air Asia, the Region’s biggest low-cost carrier (LCC), tonnes of freight a year. It ranks as the number one logistics hub placed an order valued at US$18.4 billion in 2011 for 200 of the latest among 155 countries globally, in the World Bank’s 2012 Logistics version of the Airbus 320 series. ( Airbus Press Release 13/12/12 ) Performance Index. Philippines Airlines LCC subsidiary Cebu Air, has 32 Airbus A320s, 30 Many of ASEAN’s main airports are struggling to keep pace with A321s and ten A319 short haul aircraft on order. demand, resulting in long delays, long lines and aircraft forced to stack 77 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

overhead or wait for lengthy periods on the ground for take off or businesses will be to connect fast growing smaller cities on islands off disembarking. One of the principal reasons for the congestion is the Java, such as Balikpapan and Pontianak in Borneo, Pekanbaru in rapid development of budget airlines in the last few years. Central Sumatra and Makassar in Sulawesi. In order to maintain its status, Changi airport requires ongoing Only a few of Indonesia’s airports at present have sufficiently long investment. A fourth terminal will enable an additional 16 million runways for international flights and the three largest airports serving passengers a year to be accommodated by 2017. There are also plans Jakarta, Medan and Denpasar are operating well beyond originally for a fifth terminal and a third runway in the next decade, which will designed capacity. raise the airport’s overall handling capacity to 66 million a year Indonesia’s Transport Ministry estimates that airport infrastructure by 2023. needs to grow by more than 30% a year. Consequently more than 20 Malaysia is building another terminal due to open in 2014 that will airport projects are in various stages of development, with a total of 45 serve LCCs and their passengers. Jakarta’s Soekarno-Hatta airport is projects planned for the next ten years. being overhauled with plans for a third runway and a fourth terminal. Such large scale investments are likely to involve Public Private An entirely new airport to serve the capital is being discussed. Partnerships (PPPs) both in Indonesia and elsewhere in the Region. Bangkok’s Suvarnabhumi airport which received 52 million passengers Vietnam is looking to the private sector to develop new airport in 2012, is due to complete an expansion by 2017 raising its capacity infrastructure to cope with rising domestic demand and also to to 64 million passengers a year. This will also reinforce its credentials compete with neighbouring Thailand, Malaysia and Singapore for as one of Asia’s main hubs and is especially well located to serve international traffic. New green field international airports have been Cambodia, Myanmar, Lao PDR and Vietnam. discussed for Ho Chi Minh City and for Hanoi. A new US$185 million international terminal is also due for completion In some areas the private sector is well established in airport by 2015 at Thailand’s Phuket airport to ease congestion during the development. In Thailand, Bangkok Airways operates its own airports peak tourism season from November through to April. on Samui Island, at Sukhothai and at Trat in the east of the country. In Indonesia, a new US$290 million terminal at Bali’s Denpasar Philippine Airlines along with San Miguel Corporation, which owns International Airport is due for completion by 2014. Much more 49% of the airline, is looking at constructing a new airport near Manila airport development will be vital for Indonesia’s long term economic as an alternative to the congested Ninoy Aquino International Airport. well being. Stretching 5,000 kilometres east to west, much of the “While private investment will be necessary to speed up development of country’s transport infrastructure is concentrated in Java and Sumatra. new airport facilities, an effective economic and regulatory framework As a result, large eastern parts of the country lack connectivity. will be needed to ensure that the national interests are protected,” According to a McKinsey report the challenge for the government and according to IATA’s Director General, Tony Tyler.

78 N O I T A I V A

Aviation engineering - Maintenance Repair & Overhaul (MRO)

According to Boeing current market outlook, new low-cost carriers and at Don Muang proposed as an MRO hub. Studies are also being demand for intra-country travel in the Region have resulted in a undertaken on the potential of Nakhon Ratchasima Airport, northeast of substantial increase in single-aisle aircraft. This huge and accelerating Bangkok, being developed as a new service centre. expansion is increasing demand from airlines for MRO services, an area The Thai Government is keen to see the country become a full service which is becoming a major growth industry in ASEAN member states. aviation hub and the Board of Investment is promoting the manufacture US based aviation consultancy TeamSAI predicts that the MRO market of aircraft parts and equipment, in addition to repair and adaptation of will reach more than US$24 billion a year by 2023, almost double its aircraft for different purposes. present level. Maintenance and repair operations are seen as a route towards the Frost & Sullivan forecasts that MRO business is expanding at an annual production of aircraft components with the aim of establishing aviation growth rate of 10% in Malaysia, 6.6% in Singapore, 6.2% in Vietnam, industry Tier 1 suppliers, which can provide equipment and systems 5% in the Philippines and 4.5% in Thailand. such as engines, flight control systems, fuel systems, and also Tier 2 producers which are certified to manufacture and develop parts A number of countries in the Region are seeking to develop MRO according to specifications provided by aircraft manufacturers. activities. Lufthansa Technik Philippines has completed its third and largest hangar which can accommodate the Airbus A38O at its facility Thailand has a base on which to build such production with several near Manila International Airport. The company, set up in 2000, is a international companies involved in the manufacturing of aircraft parts. These include the Ducommun Inc producing microwave switches, the joint venture between the German airline and the Philippines Weston SEA making precision components, the Primus International a MacroAsia Corporation. composite materials integrator, Driessen Aircraft Interior Systems Thailand also wants to develop MRO industries as well as serving as a producing galley and air cargo equipment, and the General Electric training centre for pilots and air crew, with Bangkok’s former main airport MRAS manufacturing engine parts and Leistriz producing engine blades. 79 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Indonesia anticipates developing its own MRO sector, which according to Frost & Sullivan recorded US$540 million of business in 2011. The country’s largest MRO company is GMF AeroAsia, an offshoot of the country’s flag carrier Garuda. The company has recently enhanced its engine overhaul capacity with a new engine test cell unit that has been developed in conjunction with General Electric and CFM International. Garuda President, Emirsyah Satar, describes acquiring the test-cell capability as an important milestone for Garuda Indonesia and GMF AeroAsia, in their goals to have engine shop capabilities and to become a major maintenance centre of excellence in the ASEAN area. The engine test unit will allow the airline to maintain and service its growing Boeing 737-800 fleet locally. The facility reportedly will have full overhaul capability for the CFM56-78 in 2015 and be able to maintain 150 engines a year by 2016. ( Asian Press Group-asianaviation.com/ articles/406/Meeting-engines-MRO-needs ) Richard Budihadianto, President and Chief Executive of GMF AeroAsia, sees considerable scope for MRO business development in Indonesia Malaysia’s aerospace manufacturing sector is already one of the where he expects the market to grow to US$2 billion by 2015, driven by country’s fastest growing industries. In 2012, it recorded sales of more the planned fleet increases of Garuda and those of low-cost carrier Lion than US$896 million employing around 5,100 workers, according to the Air. ( flightglobal.com/feature/Singapore-special/mro ) Malaysian Industry Government Group for High Technology. For the time being, the hub of the Region’s MRO activity remains within The sector is home to numerous Tier 2 suppliers to Boeing, Airbus and Singapore, which has already established a comprehensive range of others and is becoming increasingly known for its expertise in the maintenance services and aircraft modifications and conversion production of high-strength lightweight carbon-fibre components that capabilities for both passenger and freight aircraft. feature extensively in the manufacture of new aircraft. ( Crowded Skies. New Players staking the Claim to Aerospace industry Capital Investment Backed by a large pool of more than 100 aerospace companies, Site Selection ) Singapore has garnered a quarter of the Asian MRO market and has 80 N O I T A I V A

become the leading aviation hub in the Asia-Pacific area contributing designated by Rolls-Royce as a regional centre for the company’s latest a quarter of the Region’s output. ( www.edb.gov.sg/content/edb/en// Trent 900 series of aero engines which power Singapore Airlines’ fleet aerospace engineering 28/52013 ) of 19 Airbus A380 aircraft. ( Rolls-Royce ) Some of the local companies have international reach in a worldwide There will be a growing requirement for skilled workers in the sector industry valued at more than US$50 billion a year. Among these is as it extends in the Region. Boeing forecasts that 67,400 aircraft Singapore’s ST Aerospace. Now approaching its 40th anniversary the technicians and engineers will be required in the Region, out of a total company started out in 1975 focusing initially on military contracts. worldwide requirement of 243,500 qualified personnel by 2030. This Commercial business now makes up 70% of its US$1.4 billion annual prediction is based on the number of new aircraft on order and new revenue. The company continues to expand its facilities and airports due to be constructed. capabilities in China, Panama and in the US and is also seeking to In Indonesia, GMF AeroAsia envisages a requirement for 4,000 enter the business aviation sector and develop hangar space at engineers and mechanics by 2015, 80% more than at present. Roll- Singapore’s new Seletar Aerospace Park. Royce is also setting up a training unit at its Seletar site in Singapore Other leading providers of engine MRO services include SAESL, a joint with the aim of providing training in various skills. All these initiatives venture of Singapore Airlines’ engineering arm, together with Rolls- will be needed as governments in the Region increasingly target their Royce and Hong Kong Aero Engine Services. SAESL has been involvement in this crucial market.

81 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Mobile technologies drive Region’s internet connectivity

New technologies, in particular advanced digital mobile standards, are Adoption of smart phones continues to grow in Southeast Asia at transforming access to the internet. This is proving vital in areas of the speed, according to a GfK report which found that consumers across developing world where the economic and social benefits of adequate Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam and affordable telecoms services have previously been denied. and Cambodia spent US$3.4 billion on these devices in 2012. (www.newshour24.com ) Development of cellular telephone networks is providing a fast track to connectivity where there is a growing commitment by governments to This trend is welcome in a region where for many, the mobile phone is the introduction of higher speed broadband services through third and the only technology available to access the internet. This connection is increasingly fourth generation mobile devices. This is allowing greater vital in a world still facing a digital divide. access to internet based services in the Region. Swedish telecoms giant Ericsson estimates that 60% of the world’s population now has a mobile subscription, with more than six billion In Cambodia, Acleda Bank introduced mobile only bank accounts in globally. The company predicts that by 2017, 85% of the world’s 2012. These accounts allow customers to pay bills, conduct person-to- population will have third generation coverage, allowing access to person payments and buy phone credit using their mobile phones. internet and other broadband services. Customers can also make deposits and withdraw at bank branches and ATMs with such accounts. No country can afford to be left behind in the digital revolution. It is estimated that a 10% increase in internet penetration leads on average As a result of cellular technologies becoming increasingly more to 1% of sustainable GDP growth, while a doubling internet speed can affordable, the use of mobile computer tablet devices has expanded. In improve GDP by 0.3%. ( ericcsson.com/res/docs/2012/Myanmar report ) the Philippines alone demand for these devices grew fourfold in 2012. Prices across the Region have fallen by a quarter according to estimates ASEAN countries are making tangible progress in the digital from Germany’s Nuremberg based consultancy GfK. ( Reuter report in revolution. According to the World Economic Forum’s 2013 Networked Daily Finance Singapore 23.7.13 ) Readiness Index, it shows that Singapore is in second place after Finland 82 S N O I T A C I N U M M O C E L E T

T I Indonesia in an effort to improve broadband and internet take-up, is laying 35,380 kilometres of submarine optical fibre cable along the coasts of the country’s major islands. and ahead of most advanced industrial countries and twelve places the cable network linking Sulawesi and Maluku to Papua is expected to above Hong Kong. be completed in 2015. Current rankings also show that several other member states are steadily Implementation of the system will be a significant boost to the telecoms improving their performance with Malaysia, Thailand, Indonesia, market in Indonesia. According to International Data Corporation (IDC), Vietnam and Brunei recording advancement in the index that assesses a US technology market intelligence provider, the country’s broadband 144 countries. market will develop at a annual growth rate of 55% up to 2016, driven by the increased coverage provided by mobile operators in addition to There is however, a great deal to be done before the benefits of declining prices of mobile modems. telecoms and internet access are evenly spread throughout the Region. Cambodia is placed 106th in the Networked Readiness Index, receiving Thailand’s Minister of Information and Communication Technology, relatively low scores for the use of the internet by individuals, businesses Anudith Nakornthap, outlined a “Smart Network” plan in which and government compared to Singapore or Malaysia. Other the Ministry will adopt a co-network collaboration with private economically more advanced countries in the Region are striving to operators to provide network connectivity to 16 million homes catch up. These include Thailand, Indonesia, Vietnam and the Philippines through existing infrastructure for third and fourth generation mobile which are listed in 74th, 76th, 84th and 86th place respectively in the services. The US$2.6 billion project aims to raise Thailand’s broadband Index. In contrast, Malaysia is ranked in 30th place globally while penetration to 80% within three years and 95% by 2020. Singapore is bettered only by Finland. (www.futuregov.asia/thailand-pushing-us-26-bil-expand-braodband- national ) Indonesia, in an effort to improve broadband and internet take-up, is laying 35,380 kilometres of submarine optical fibre cable along the Thailand is also seeking to deploy mobile broadband systems to support coasts of the country’s major islands. Another 21,870 kilometres will distant learning for schools in remote areas, provide healthcare integrate the undersea element with urban centres and industries in the information as well as encouraging access to e-government services archipelago through what is known as the PALAPA ring. A final phase of including technical help for farmers. 83 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

This situation is due to be remedied with a masterplan involving new laws governing telecommunication services including privatisation of the state owned Myanmar Posts and Telecommunications. ( KPMG Infrastructure in Myanmar www.kpmg.com/mm ). The aim is to achieve a mobile telephone density of 76%-80% and internet penetration of more than 50% by 2016. ( Myanmar The next telecommunications greenfield? www.deloitte.com ) The greatest scope to improve services lies in the more populous areas There is an urgency to improve services to accelerate Myanmar’s such as Thailand, where at present, an estimated 23.7% of the integration into the ASEAN economic community. Japan’s Sumitomo population use internet services according to ITU figures. Corporation and NEC Corporation in conjunction with NTT Communications are working on a contract awarded in 2012 in support In spite of an increasing use of mobile devices to access services, the of the country’s emergency communications network improvement percentage of individuals using the internet is still low in most of the plan. This follows the promise of US$17 million of assistance from the Region. In the Philippines just 36.2% of the population were recorded as Japan International Cooperation Agency. internet users by the ITU in 2012. The figure falls to 15.36% in Indonesia. The companies will help improve communication infrastructure linking In Malaysia, a more advanced economy, the user figure is still relatively the main cities of Yangon, Mandalay and Naypyidaw and will also small at 65.8% compared to 74.18% in Singapore. operate systems supporting internet connections. The Japanese Myanmar is one of the countries least touched by the tremendous global companies say they expect to continue helping in the area of developments in telecoms over the last two decades. communications expansion in Myanmar’s urban and rural areas. (www.nec.com NEC press release 21.5.13 ) Only around one million of the country’s more than 60 million people enjoy the benefits of a mobile telephone, and it is estimated that less However, as has been illustrated elsewhere in the Region, it will be than 400,000 have internet access. mobile services that will drive the country’s telecoms overhaul. An award 84 S N O I T A C I N U M M O C E L E T

T I

was made in 2013 to Norway’s Telenor and Ooredoo (formerly Qatar Opportunities are also identified in Vietnam to provide IT consulting Telecom) to operate cellular networks in Myanmar. Their 15 year services in a largely undeveloped IT market, which is expected to wireless licences represent some of the largest foreign investments in expand as more state owned enterprises are privatised. the country since 2011. The Philippines is the largest international location for offshore Myanmar is an attractive market for investors. According to Ooredoo’s Business Process Outsourcing (BPO) services providing operations for Asia Regional Director, Nicholas Swierzy, while Indonesia is the largest major foreign clients and call centres. The industry grew by 20% in market for the Qatar telecoms company, Myanmar, with estimated 2012 and is expected to be valued at US$25 billion by 2016 sales of US$2 billion a year, is expected to be its second largest. contributing 10% of GDP, according to the Philippine BPO Association. (Investvine.com/Philippines-bpo-industry-to-hit ) Telecoms renewal boosts adoption of new ICT Sound and reliable telecoms services are the foundation for There is also a concerted effort by the Singapore Government to attract development of ICT. ASEAN members recognise that these and host major international IT companies seeking a regional base. technologies are a key enabler for growth and essential for the This concept permits smaller firms to rely on remote access computing Region’s social and economic integration. The adoption and rather than having to accommodate their own hardware and install development of these technologies are seen as helping to transform and maintaining applications. Since services are hosted remotely, they ASEAN into a single market. ( ASEAN ICT Masterplan 2015 ) can be accessed from any computer or phone. Malaysia’s digital initiatives such as “Get Malaysian Businesses Online” Thailand’s Minister of Information and Communications Technology, as well as the build up of data centres are helping to fuel IT services Anudith Nakornthap, says that cloud computing service frees state growth in the country. bodies from the responsibility of having to procure their own Thailand’s market is predicted to expand by 9.8% to reach US$12.1 equipment and software, resulting in a significant reduction of billion in 2013, making the country the second highest spender in the government IT costs. Region after Indonesia. IDC says that the Kingdom has the potential to ASEAN countries have the opportunity to be at the forefront of the new become a regional ICT hub with the advent of the ASEAN Economic IT approach. In particular, there are expectations that Singapore will Community. ( www.bangkokpost.com/print/360403/ ) become a hub for the development of cloud computing.

85 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Glittering mining prospects need careful management

Prospects for mining precious metals and industrial mineral ores are Australia’s PanAust is looking to develop its third copper and gold mine growing throughout Southeast Asia, a region that is already established in the country. The company’s operations and those of China’s as a leading world producer in several key areas. Minmetals Corporation already produce around 200,000 ounces of gold Indonesia is the world’s largest producer of nickel, for example, with a year in addition to copper and silver. production of 7.52 million tonnes in 2011 of which 6.39 million tonnes Thai companies are also developing a coal mine and power station that was exported. are expected to come on stream in Lao PDR during 2015. Several With sales of around 11,000 tonnes a year, Indonesia is also the world’s potash developments are also underway by Chinese, Vietnamese and largest exporter of refined tin accounting for about 40% of the world’s Thai interests. trade. Singapore, Malaysia, Japan, China and South Korea are the In addition, a Chinese-Australian joint venture is examining the feasibility largest customers. of a bauxite project in the south of the country. Such developments are Mining is becoming a significant investment motor in some of the lesser a much needed boost to an economy striving to catch up with others in developed economies in the Region. In Cambodia, plans have been the Region. The World Bank has said that the natural resource wealth of reported for an US$11 billion Chinese venture to develop high-grade Lao PDR with sensible management can contribute to rapid sustainable iron ore deposits, a steel plant, as well as a port and railway infrastructure growth and poverty reduction in the coming few years. at Rovieng in northern Cambodia. Mining is already well established as a major economic contributor in The World Bank says that the rapid development of natural resources Indonesia with its share of GDP, together with quarrying operations has transformed the economic landscape of Lao PDR with mining now almost trebling in eight years to 6.8%. The sector attracted US$3.2 billion a US$1 billion a year industry. The mining sector accounts for around in Foreign Direct Investment (FDI) in 2012, representing 17.3% of all FDI half the country’s exports and 15% of government revenues. in the country. 86 m a A p H t c o T i F c r c k t a I n h n o e a o o i n d u h o u u o l s e s t

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the country can make huge savings in foreign exchange outflow if the in Southeast Asia at Tampakan in South Cotabato Province. Majority mining sector can be further developed. This, he acknowledges, will owned by Xstrata, the resource is estimated to hold 16.2 million require a variety of technology and skills and be very capital-intensive. ounces of gold and 13.9 million tonnes of copper. The chamber identifies plentiful coal deposits in east Malaysia which Another major project due to come on stream is the Didipio mine could meet the country’s entire domestic needs and provide a surplus development on Luzon island in the northern Philippines. The mine is for export. Potential for nickel, gold and copper mining is also seen in expected to produce 100,000 ounces of gold and 14,000 tonnes of Sabah and the central belt of Malaysia, stretching from Kelantan State copper a year by OceanaGold of Australia. to Johor State. There are few parts of the Region not possessing unexploited and The Philippines, with estimated mineral resources valued at some valuable mineral resources. Vietnam holds some of the world’s largest US$850 billion, also holds vast potential. This includes possibly the bauxite reserves mostly located in the country’s central highlands. world’s third largest gold ore deposits, the fourth highest copper Myanmar also contains significant natural resources including copper, reserves, fifth largest nickel and the sixth biggest chromite ore deposits. zinc, tungsten, tin, precious stones and industrial aggregates in This is in addition to large scale resources of iron ore, bauxite and addition to its petroleum and gas. rare earth minerals such as titanium, vanadium, molybdenum as well as cobalt. There are still outstanding questions about the ultimate benefits and costs of mining in areas such as the Philippines as well as in other Around 30 major international companies are already involved in ASEAN countries. Concerns over environmental impact, transparency mining operations including Australia’s BHP Billiton, Japan’s Sumitomo as well as the disruption, compensation levels and ultimate rewards to Metal Mining, Brazil’s Vale, Anglo American, AngloGold Ashanti and local populations need to be weighed against wider national economic Anglo-Swiss Xstrata. development considerations. It is a challenging agenda and given the A number of very large scale exploration and development projects are sensitivities involved, likely to be a keenly argued debate throughout underway including the largest undeveloped gold and copper deposit the Region.

88 E R U T L U C I R G A

Integration provides vast agricultural opportunities

Agriculture is a vital sector for the ASEAN community accounting for over Indonesia and Malaysia are the Region’s main palm oil producers and 25% of GDP in some member states and providing more than 40% of provide nearly 90% of global output. Indonesia exports around 18 total employment in the case of Myanmar. million tonnes a year of this versatile commodity whose uses range from Food security is a priority to meet the needs of the Region’s expanding production of vegetable oil for cereal products, crisps and confectionery population as well as underpin the steadily growing role in the export of to soaps, detergent, cosmetics and biofuel. agricultural and forestry products to global markets. Agricultural output is increasingly important in the composition of the There is no shortage of resources with arable land totalling around 60 Regions exports. Between 2003 and 2010, agro-based exports increased million hectares. The Regions’s forests and waterways also contain some threefold with the total value rising from US$11.8 billion to some of the richest habitats on earth. US40 billion. Food processing and manufacturing contributed up to 13.5% of GDP. These valuable natural resources include the Greater Mekong Sub- region which covers vast swathes of tropical forests and rivers in The Philippines is one of the world’s largest producers of coconuts and Cambodia, Lao PDR, Myanmar, Thailand and Vietnam. Borneo, in pineapples, and a major producer of rice and sugar. Some of the biggest addition, comprises 24 million hectares of equatorial rainforests global food producers and domestic industries have developed large scale stretching along the borders of Indonesia, Malaysia and Brunei. cultivation and processing facilities. These include domestically based San Miguel and other corporations including foreign companies such as Del ASEAN countries are established as important world suppliers of Monte, Kraft Foods, Unilever, Nestle and Dole Food Company. commodities. Indonesia, Thailand and Malaysia, for example, cultivate some 3.3 million tonnes a year of rubber, accounting for around 70% of According to figures given at 2013s ASEAN-EU Business Summit held in the world’s production. Hanoi, agro-food sales account for 17% of total exports for Vietnam 89 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

The ASEAN area is already Thailand’s largest export market accounting for 20.6% of sales, followed by Japan at 14.6% and the US at 12.8%. The National Food Institute (NFI) is urging small and medium sized enterprises to cooperate with companies in other ASEAN countries to utilise new technologies and improve the free flow of goods and raw materials. The NFI, which operates independently under the Ministry of Industry, focuses on implementing international quality standards, technology and food safety research and development. This has helped establish Thailand as one of the top five net food exporters in the world. Sales of canned and frozen fish including catfish, shrimp, prawn, carp and tilapia are a growing export for Thailand and others in the Region. and Indonesia and 14% for Thailand. The latter’s food exports are Around 17% of the world’s aquaculture production is produced here. running at around US$30 billion a year with exports to other ASEAN Indonesia is the largest producer with an annual production estimated at countries representing some US$6 billion of the total. 3.9 million tonnes followed by Vietnam, Philippines and Thailand with production of around 2.5, 2.4 and 1.4 million tonnes a year respectively. With some 1.4 million hectares of land under cultivation for sugar cane, Thailand is the world’s second largest sugar producer after Brazil with Export growth is also part of the strategy of less developed countries in exports of 6.5 million tonnes a year, valued at more than US$3.6 billion. the Region. The country also ranks as the world’s largest producer of shrimp, Cambodia’s Rice Policy is designed to promote diversification of its processed chicken and canned tuna and provides high quality food economic sectors by catalysing growth in paddy rice production and products for markets in Europe, Japan and North America as well as the milled rice export to match growth seen in the country’s garment and ASEAN Region. service sectors. Closer regional cooperation could see the percentage of export sales Agriculture, led by rice farming, contributes to roughly a third of the within ASEAN countries rise up to 30% in the next few years, according country’s GDP and has immense potential for strengthening Cambodia’s to Petch Chinabutr, Director of the Thai National Food Institute. economic growth and to accelerate poverty reduction. 90 E R U T L U C I R G A

The National Food Institute (NFI) is urging small and medium sized enterprises to cooperate with companies in other ASEAN countries to utilise new technologies and improve the free flow of goods and raw materials.

If the country’s rice export sector were to reach its full potential, it could As the world’s largest rubber exporter, Thailand has a long history in the produce three million tonnes of milled rice, with a total export value cultivation and harvesting of the commodity and operates some of the estimated at US$2.1 billion. At present, an under utilisation of arable land largest plantations and rubber processing facilities in the world. and high energy costs are stalling expansion. Downstream applications are well established with tyre manufacturers including Michelin, Goodyear and Bridgestone among them. Agriculture plays a vital role in Indonesia’s economy and contributes 15% of GDP, the third largest total after hydrocarbons and The country’s rubber exports are valued at more than US$13 billion a manufacturing. The country’s food crop production, livestock and year. Annual production is expected to increase by 7% by 2017, as a fisheries output is valued at some US$90 billion a year with rubber, palm result of a plantation expansion strategy. oil and forestry production providing an additional US$22 billion. Malaysia, which is the Region’s third largest producer of rubber after Indonesia is the world’s third largest cocoa producer providing some Thailand and Indonesia, exported around US$11 billion of the 450,000 tonnes a year and a significant coffee producer with an output commodity in 2012, an amount it aims to triple through investments of 700,000 tonnes in 2012. Indonesia is also the world’s eighth largest over the next seven years. ( Malaysian Rubber Board annual report ) tea producer according to the UN’s Food and Agriculture Organisation. Plantations and its agriculture sector are important drivers of Indonesia in common with other countries in the Region is seeking to economic growth in Malaysia, contributing more than 11% to GDP and move agriculture further up the value chain to attract investment from providing employment to a similar percentage of the working global agro-industry and domestic companies. Following the World population. The country also ranks as one of Asia’s main furniture Economic Forum on East Asia in 2011, the Partnership for Indonesian producers and is among the top ten exporters in the world. Malaysia is Sustainable Agriculture was set up to assist this process. seeking to more than double its timber exports to more than US$13 billion a year by 2020. The aim is to facilitate private sector investment and achieve a 20% increase in yields of commodities such as corn, soybeans, rice, poultry, An economic transformation programme is also seeking to expand livestock and aquaculture. Founding partners include Indofood, cultivation of rice, fruit and vegetables and in other areas where Malaysia McKinsey & Company, Nestle, Sinar Mas, Syngenta and Unilever. currently is a net importer. 91 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

As expansion strategies take hold in the Region, issues of environmental sustainability, and the handling of its water resources, are also paramount concerns. One of the biggest threats to the Mekong River’s ecological system is long term deforestation of the river basin. One of the most important freshwater fisheries at Tonle Sap in Cambodia is reported to have seen larger migratory species of fish decline significantly. The wetland area, that stretches over 16,000 square kilometres, is the largest freshwater lake in the Region. Regional cooperation has emerged through initiatives such as the Mekong River Commission, formed by Cambodia, Lao PDR, Thailand and Vietnam. The Commission is using the Biodiversity Conservation Corridors Initiative which is backed by the Asian Development Bank, to speed up efforts to address conservation and climate change issues. The Heart of Borneo Project by Brunei Darussalam, Indonesia and Malaysia, is driving cooperation among the three countries to protect, conserve and sustainably manage remaining forest land and nearby areas. Malaysia and Indonesia are the largest contributors to certification of sustainable palm oil trees with one million hectares of certified production area under the Forest Stewardship Council. However, there is an urgent need for ASEAN countries to increase their collaboration on deforestation. An increasing frequency of forest and land fires over the last few years has had huge consequences by creating smog conditions in major cities across the Region. Avoiding and reversing the loss and degradation of forests is a crucial element of sustainable development. The deployment of a Brazilian type satellite observation system to cover the Region’s forests and regular checks on the ground have been suggested as a way forward for future monitoring. The Region has prodigious natural resources that if carefully used and nurtured will be of long term benefit to every country in the area.

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ASEAN states move to universal healthcare

ASEAN has traditionally relied on a mixture of public and private the entire 67 million Thai population is now covered for primary care healthcare with an emphasis on the latter. It is a structure that is likely to through to hospital treatment. continue as more countries in the Region begin to move towards the The Philippines aims to attain universal healthcare by 2016. From this provision of universal healthcare. date around 100 million Filipinos will be covered by insurance according For those shortly to implement such schemes in the cases of Indonesia to Dr Eduardo Banzon, President of the Philippine Health Insurance and the Philippines there are big challenges ahead. However, even in Corporation, which has been set up by the Government as a tax free these countries, which together account for more than half of the vehicle to enact the scheme. ASEAN Region’s 600 million population, the private sector is likely to In some countries in the Region such as Singapore, the private sector is continue to play an important role in the provision of services to state- well established as the main healthcare provider. insured patients. Singapore has a well funded compulsory insurance scheme that allows In January 2014, health insurance is due to cover almost 122 million some of the most advanced levels of health provision to be offered. The people throughout Indonesia. A tax exempt state corporation, BPJS Parkway Group’s Mount Elizabeth hospital in Singapore is the first centre Kesehatan, has been established to roll out the scheme which is to be in Southeast Asia to offer stem cell transplant therapy for acute tumours. extended to the whole of the country’s 240 million population by 2019. The country has developed at the top end of hospital treatments offering Thailand is already a pioneer in the Region having introduced free such specialised care as neurological procedures and heart transplants. universal healthcare at the point of delivery in 2002 and demonstrating Access to such advanced care remains though an aspiration in much of that the concept is not out of reach of middle income countries. Virtually the rest of the Region. 93 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

The Philippines, for example, is estimated to require more than 152,000 new hospital beds to serve its population. The Region urgently needs to train more health professionals including technicians as well as doctors and nurses. According to a recent study by the industry expert analysis company, Frost & Sullivan, the proportion of healthcare workers in the Asia-Pacific region is 6.8% per 1,000 of population compared with 18.9% in Europe and 24.8% in North America. Health service coverage remains stubbornly uneven throughout the Region with an average ratio of just three doctors for every 10,000 people in Indonesia, compared to nine per 10,000 of population in Malaysia. Not surprisingly people live longer in the wealthiest ASEAN countries. Myanmar, while increasing its healthcare spending still has the lowest life expectancy of any country in the Region and also has more than 50% of malaria related deaths. According to a report in 2012 by the Lancet, this Many countries in the Region will have to make very substantial is a result of poor diagnosis but also to the prevalence of counterfeit anti- increases in annual investments in healthcare to catch up with averages malarial medication. in OECD countries. Even in Malaysia, spending is still only one tenth of that in Western Europe and in Indonesia one seventieth according to The path is complex and there is no single formula as ASEAN member World Health Organisation 2011 figures. states adopt different solutions tailored to their own circumstances. However, an improvement and wider coverage of medical services is a Finding sustainable methods to fund basic healthcare is a challenge and priority in the Region. involves a keen focus on cost containment throughout the ASEAN area. There are no easy choices to obtaining the most from limited budgets. Malaysia’s former Health Minister, Liow Tiong Lai, declared that Singapore began to restructure its public hospitals to make them run on healthcare is viewed as investment and not as a cost burden to the corporate lines in the mid 1980s. Indonesia has since introduced the self country encompassing primary, secondary and tertiary care. As a result, financing methods for its hospitals. the country has increased its spending on health to 4.4% of GDP 94 E R A C H T L A E H

The Tourism Authority of Thailand (TAT) estimates that 2.4 million foreign visitors arrived in the country in 2012 for health services, generating revenues of US$439 million. compared to 2.9% in 1997. The system, as with others in Southeast Asia also built up considerable expertise and experience in Singapore, works in tandem with private healthcare providers. Malaysia and Thailand. It is believed that the Region’s shape of future healthcare provision is The private healthcare sector is also very active in providing services to unlikely to replicate systems in the West but provide an environment for foreign “medical tourists”. Singapore is estimated to receive more than innovative forms of Public Private Partnerships (PPPs) to develop. 400,000 foreign patients a year. This may see the Government’s role steadily shifting from provider to A growing international number of patients are attracted by low cost regulator with private health companies working in partnership with the treatments. Hospitals in the Region can offer complex operations ranging state in the provision of services. In Vietnam and Indonesia, for example, from heart-bypass procedures to hip and knee replacements or IVF private providers are purchasing and managing large items of procedures often at a quarter of the cost in the US or in Europe. equipment such as MRI scanners, which are placed in public sector hospitals and paid for over several years. Thai hospital groups have positioned the country as a hub for a variety of procedures. PPPs are already playing a prominent role in the provision of more extensive medical services. An example is the US$130 million teaching The Tourism Authority of Thailand (TAT) estimates that 2.4 million hospital under development at Kuantan in Malaysia. Peninsular Medical foreign visitors arrived in the country in 2012 for health services, (PenMedic), a subsidiary of Ahmad Zaki Resources Berhad (AZRB), has generating revenues of US$439 million. TAT expects three million a 25 year concession to build and maintain the 300 bed hospital. The medical tourists by 2016 and a doubling of 2012s revenues. hospital, with facilities for 735 students, is due for completion in 2015. Bangkok’s Bumrungrad International Hospital is one of the largest Malaysian owned Parkway Group is involved in a PPP project in Brunei. privately run facilities in Southeast Asia. The hospital which has a Other providers such as India’s Fortis and Bangkok Hospital Group have large number of Middle Eastern patients has a streamlined operation, 95 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

starting with its own reception area at the international airport and exercise. Translational research aims to bridge the gap between basic providing serviced apartments for patients families in addition to its research and delivering an effective product. Discoveries made in the clinical services. laboratory are used in clinical trials with volunteers. Data generated from patients responses can then be fed back to researchers allowing them to Demand particularly from Middle Eastern patients has increased modify products where required. As a result new innovative products dramatically as a result of visitors being allowed to stay for up to 90 days can be adopted for use much quicker. instead of the previous limitation of 70 days. This type of approach seeks to end compartmentalisation in research Business is growing and many independent private hospitals in both and development by translating research findings more rapidly into Bangkok and provincial areas have partnered with larger hospital groups practical applications through multi-disciplinary collaboration, linking as a means of staying competitive. skills in the physical sciences to those in biology and medicine. Further cross-border investments will also result from the liberalisation In addition to developing new modes of research and development the due to follow ASEAN’s economic integration in 2015. Region also has the potential to provide entirely new types of drugs. ASEAN builds role in global life sciences The Malay Archipelago is also one of the world’s most concentrated The ASEAN Region is poised to occupy a critical and distinctive areas of biodiversity. The rainforests of Brunei Darussalam, Malaysia, place in the future of the global technology industry both as a Indonesia and the Philippines contain thousands of species of plants. pharmaceuticals manufacturing hub and as a location for bio-sciences research and development. Because the compounds that might be created from these plants are staggering in terms of their scientific and medical applications, scientists Singapore is already looked upon as the pharmaceutical hub of from around the world are being drawn to investigate the forests for Southeast Asia. unknown resources. “Bio-prospectors” have already discovered a wide The top 30 of the world’s leading life sciences companies have made variety of chemicals in the flora of these tropical forests. Singapore their base with GlaxoSmithKline, Abbott Laboratories, MSD Brunei’s Tropical Biodiversity Centre is forging ahead with plans for a (Merck), Novartis, Pfizer and Sanofi, all positioned there, where they bio-technology industry to develop pharmaceuticals from the microbes have collectively invested more than US$4 billion. found in the Sultanate’s forests. Moving towards 2015, it is expected that Singapore’s biomedical sector Thailand is seen as a natural base for biotechnology following on from will employ in excess of 15,000 people and achieve 8.5% compound the country’s highly developed agricultural and food sectors and is being annual growth rate with pharmaceuticals being a key driving force. advanced by the country’s National Centre for Genetic Engineering and Singapore’s success in attracting leading bio-technology companies is Biotechnology. Thailand has more than 165 companies operating in the also reflected in its growing role in new approaches to research. area and has also developed as a major centre for pre-clinical trials. Fewer than 5% of drugs under development gain approval for public Malaysia has also identified biotechnology as a new engine of growth for use. In the past, exploratory work and clinical trials were distinct and the economy. In 2012, exports of pharmaceuticals were valued at followed each other in a sequence, this was a time consuming and costly US$180 million. 96 f S V a G i p O g n I e o t p T F e I r c p 2 n t n o o e a l r a l x n h

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ASEAN commits to education and new skills

A sound education system accessible by all, is key to any country’s social The country’s reform agenda is seen as critical in order to meet the and economic development. This is clearly recognised by ASEAN public demand for a higher performing education system and build a countries where a pro-active educational agenda is being followed in sustainable foundation for human development in middle income order to produce workforces with the necessary skills to compete in Vietnam. ( World Bank News Release 25/4/12 “High Education For All future global markets. Should Be Vietnam’s Priority” ) In view of this requirement, ASEAN countries are making the Thailand is seen by the OECD as having achieved impressive progress in improvement of educational standards and widening access to primary, providing education to most of its population. Nevertheless, significant secondary and technical and vocational education a major priority. disparities in access still exist, especially between rural and urban areas. Much progress has already been achieved in spite of the difficult (OECD SE Asia 2013 report ) hurdles still faced in some parts of the Region. The latest UN Human Development Index, for example, shows that children in Lao PDR and The importance placed by the Philippines Government on improving Myanmar on average have just 4.6 years and 3.9 years of schooling education is seen in its record allocation of US$6.6 billion in the 2013 respectively while the average is also relatively low in both Cambodia national budget, an increase of 22.6% on the previous year and the and Indonesia at 5.8 years. highest figure given to any government department. President Benigno Aquino III, has said that half this amount is for upgrading facilities and In spite of the challenges, sound progress is being made by ASEAN building new schools. (eGov Innovation Editors 30/7/12) countries. A joint report from the World Bank, UK Department for International Development and Belgium Development Cooperation However, even in those countries where longer periods are spent in in 2012 concludes, for instance, that “Vietnam has made impressive education, there is some way to go before the averages seen in the US gains in improving educational performance over a relatively short and Germany, for example, of 13.2 years and 12.2 years are reached. In period of time. Vietnam’s literacy rate and school attendance rate Malaysia and Singapore, which are the most advanced economies in the compare favourably to other countries in the Region and in the same Region, pupils spend an average of 9.5 years and 10.1 years in school. income group”. (UN 2013 Human Development repor t) 98 I e G i T l 1 b T c t B 2 P a n a n h o n f h h 5 8 r e o o b f c d i o l

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Singapore, which already has an enviable reputation for providing border education within the Region. Member states agreed to facilitate quality higher education shows just how high the Region’s educational staff and student exchanges, and create research clusters. bar can be raised. In the 2012 annual university ranking of Asian Meanwhile, Thailand, Lao PDR and Vietnam are discussing plans to Universities, published by Quacquarelli Symonds, the National University develop methods that will lead to vocational qualifications being of Singapore placed second while Nanyang Technological University was recognised in each country. Dr. Dao Viet Dung, Director of Vinh 17th. The University of Malaya was ranked 35th. ( ASEAN-Canada University of Technology Education in Vietnam has said that the tri- Research Partnership 10/5/13 ) nation vocational training scheme will set the same standards in ASEAN increases education cooperation professions across the three countries, making it easier for those in the Student mobility, the transfer of academic credits, quality assurance and same field to move across borders. ( ASEAN Trade Union Council ) creation of research clusters have been identified as priorities to English needed for economic development harmonise ASEAN’s higher education system that encompasses an Globalisation has accelerated the growing role of the English language in estimated 6,500 higher education institutions and 12 million students in Southeast Asia where it has become the working language in most the ten member states. ( topuniversities.com ) ASEAN countries, notably Singapore and the Philippines. The ASEAN University Network (AUN) is strengthening the existing A poll carried out in 2012 by market research company, Ipsos, found that network of cooperation among 26 of the Region’s leading universities to 74% of people use English to communicate with foreigners in Singapore. promote information dissemination in an effort to accelerate development of regional identity. This includes development of a quality In multi-ethnic Malaysia, English is the basis of post secondary school assurance system which will lead to mutual recognition of academic tertiary education. “English language skills are not considered optional standards in member countries. anymore but a necessity,” according to Azirah Hashim, Dean of Humanities and Ethics Research Cluster at the University of Malaya. This process will be helped through a credit transfer system to facilitate (Southeast Asia Globe ) recognition of each country’s academic qualifications. The AUN has also set up an intellectual property network, organising conferences, The country’s schools strategy seeks to ensure every child is proficient in workshops and setting up relationships with IP networks. English. ( The Star 17/9/12 ) The Cha-am Hua Hin Declaration on the Roadmap for the ASEAN “Deficiency in English language skills and consequent deficiency in social Community (2005-2015) also listed several initiatives to promote cross- networking aptitude, hinders progress in the adoption of technology and 100 A b a t t A E a m t t a A l m p I i w R a n h h r o n s c

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n e n e s g g c m n o s a l t , h d d d e t e g ” s s t f , l 1 0 1 EDUCATION ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Touching lives, improving life

P&G globally is committed to ensuring a better quality of life for children in need around the world. Our company purpose is to touch and improve lives, now and for generations to come. Every year, P&G reaches more than 50 million children through our corporate cause platform which enables children and their families to live, learn and thrive by getting off to a healthy start, receiving access to education and building skills for life. Disaster Relief P&G touches the lives of the community through disaster relief programmes. Our flagship not-for-profit programme is called Children’s Safe Drinking Water (CSDW) which provides clean drinking water to impoverished communities in the developing world through P&G’s Purifier of Water. An advanced technology which was developed by P&G and the US Centres for Disease Control and Prevention, the product transforms contaminated water into clean safe drinking water. Since its establishment in 2004, the CSDW programme has partnered Myanmar with more than 120 NGOs throughout the world to provide six billion In 2007, P&G joined hands with World Vision Singapore, to provide over litres of clean drinking water to people in more than 65 countries. By 25 million litres of clean, safe drinking water to the disaster victims of 2020, P&G aim to “save a life an hour” by delivering two billion litres of Cyclone Nargis, contributing a total of US$310,000. clean water each and every year. The programme has saved an estimated 32,000 lives and prevented 250 million days of diarrheal illness. CSDW has since provided US$350,000 to stockpile 4.5 million sachets in preparedness for future disasters. E

L P&G has extended aid to some of the most critical global emergency B

M relief situations where safe drinking water is a critical need, in the wake In May 2013, P&G partnered with Chelsea Clinton, Board Member of the A G

of hurricanes, earthquakes, tsunamis, typhoons, flooding and other Clinton Foundation, to deliver the 6th billionth litre of clean drinking & disasters. CSDW has provided aid to the Aceh tsunami, Cyclone Nargis water in Myanmar and announced a landmark partnership with USAID R E

T in Myanmar, Yogjakarta and Padang earthquakes, Thailand flooding and to mark the occasion. C O

R Typhoons Ketsana and Sendong in the Philippines.

P Indonesia

: Y

D P&G engages partners such as local government, distributors, celebrities, In Indonesia, due to its geographical landscape, P&G focuses its efforts U

T media, customers, consumers and employees in our CSR programmes, towards disaster relief programmes, which started during the 2004 Aceh S E

S to help touch and improve the lives of the community and children in tsunami, and subsequent Padang and Yogjakarta earthquakes, and A

C ASEAN and around the world. flooding in Jakarta in January 2013. 102 N O I T A C U D E

Together with World Vision Indonesia, P&G donated water purification Giving back to the community via children’s education packets through local clinics called POSYANDU, endorsed by the heads Thailand of the medical community who were involved directly in the training of P&G supporting Thai children’s education how to use P&G’s Purifier of water. The programme helped protect the P&G Thailand looks to support the welfare of young children, from people and children of Padang Pariaman from an epidemic of diarrhea newborns to aged 13, as these are the important formative years of a and water borne diseases, common consequences in the aftermath of disasters. In Pariaman, P&G Indonesia also helped the community to child’s development. In Thailand, P&G started a unique campaign called build temporary housing in Desa Kudu and donated P&G products such “Back To School” to help support Thai street children and give them the as Pampers, Pantene, Safeguard and Oral B toothbrushes. chance of an education. P&G also supports a campaign called “One Year, One School” which builds new schools and educational facilities. Philippines Through a partnership with the Ministry of Social Welfare and Human P&G supports the disaster management and community health Security Development (MOSDHS), the Foundation for the Better Life of programmes of the Philippine National Red Cross (PNRC) by donating Children, and related welfare agencies, P&G helps to provide proper over US$448,000 worth of products and financial aid during natural basic healthcare and education to 25,000 street or homeless children. calamities including typhoons and landslides and outbreaks of diseases such as H1N1. Philippines Gawad Kalinga (GK) (“Giving Care”) P&G Philippines have donated Thailand over 200 houses to the Gawad Kalinga programme where P&G helps P&G Thailand provided 2.5 million water purification sachets to the Thai improve lives through continued investment in a P&G village of 200 Red Cross Princess Pa Foundation, to provide safe drinking water to the homes, helping provide shelter for the homeless people of Baseco, 2011 flood victims. Partnering with media and retailers such as Tesco in Tondo, Manila; development of P&G Safeguard A.R.A.L (Acquired the relief efforts, P&G donated products such as Pantene, Safeguard, Reading and Learning) School which includes the awarding of Pampers, Whisper, Gillette, Oral B in survival kits packed by our own scholarships to underprivileged children in the P&G village. employees. Spearheaded by the Downy fabric conditioner brand, P&G also created the Downy Scent of Hope programme with trucks that 3-pid Handog Edukasyon (Gift of Education) Through the purchase of serviced the evacuation centres, providing much needed service of P&G 3-pid value packs of key brands Tide, Ariel, Mr. Clean, Downy and washing laundry for the flood victims. P&G received royal recognition for Safeguard, P&G have enabled sending over 75,000 students in over 575 the relief efforts. schools to school for one day by giving him/her necessary school 103 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Over the past five years, P&G partnered with World Vision to build four kindergarten schools in Lao PDR, Cambodia and Vietnam. This has benefitted nearly 1,000 children, with a total budget support of US$250,000.

supplies. On our 75th Anniversary, P&G have provided 35,000 more internet connectivity to beneficiary school children. The programme students with school supplies and have refurbished a school with will enable students towards enjoyable self discovery of a wider world seven classrooms that was damaged by Typhoon Ondoy. of knowledge that helps them be more competitive in the future. Hand washing education Beyond Borders: Singapore P&G Philippines partnered with the Department of Health to come out Building one school every year: With support from P&G Singapore with public health advisories on proper and effective hand washing headquarters, P&G‘s Beyond Borders programme aims to help through the annual celebration of the Global Handwashing Day support less fortunate children who live beyond Singapore’s borders. beginning 2008 and are educating young students nationwide on this Over the past five years, P&G partnered with World Vision to build important habit by supporting the DOH’s Essential Health Care four kindergarten schools in Lao PDR, Cambodia and Vietnam. Programme, targeting three million students in three years. This has benefitted nearly 1,000 children, with a total budget support of US$250,000. Teen Education - P&G have partnered with the Department of Education in this school programme that provides teens modules on Vietnam E L

B their interests and needs at a pre-pubescent stage, reaching over 1.2 P&G Vietnam has partnered with Unicef and local newspaper Tuoi Tre M A million young girls since 2005. to provide hygiene & sanitation facilities and hygienic practice training G to 12,500 students in disadvantaged areas of Vietnam such as Can & Mother’s Education - Since 2004, P&G have had an ongoing education R

E Gio, Ben Tre, An Giang, Dong Thap, Dien Bien, Ninh Thuan, Binh T and sampling programme that teaches mothers the proper and C Duong with a total investment of US$345,000 from 2009-2011. In O

R sanitary way of using diapers through Barangay Health Centres and

P 2012 & 2013, P&G helped 2,000 children with special needs to

Y public hospitals reaching at least 700,000 mothers every year.

D improve health & integrate into the society via Special Olympics U T E. Studyante sports. Almost 2,000 scholarships have been given to disadvantaged S E

S P&G is taking its commitment to children’s education to the next students of Binh Duong, Lam Dong, Dak Lak, Dak Nong & Kon Tum. A

C level with E.Studyante, which aims to provide 1,000,000 laptops and For five years now, every Tet (Vietnamese Lunar New Year), P&G 104 t C c C P p r S n t p g a 1 I I t o I c T s b a c p M T t d n n h n h h e e u h h o c s e i o h & r o

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n h h i u i r t t a N i d h o e e e s s , 1 0 5 EDUCATION ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Real Estate investment opportunities throughout the Region

Nothing reflects economic dynamism more than the Region’s surging real Large US, Canadian and Middle Eastern investors are returning to the estate developments, witnessed in the often spectacular construction of Region and, together with active Asian high net worth individuals and new offices, retail outlets, housing, hotels and industrial parks. pension funds, are creating strong demand for assets here. The Region’s steady move towards urbanisation is dramatically changing “The growth translates to robust domestic investment into commercial the shape and size of cities. While just over nine million people live in property, driving demand for office and logistics space. Increased the central area of Jakarta, more than 23 million live in its larger consumer spending will also support the development of retail malls metropolitan area, making it the largest mega city in Asia and the third and accompanying infrastructure,” says Chris Fossick, Jones Lang largest in the world. LaSalle’s Southeast Asia Director. By 2025, Asia is expected to host seven of the world’s ten largest metro In Jakarta, office demand has increased by nearly 150% in four years, regions. These are likely to include Manila, Bangkok and Jakarta growing 7.4% this year. The city’s office market is now described as one according to Wharton Business School estimates. ( knowledge@ of the tightest in Southeast Asia with low vacancy rates and total take-up Wharton, Wharton School’s online business journal ) in 2012 reaching 350,000 square metres, 5.4% higher than in 2011 says a recent report by UK accountants and consultants KPMG. The report As cities continue to expand, Chicago based global real estate also says that in the Philippines demand for office space has also consultants Jones Lang LaSalle says it can see a number of real estate witnessed record levels. ( KPMG Asian Real Snapshot/Spring 2013 ) trends and opportunities in emerging markets across Southeast Asia as the Region’s economies continue to outpace the rest of the Real estate investment is also expanding in Malaysia’s growing economy world by a considerable margin. ( Jones Lang LaSalle announcement with almost one million square metres of new offices expected over the 4.6.13 Reuters ) next four years. According to Stuart Crow, Head of the firm’s Asia-Pacific Capital Markets, Much of this additional space will be provided in the Tun Razak “there are increasing allocations being directed to real estate investments Exchange development which involves a huge new financial district by global sovereign and other fund investors”. being built on a 28 hectare site in Kuala Lumpur. Abu Dhabi’s sovereign wealth fund is a significant investor in the project. Investor interest is also growing in the Region’s Real Estate Investment Trusts (REITs) with around 14 that have an estimated Another major Malaysian venture is the Warisan Merdeka, a 118 capitalisation of US$4.7 billion, listed on Bursa Malaysia. the country’s storey tower block which will be higher than the city’s landmark stock exchange. Petronas twin towers. 106 P a f I m r a J T a o A c 2 a I t F b o L a r A t u t i e o e n n n a o r h o a e o p n n g o n a h c n r 0 c e p l u s c a c t v d

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Regional focus on sports industry development

There are few parts of the world that have larger numbers of people “We can and should exploit this opportunity in what is relatively an avidly following sport than in the ASEAN Region. It is seeking to untapped market for ASEAN members,” ( Bernama 14/12/11 ) achieve a more participatory and winning role in major international During the Heads of State summit in Brunei Darussalam, 2013 was competitions. Apart from increasing involvement in sport, governments designated ASEAN Sports Industry Year. The summit meeting also also want to gain a share of a very large, and growing, world agreed that “cooperation with the private sector in sport and related sports industry. activities will not only promote healthier lifestyles among our people as The income generated from business enterprises, goods and services, we move towards the ASEAN Community in 2015 but also further media rights and sponsorship that are focused on sport is huge. PwC contribute to building a stronger regional identity”. estimate that the global sports industry will be worth more than US$145 The bigger the occasion the greater is the degree of international billion by 2015. attention and business interest. Such considerations were paramount in At the first ASEAN ministerial meeting on sport held in Yogyakarta, Java Malaysia’s hosting of its first Formula 1 Grand Prix race in 1991, as well in 2011, Ahmad Shabery Cheek, then Youth and Sports Minister said. as Singapore’s inaugural Formula 1 race in 2008. While both ASEAN 108 T R O P S

platform for Malaysia to be known worldwide,” referring to the promotion of the country as both a destination and a place to do business. ( Bernama 23/3/12 ) Thailand is also vying to become a host venue for the Formula 1 calendar within the next few years. Bangkok’s Rattanakosin Island as well as Phuket, Khon Kaen and Nakhon Ratchasima have been suggested as possible venues by the Tourism and Sports Ministry. Singapore is also further developing its sports industry, targeting it to contribute US$2 billion to GDP by 2015, a 40% increase over 2010. This is to be achieved by developing the island as a “regional hub for sports related companies and organisations”. ( Ministry of Community Development, Youth and Sports 2009 ) Motor racing is just one of a number of high profile sports events that Singapore has hosted including the 2011 World Netball Championships and as co-host with Malaysia, the Junior World Hockey, in 2009. The island was also a stop over destination on sailing’s round the world Volvo Ocean Race in 2006. members already had achieved economic status in the Region and Golf is another sport with an increasingly growing profile in Southeast globally, and were already established visitor destinations, neither Asia. Many courses have been developed over the last 30 years along ranked highly in the world of sport. with the introduction of professional competitions. Formula 1 motor racing is the most watched television sporting spectacle Interest in golf has accompanied expanding economies and the rise of after the World Cup and Olympic Games according to the Deloitte high and middle income groups especially in Singapore, Malaysia, Sports Business Group. Malaysia has now been hosting the event for 14 Thailand and Indonesia. The latter alone has around 160 courses with years at the Sepang International Circuit. This has allowed the country to another 50 expected to be built over the next few years. ( Myanmar project itself as an international destination offering fine dining and five Associates 2013 Asia Pacific Golf Summit 25/7/13 ) star accommodation as well as high-end entertainment and shopping. Now ten years old, the professional golf Asian Tour is one of the most The country’s Prime Minister, Najib Razak has said: “Formula 1 has been established golfing bodies in Southeast Asia. The tour schedule in 2013 an engine of growth in our country with Malaysia reaping numerous saw tournaments in Indonesia, Philippines, Malaysia, Thailand as well as benefits from its involvement in the sport and is the most effective Vietnam for the first time. 109 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Myanmar is hoping that its hosting of the 2013 Southeast Asia Games, the largest sporting event in the Region, will make a statement about its increasing engagement with regional and global economies.

In March 2014, Asia will take on Europe in a recently launched EurAsia city’s Mass Rapid Transit network and major roads. It will also be 15 Cup team match-play golf tournament to be held in Malaysia. minutes from the city’s Changi International Airport. Mega sporting events which have mass popular appeal and regional as Envisaged as an integrated centre for a range of uses, the main feature well as international significance, focus attention on any country which of Singapore’s Sports Hub project is a new 55,000 seat stadium with a can generate positive publicity for the host nation, its culture and retractable roof. A 6,000 seat indoor Aquatic Centre, a 3,000 seat multi- highlight its attractions for visitors and investors. A big event is also a purpose arena, some 41,000 square metres of commercial space and signal that a country has arrived on the international scene. Other other leisure and commercial developments are also to be built. tangible benefits are seen in improvements to infrastructure as well as The US$1.3 billion project is based on a 25 year concession agreement, new sports venues and stadiums. under which the Singapore Sports Hub Consortium is responsible for Myanmar is hoping that its hosting of the 2013 Southeast Asia Games, the design, build, finance and operation of the project. Singapore the largest sporting event in the Region, will make a statement about its Sports Council is the sponsoring government authority. ( Singapore increasing engagement with regional and global economies. The event Sports Council ) will be held in the country’s new capital Naypyidaw and in Yangon and While the aim of the Sports Hub is to be a sustainable commercially Mandalay and features some 33 different sports competitions. It will be viable project, there are in addition wider implications. The intention is the first time since 1969 that the Games have been held in the country. also to create a sporting culture within the community by encouraging The Region’s ability to stage large scale sports events will be enhanced even greater participation, grooming young talent as well as stimulating as a result of Singapore’s Sports Hub project, the world’s largest sports the corporate community’s interest and investment in sports. Public Private Partnership (PPP) and also described as “Asia’s most In the last ten years, participation rates in sports have been rising in inspiring destination for sports and entertainment,” by the developers. Singapore in almost all age groups. Singapore, encouraged by its Sports The project, due to be completed in 2014, is located in Singapore Council, Ministry of Education, Health Promotion Board and other Island’s Marina Bay area on a 35 hectare site. It will be connected to the agencies, has achieved a growing participation in sports activities. It is 110 T R O P S

hoped that by 2015, 66% of the population will take part in some form Athletico Madrid, Chelsea and Arsenal are involved in schools of sports activity. programmes and football academies in Singapore. Similarly Bayern Munich has involvement with a number of football school In terms of sporting excellence, the official aim is to build on The Wall Blog. wallblog.co.uk southeast Singapore’s medal success at the 2012 Olympic Games in London, programmes in Indonesia. ( asia scores with English premier league when a silver medal was won in weightlifting and a bronze medal in ) table tennis. While football is immensely popular in Southeast Asia, clubs and Neighbouring Malaysia also won a silver medal in badminton and a national sides in the Region have struggled to match the best in Asia or bronze in the women’s diving competition. Indonesia achieved a silver feature in major international football events such as the World Cup. medal plus a bronze in weightlifting while Thailand won silver medals In an effort to raise standards, the ASEAN Football Federation (AFF) in weightlifting, boxing and a bronze in Taekwondo. has announced the creation of a Super League, a competition that will While the overall medals haul is modest, a lot more achievement is pit the best club sides in Southeast Asia in the same type of contest as likely to be recorded in future as improved facilities and sponsorship seen in the Champions League in Europe. The new competition is increase the development of athletes able to win world contests across expected to feature two clubs from the national leagues in Malaysia, a broad spectrum of sports. Singapore, Thailand, Indonesia, Cambodia, Myanmar and Philippines. There will be increasing focus on football, which is undoubtedly the The start up of the planned Super League is seen as leading to more most popular spectator and participatory sport in the Region. Top participation in sports activities and also serving to develop the European football clubs such as Barcelona, Manchester United, commercial aspects of football at a national and regional level. ( World Arsenal, Liverpool and Chelsea have all had pre-season tours in Sports Group ) Southeast Asia in 2013. In 2013, the AFF announced that the organisation intends to bid to These clubs are increasingly engaged with promoters and sponsors in stage the 2034 World Cup. This is likely to be on the basis of two or the Region and enjoy widespread local support with games played in more countries co-hosting the event as in 2002, when South Korea Thailand, Malaysia and Indonesia. Top ranking European football clubs and Japan acted as the joint hosts.

111 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

ASEAN seeks to broaden tourism’s benefits

Tourism has continued to expand over the last 20 years with the sector, estimated at US$19.5 billion, US$13.5 billion and US$25.3 international arrivals to ASEAN countries increasing by an average 7.3% billion respectively. a year from 21.8 million in 1992 to a record 89.5 million in 2012. Malaysia’s Tourism and Culture Minister, Mohammed Nazri Abdul Aziz Travel and tourism business is estimated to contribute 11.1% of total says his country is aiming to receive 28 million visitors in 2014 and 36 GDP. Revenues now generated are estimated to sustain a total of 25.4 million by 2020. This number is expected to generate revenues of million jobs, some 8.8% of total employment, across a wide range US$50.1 billion. ( New Straits Times 25/5/13 ) of economic sectors according to the World Travel and Tourism Council (WTTC). Tourism Authority of Thailand’s Action Plan 2014, predicts that international visitors will generate US$62 billion of revenues by 2015. In a report on the economic impact of tourism on Southeast Asia the Thailand earned US$30.5 billion in tourism revenue in 2012 from 22.3 WTTC, London based global tourism promoter, says that in the next million foreign visitors. ( TTR Weekly 24/7/13 ) decade international tourist arrivals in the Region will reach 145 million and that these will generate expenditures of US$192 billion, an increase The Philippines, which until now has tended to lag behind others in of 6.5%. This growth is expected to provide up to 28 million jobs, directly developing its visitor attractions, is placing greater emphasis on and indirectly. ( WTTC 2013: Travel & Tourism Economic Impact Report infrastructure and air connectivity. With the necessary investment taking Southeast Asia ) place the country’s tourism revenues are expected to increase from US$5 billion expected in 2013 to nearly US$10 billion in 2016, according to The impact of tourism development programmes is most apparent in Ramon Jimenez, Secretary of the country’s Department of Tourism. the Region’s larger economies. Indonesia earned US$27 billion in 2012, contributing 3.1% of GDP and employing more than three million Vietnam continues to make substantial headway expanding its tourism people. Malaysia, Singapore and Thailand also have earnings from industry According to Vice President, Nguyen Thi Doan: “The sector has 112 c c D l a i “ U r a b o r y T r c v s h T c T C p 4 e d o i e V o o o o o e i p l o h h . e f s u o o N s a l a 5 e

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r t i d n e e s 1 1 3 TOURISM ASSOCIATION OF SOUTHEAST ASIAN NATIONS

One of ASEAN’s major policies is to encourage tourists to think beyond a single destination and spread the growing numbers of visitors to the Region to less visited areas.

Such economic benefits have yet to be emulated in other parts of a set of tourism standards with a certification process, enabling tourism the Region. professionals to work in any of the ASEAN member states. Myanmar, for instance, has only just begun to market the country’s If tourists are to move beyond a single resort or city easily within the diverse and extensive natural and cultural assets. The country’s Tourism limited time available to a vacation or business visitor, considerable Masterplan 2013-2020 outlines investment of some US$487 million to development of the Region’s roads, airports, railroads and maritime links develop the sector and has set an ambitious target to attract three million will be needed. Southeast Asia’s tourism development as a multi- international visitors by 2015 and more than seven million by 2020. destination entity hinges, to a large extent, on efficient and cost effective Fundamental to this strategy is the encouragement of Public Private transportation modes being in place. Partnerships (PPPs) to develop the sector’s potential. Regional Brunei Darussalam is hoping its plans to develop as a centre for cooperation is also a firm element. This is seen as necessary to ensure ecotourism and to become a convenient base to explore the rest of consistency in standards as well as visa policies in order to promote Borneo will be enhanced by plans to develop bus services across Borneo the country with other ASEAN destinations and the Greater Mekong and the launch of low-cost airline Darussalam Air in early 2014. The latter Sub-region. could increase the number of stop over visitors, especially those from One of ASEAN’s major policies is to encourage tourists to think beyond the southern Philippines, eastern Indonesia and from China. ( Investvine a single destination and spread the growing numbers of visitors to the 21/7/13 ) Region to less visited areas. There are numerous other areas of potential cooperation between In order to achieve this, the Region’s national tourism organisations have countries including joint training programmes, heritage management, agreed to use the tagline “Southeast Asia - feel the warmth” in marketing private sector collaboration, customs procedures in addition to and promotional materials. transport connectivity. A key issue concerns the introduction of a single visa for international Lao PDR, Thailand and Cambodia have agreed to promote cross-border travellers in the Region. Initiatives have also been introduced to develop facilitation of tourism and ease travel through border checkpoints with 114 M I a a A s v t t “ p C o s A a t “ t g D o s t A t n h h h r h o a S u W u i t g

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117 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

BRUNEI DARUSSALAM

The economy of Brunei Darussalam is driven by its production of crude oil and natural gas. The Government is hoping that offshore exploration home to a large expatriate community due to Brunei Shell Petroleum will allow a substantial increase in future output as global hydrocarbon housing and facilities. The majority of the population live in the eastern prices remain at a high level. At the same time strong efforts are being part of Brunei, while the remainder live in the mountainous made to diversify the economy by encouraging investment in southeastern region, in the district of Temburong. Most of Brunei is agriculture, fisheries and forestry. Brunei’s Vision 2035 plan seeks to within the Borneo lowland rainforest eco-region, which covers the increase food self-sufficiency and transform the country into a regional majority of the island. There are also areas of mountain rainforest inland. trading and financial hub. Culture is deeply connected to religion, with the family being the focal Located on the northern shore of the island of Borneo, Brunei point of the social structure. Islam is the primary religion. The monarchy Darussalam consists of two unconnected parts, with a total area of 5,765 provides a royal heritage with a direct family line going back to 1405 and square kilometres and occupies only 1% of Borneo’s land area. It is this is the only Malay Islamic Monarchy in the world. bound on all sides by the Malaysian State of Sarawak. To the north there is a 161 kilometre long stretch of coastline next to the South China Sea. Bandar Seri Begawan is Brunei’s centre of commerce, finance and The island is also shared with the Indonesian provinces of West, South, government. One of the city’s most prominent features is the Sultan Ali East and Central Kalimantan. Saifuddien Mosque, a tribute and indication of the nation’s deep rooted Islamic faith. Of the total population in Brunei, around 140,000 live in the capital Bandar Seri Begawan. Other major towns are the port of Muara, the oil Brunei joined ASEAN on 7 January 1984, becoming the sixth member producing Seria and its neighbouring Kuala Belait. The Panaga area is and hosted the ASEAN Regional Forum in July 2002. 118 E C

BRUNEI DARUSSALAM N E R

Joined ASEAN: 7 January 1984 E F E

Head of State: His Majesty Sultan Haji Hassanal Bolkiah Mu’izzaddin Waddaulah R Y R T

Area: 5,765 square kilometres N U Border countries: Malaysia O C Coastline: 161 kilometres Capital city: Bandar Seri Begawan Total population: 415,717 Population of capital: 140,000 Climate: Tropical, hot, humid and rainy Languages: Malay, English, Chinese Religions: Muslim 67%, Buddhist 13%, Christian 10%, other 10% Ethnic groups: Malay 66.3%, Chinese 11.2%, indigenous groups 3.4%, other 19.1% Monetary unit: Brunei Dollar (BND) Natural resources: Petroleum, natural gas, timber Major exports: Crude oil, natural gas, garments Major export trading countries: Japan 46.5%, South Korea 15.5%, Australia 9.3%, India7%, New Zealand 6.2% Major imports: Machinery and transport equipment, manufactured goods, food, chemicals Major import trading countries Singapore 26.3%, China 21.3%, UK 21.3%, South Korea 12.2%, Malaysia 11.8% Internet domain: .bn International dialling code: +673

Sources: CIA 2013 World Factbook | World Bank 119 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

CAMBODIA

Cambodia’s GDP grew 7.2% driven by strong exports especially from its garments manufacturing sector. European demand for the country’s garments and footwear is expected to maintain robust economic growth, supported by duty-free access to the European Union. Increased foreign Gulf of Thailand, is a narrow lowland strip, heavily wooded and investment is funding new industries, including the manufacture of sparsely populated, which is isolated from the central plain by the automotive parts and processing of agricultural products. A fast southwestern highlands. developing tourism industry is stimulating development of hotels, retailing, transport and communications. The Mekong River provides fertile, irrigated fields for rice production. Exports of clothing generate most of Cambodia’s foreign exchange but Cambodia is located in the southern portion of the Indochina Peninsula. tourism is also an important part of the economy. It is bordered by Thailand to the northwest, Lao PDR to the northeast, Vietnam to the east and the Gulf of Thailand to the southwest. Cambodia received 2.8 million visitors in 2011, many visiting the Angkor temples in Siem Reap Province, built between the ninth and 13th Cambodia’s landscape is characterised by a low lying central plain which centuries. The beaches in Sihanoukville in the southeast and the capital is surrounded by uplands and low mountains and includes the Tonle Phnom Penh, are the principal visitor attractions. Other attractions Sap (Great Lake) and the upper reaches of the Mekong River Delta. include the area around Kampot and Kep, with the Bokor Hill Station. Extending outwards from this central region are transitional plains, thinly forested and rising to elevations of about 200 metres above sea level. Buddhism is the main religion and this creates an identity and a behaviour pattern for each person. This also enforces a sense of The Mekong River flows south through the country’s eastern regions. To hierarchy within society. Cambodia is a collective society. This places the east of the Mekong there is a region of forested mountains and high emphasis on groups rather than the individual. plateaus, which extend into Lao PDR and Vietnam. In southwestern Cambodia, there are two distinct upland areas, the Kravanh Mountains Cambodia joined ASEAN on 30 April 1999, making them the and the Damrei Mountains. The southern coastal region adjoining the tenth member. 120 E C

CAMBODIA N E R

Joined ASEAN: 30 April 1999 E F E

Head of State: His Majesty King Norodom Sihamoni R Y R T

Area: 181,035 square kilometres N U Border countries: Lao PDR, Thailand, Vietnam O C Coastline: 443 kilometres Capital city: Phnom Penh Total population: 15,205,539 Population of capital: 1,519,000 Climate: Tropical and humid. Monsoon season May to November. Dry season December to April. Languages: Khmer, French, English Religions: Buddhist 96.4%, Muslim 2.1%, other 1.3%, unspecified 0.2% Ethnic groups: Khmer 90%, Vietnamese 5%, Chinese 1%, other 4% Monetary unit: Riel (KHR) Natural resources: Oil & gas, timber, gemstones, iron ore, manganese, phosphates, hydropower potential Major exports: Clothing, timber, rubber, rice, fish, tobacco, footwear Main export trading countries: US 32.7%, UK 8.4%, Canada 7.7%, Germany 7.7%, Singapore 6.6%, Vietnam 5.8%, Japan 4.7% Major imports: Petroleum products, cigarettes, gold, construction materials, machinery, motor vehicles, pharmaceutical products Main import trading countries: Thailand 27.2%, Vietnam 20%, China 19.5%, Singapore 7.1%, Hong Kong 5.9%, South Korea 4.3% Internet domain: .kh International dialling code: +855

Sources: CIA 2013 World Factbook | World Bank 121 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

INDONESIA

Indonesia has achieved considerable macroeconomic stability. The Indonesia has at least 150 active volcanoes, including Krakatoa and World Bank says many of the country’s fiscal targets were achieved in Tambora. Volcanic ash is a major contributor to the vast agricultural 2012, when GDP growth of 6.2% was recorded. Indonesia’s economy fertility that has historically sustained the high population densities of continues to grow and recent levels of growth are expected to be Java and Bali. sustained into 2014. There is a growing emphasis on investment in infrastructure to accelerate transport improvements and a more Although the main tourist attraction is Bali, many of the country’s best even economic development between the east and west of the beaches are located on the less known Toglan Islands off the coast of archipelagic country. central Sulawesi, Karimunjawa in the Java Sea and the Banda Islands in Maluku Province. Other popular tourist attractions include the temples Indonesia consists of over 17,000 islands, about 6,000 of which are of Borobudor, the tropical rainforest of Sumatra, the mountainous inhabited. These are scattered over both sides of the equator. The largest Lorenze National Park in Papua and West Nusa, home to the Komodo are Java, Sumatra and Borneo, shared with Brunei and Malaysia, New Dragon. Indonesia’s eastern most province of Papua contains 1,500 Guinea, shared with Papua New Guinea and Sulawesi. The capital, islands and west of Papua lies the Maluku archipelago, once known as Jakarta, is on Java and is the nation's largest city, followed by Surabaya, the Spice Islands. Bandung, Medan and Semarang. Indonesia is perhaps the most culturally diverse of the ASEAN states. Indonesia is the most populated of ASEAN’s ten nations and is the There are over 300 ethnic groups in Indonesia. Due to this diverse world's 16th largest country in terms of land area, with Java being the nature, there is a strong pull towards each person’s ethnic group or place world's most populous island. At 4,884 metres, Puncak Java in Papua is of birth or family. The national motto is “Unity in Diversity”. Indonesia's highest peak and Lake Toba in Sumatra its largest lake, with an area of 1,145 square kilometres. The country's largest rivers are in Indonesia is a founding member of ASEAN and a member of the G-20 Kalimantan and include the Mahakan and Barito. major economies. 122 E C

INDONESIA N E R

Joined ASEAN: 8 August 1967 (Founder Member) E F E

Head of State: President Susilo Bambang Yudhoyono R Y R T

Area: 1,904.569 square kilometres N U Border countries: Timor-Leste, Malaysia, Papua New Guinea O C Coastline: 54,716 kilometres Capital city: Jakarta Total population: 251,160,124 Population of capital: 9,121,000 Climate: Tropical, hot and humid. More moderate in the highlands Languages: Bahasa Indonesia, English, Dutch, local dialects (of which most widely spoken is Javanese) Religions: Muslim 86.1%, Protestant 5.7%, Roman Catholic 3%, Hindu 1.8%, other 3.4% Ethnic groups: Javanese 40.6%, Sundanese 15%, Madurese 3.3%, Minangkabau 2.7%, Betawi 2.4%, Bugis 2.4%, Banten 2%, Banjar 1.7%, other 29.9% Monetary unit: Rupiah (IDR) Natural resources: Petroleum, tin, natural gas, nickel, timber, bauxite, copper, fertile soils, gold, silver, coal Major exports: Oil & gas, coal, electrical appliances, plywood, textiles, rubber Main export trading countries: Japan 15.9%, China 11.4%, Singapore 9%, South Korea 7.9%, US 7.8%, India 6.6%, Malaysia 5.9% Major imports: Machinery and equipment, chemicals, fuels, foodstuff Main import trading countries: China 15.3%, Singapore 13.6%, Japan 11.9%, Malaysia 6.4%, South Korea 6.2%, US 6.1%, Thailand 6% Internet domain: .id International dialling code: +62

Sources: CIA 2013 World Factbook | World Bank 123 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

LAO PDR

Lao PDR is on an increasingly sustainable development path. GDP grew 8.1% in 2012, after expanding by an average of more than 7% per year over the previous decade. The country continues to increase its integration into the regional and global economy. This is seen in the steady growth of cross-border investments and exports, particularly hydropower, to neighbouring countries. Lao PDR is situated between Myanmar, China, Vietnam, Cambodia and Thailand. Its thickly forested landscape consists mostly of rugged mountains, the highest of which is Phou Bia at 2,818 metres, with a number of plains and plateaus. The Mekong River forms a large part of the western boundary with Thailand, whereas the mountains of the destination. Other large cities include Luang Prabang, Savannakhet Annamite Chain form most of the eastern border with Vietnam. and Pakse. Dong Hua Sao, at the southern end of the country prevents access to the Buddhism is the religion of 67% of the population. The people are sea but cargo boats travel along the entire length of the Mekong in Lao influenced largely by Buddhist teachings and this is reflected in the PDR during most of the year. Smaller power boats and pirogues provide culture. Lao PDR is so far, untouched by the modern demands and an important means of transportation on many of the tributaries of pace of life. Collectivism is also a strong part of its culture. There are 65 the Mekong. ethnic minorities, each with their own language, making individualism also possible. The capital city Vientiane, located on the curve of the Mekong River, has French inspired architecture, it’s a vibrant city and popular tourist Lao PDR joined ASEAN on 23 July 1997, along with Myanmar. 124 E C

LAO PDR N E R

Joined ASEAN: 23 July 1997 E F E

Head of State: President Choummaly Sayasone R Y R T

Area: 236,800 square kilometres N U Border countries: Myanmar, Cambodia, Thailand, Vietnam, China O C Coastline: Landlocked Capital city: Vientiane Total population: 6,695,166 Population of capital: 799,000 Climate: Tropical. Monsoon season May to November. Dry season December to April Languages: Lao PDR, French, English, various ethnic languages Religions: Buddhist 67%, Christian 1.5%, other 31.5% Ethnic groups: Lao PDR 55%, Khmou 11%, Hmong 8%, other 26% Monetary unit: Kip (LAK) Natural resources: Timber, hydropower, gypsum, tin, gold, gemstones Major exports: Wood products, coffee, electricity, tin, copper, gold Main export trading countries: Thailand 32.8%, China 20.7%, Vietnam 14% Major imports: Machinery and equipment, vehicles, fuel, consumer goods Main import trading countries: Thailand 63.2%, China 16.5%, Vietnam 5.6% Internet domain: .la International dialling code: +856

Sources: CIA 2013 World Factbook | World Bank 125 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

MALAYSIA

Malaysia has emerged strongly from the global recession of 2008, with the east and west and the principal river is the Pahang. East Malaysia GDP growing at 5.8% in 2012, and inflation reigned in at 1%. Forceful has a broad swampy coastal plain, which rises to jungle covered hills in counter cyclical policies and intra-regional trade, have assisted recovery. the interior. The country’s near term prospects are very favourable with both external As well as its status as a leading business destination, Malaysia offers and private domestic demand, propelling economic activity. In the World beautiful scenery and a huge variety of tourist attractions, from beaches Bank’s Ease of Doing Business report, the country is ranked 12th one to dense rainforests. place above Sweden globally. Leading destinations include the Pulau Payar Marine Park at Langkawi, Malaysia consists of two regions separated by 1,030 kilometres of the the Gunung Mulu National Park in Sarawak, Sipadan Island in Sabah and South China Sea. West Malaysia in the southern third of the Malay Penang’s Georgetown, a UNESCO World Heritage site. Peninsula and East Malaysia which occupies the northern quarter of the island of Borneo, with it’s Provinces of Sarawak and Sabah. West Malaysia is a multi-cultural society. The main cultural groups are the Malaysia is bound by Thailand to the north, the South China Sea to the native Malays, together with groups of Chinese and Indian ethnicity. east, Singapore to the south and the Strait of Malacca to the west. East Individual lifestyles are maintained. Families tend to socialise within their own ethnic groups but the desire to conform socially, makes Malaysians Malaysia is bound by Indonesia to the south, the South China Sea to the strive for harmonious relationships in every aspect of their lives. west and north and the Sulu Sea to the northeast. West Malaysia consists of a range of steep forest covered mountains, with coastal plains to Malaysia is a founding member of ASEAN. 126 E C

MALAYSIA N E R

Joined ASEAN: 8 August 1967 (Founder Member) E F E

Head of State: Sultan Abdul Halim Mu’adzam Shah R Y R Area: 329,847 square kilometres T N U

Border countries: Brunei Darussalam, Indonesia, Thailand O C Coastline: 4,675 kilometres Capital city: Kuala Lumpur Total population: 29,628,392 Population of capital: 1,493,000 Climate: Tropical. Southwest monsoons April to October, northeast monsoons October to February Languages: Bahasa Malaysia, English, Chinese, Tamil, Telugu, Malayalam, Panjabi, Thai Religions: Muslim 60.4%, Buddhist 19.2%, Christian 9.1%, Hindu 6.3%, Confucianism, Taoism and other Chinese religions 2.6%, other 1.5% Ethnic groups: Malay 50.4%, Chinese 23.7%, indigenous 11%, Indian 7.1%, other 7.8% Monetary unit: Ringgit (MYR) Natural resources: Tin, petroleum, timber, copper, iron ore, natural gas, bauxite Major exports: Electronic equipment, petroleum and liquefied natural gas, wood and wood products, palm oil, rubber, textiles, chemicals Main export trading countries: Singapore 13.6%, China 12.6%, Japan 11.8%, US 8.7%, Thailand 5.4%, Hong Kong 4.3%, India 4.2, Australia 4.1% Major imports: Electronics, machinery, petroleum products, plastics, vehicles, iron and steel products, chemicals Main import trading countries: China 15.1%, Singapore 13.3% Japan 10.3%, US 8.1%, Thailand 6%, Indonesia 5.1%, South Korea 4.1% Internet domain: .my International dialling code: +60

Sources: CIA 2013 World Factbook | World Bank 127 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

MYANMAR

Myanmar’s economy is on the move. GDP is estimated to have grown 6% in 2012, and prospects for expansion look highly promising with the Government committed to an extensive agenda of reforms. The country is embarked on a transition from a centrally directed economy to one that is market driven. These changes have the potential to create many investment opportunities. Myanmar, the second largest country in Southeast Asia, is bordered by China on the northeast, Lao PDR on the east, Thailand on the southeast, Bangladesh on the west, India on the northwest and the Bay of Bengal to the southwest, with the Andaman Sea defining its southern periphery. In the north, the Shan mountains form the border with China. Hkakabo Razi, located in Kachin State, at an elevation of 5,881 metres, is the highest point in Myanmar. Three mountain ranges, namely the Rakhine Yoma, the Bago Yoma and the Shan Plateau. They divide three river systems, the Salween, the Sittaung and the Irrawaddy, the longest at nearly 2,170 kilometres which flows into the Gulf of Martaban. There are around 100 different ethnic groups within Myanmar. Much of Much of the country lies between the Tropic of Cancer and the Equator. the Country’s population is rural and occupied by agricultural activities. It lies in the monsoon region of Asia, with its coastal areas receiving over Many of these ethnic groups are largely untouched by western cultures, 5,000mm of rain annually. leaving their own rich cultural traditions still intact. Buddhism is the main guiding force in the lives of the Myanmar people. Myanmar has huge tourism potential with its pristine beaches, snow capped mountains, jungle trails and spectacular temples. Myanmar joined ASEAN along with Lao PDR on 23 July 1997. 128 E C

MYANMAR N E R

Joined ASEAN: 23 July 1997 E F E

Head of State: President Thein Sein R Y R Area: 676,578 square kilometres T N U

Border countries: Lao PDR, Thailand, Bangladesh, China, India O C Coastline: 1,930 kilometres Capital city: Naypyidaw Total population: 55,167,330 Population of capital: 992,000 Climate: Summer is tropical, cloudy, hot and humid. Southwest monsoon June to September. Winter less cloudy with lower humidity. Northeast monsoon December to April. Languages: Burmese Religions: Buddhist (89%), Christian (4%), Muslim (4%), other (3%) Ethnic groups: Burman 68%, Shan 9%, Karen 7%, Rakhine 4%, Chinese 3%, Indian 2%, Mon 2%, other 5% Monetary unit: Kyat (MMK) Natural resources: Petroleum, timber, tin, antimony, zinc, copper, tungsten, lead, coal, marble, limestone, precious stones, natural gas, hydropower Major exports: Natural gas, wood products, pulses, beans, fish, rice, clothing, jade, gems Main export trading countries: Thailand 40.5%, India 14.7%, China 14.2%, Japan 7.4% Major imports: Fabric, petroleum products, fertiliser, plastics, machinery, transport equipment, cement, construction materials, crude oil, food products Main import trading countries: China 37%, Thailand 20.2%, Singapore 8.7%, South Korea 8.7%, Japan 8.2%, Malaysia 4.6% Internet domain: .mm International dialling code: +95

Sources: CIA 2013 World Factbook | World Bank 129 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

THE PHILIPPINES

The Philippines achieved its target of 6.5% GDP growth in 2012, driven by higher government spending and improved exports. In recent years, the country has restored stability and proved resilient to food and fuel price increases in addition to global recession and the impact of natural disasters. The country’s robust economic growth combined with sound fiscal management have also seen the Philippines attain investment grade status from the Japan Credit Rating Agency following similar upgrades from other international rating bodies. The Philippines is made up of over 7,000 islands but the majority of people live on just 11 of them. Its islands make it the country with the fifth longest coastline in the world. It is bordered by the Philippine Sea to the east, the South China Sea to the west and the Celebes Sea to the south. The island of Borneo is located a few hundred kilometres southwest. Most of the mountainous islands are covered in tropical rainforest and are volcanic in origin. The highest mountain is Mount Apo, which measures up to 2,954 metres above sea level and is located on the island of Mindanao. To the east of the Philippines on the ocean floor lies the Philippine Trench, where the Galathea Depth is the third deepest place on earth. The longest river is the Cagayan in Northern Luzon. Manila Bay, upon the shore of which the capital city of Manila lies, is The main religion in the Philippines is Christian Malay, with over 80% of connected to Laguna de Bay, the largest lake in the Philippines, by the Filipinos practicing Catholicism. Family values are at the heart of the Pasig River. Filipino family. It is recognised and accepted that family members often work for the same company. There is a strong sense of social propriety The Philippines contains some of the world’s most amazing scenery, to conform to societal norms of behaviour. including the beaches of Boracay, Panglao and Pagudpad, as well as historical sites such as Intramuros, Cebu City, Corregidor and Bataain. The Philippines are a founder member of ASEAN. 130 E C

THE PHILIPPINES N E R

Joined ASEAN: 8 August 1967 (Founder Member) E F E

Head of State: President Benigno S. Aquino III R Y R

Area: 300,000 square kilometres T N U

Border countries: None O Coastline: 36,289 kilometres C Capital city: Manila Total population: 105,720, 644 Population of capital: 11,449,000 Climate: Tropical marine. Northeast monsoon from November to April and southwest monsoon May to October Languages: Filipino, English Religions: Roman Catholic 80.9%, Muslim 5%, Evangelical 2.8%, Iglesia ni Kristo 2.3%, Aglipayan 2%, other Christian 4.5%,other 1.8%, none 0.1% Ethnic groups: Tagalog 28.1%, Cebuano 13.1%, Ilocano 9%, Bisaya/Binisaya 7.6%, Hiligaynon Ilonggo 7.5%, Bikol 6%, Waray 3.4%, other 25.3% Monetary unit: Peso (PHP) Natural resources: Petroleum, gold, silver copper, nickel, cobalt, timber, salt Major exports: Semi-conductors and electronic products, transport equipment, garments, copper products, petroleum products, coconut oil, fruits Main export trading countries: Japan 19%, US 14.2%, China 11.8%, Singapore 9.4%, Hong Kong 9.2%, South Korea 4.7% Major imports: Electronic products, mineral fuels, machinery and transport equipment, iron and steel, textile fabrics, grains, chemicals, plastic Main import trading countries: US 11.5%, China 10.8%, Japan 10.4%, South Korea 7.3%, Singapore 7.1%, Thailand 5.6%, Saudi Arabia 5.6%, Indonesia 4.4%, Malaysia 4% Internet domain: .ph International dialling code: +63

Sources: CIA 2013 World Factbook | World Bank 131 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

SINGAPORE

Singapore is one of the wealthiest countries in Asia. Its highly globalised Singapore’s land area consists of forest and nature reserves and its economy grew by 1.3% in 2012, following a 4.8% increase the previous primary rainforest is Bukit Timah. year. Strong manufacturing and services sectors are the principle Most work in Singapore is in the service sector and poverty levels are low elements of an economy that features electronics production, financial compared to other countries in the Region. Singapore has the world's services, oil drilling equipment, refining, pharmaceutical manufacturing, highest percentage of millionaire households. processed food and beverages, rubber products and ship repair. There is a growing focus on value-added activities including chemical and Tourism forms a large part of the economy with over ten million visitors biotechnology industries. each year. Gambling has been legalised and the country’s casino resorts have proved popular destinations. Singapore is located off the southern tip of the Malay Peninsular, 137 kilometres north of the Equator. As an island country, it is made up of A largely Buddhist (Chinese) state, Singaporians may claim that they are 63 islands and is separated from Malaysia by the Straits of Johor. There an egalitarian society, yet they retain strong hierarchical relationships in are two man-made connections to Malaysia, the Johor-Singapore most aspects of their lives. Singapore is a multi-ethnic society, where culturally diverse, Chinese, Malay and Indian traditions co-exist in a Causeway in the north and the Tuas Second Link in the west. Jurong westernised cosmopolitan metropolis. Island, Pulau Tekong, Pulau Ubin and Sentosa are the largest islands after Singapore Island, which contains the capital, Singapore City. Singapore is a founder member of ASEAN. 132 E C

SINGAPORE N E R

Joined ASEAN: 8 August 1967 (Founder Member) E F E

Head of State: President Tony Tan Keng Yam R Y R Area: 697 square kilometres T N U

Border countries: None O C Coastline: 193 kilometres Capital city: Singapore City Total population: 5,460,302 Climate: Tropical, hot and humid with two monsoon seasons. Northeastern monsoon from December to March, southwestern monsoon June to September Languages: Mandarin, English, Tamil, Malay, Hokkien, Cantonese, Teochew Religions: Buddhist 42.5%, Muslim 14.9%, Taoist 8.5%, Hindu 4%, Catholic 4.8%, other Christian 9.8%, other 0.7%, none 14.8% Ethnic groups: Chinese 76.8%, Malay 13.9%, Indian 7.9%, other 1.4% Monetary unit: Singapore dollar (SGD) Natural resources: Fish, deepwater ports Major exports: Machinery and electronic equipment, consumer goods, pharmaceuticals, chemicals, refined petroleum products. Main export trading countries: Malaysia 12.2%, Hong Kong 10.9%, China 10.7%, Indonesia 10.5%, US 5.5%, Japan 4.6%, Australia 4.2%, South Korea 4% Major imports: Machinery and equipment, foodstuffs, consumer goods, mineral fuels, chemicals Main import trading countries: Malaysia 10.6%, China 10.3%, US 10.2%, South Korea 6.8%, Japan 6.2, Indonesia 5.3%, Saudi Arabia 4.5%, UAE 4.1% Internet domain: .sg International dialling code: +65

Sources: CIA 2013 World Factbook | World Bank 133 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

THAILAND

Thailand’s economy rebounded strongly in 2012, with GDP growth of 6.4% recorded compared to 0.1% in 2011, when the dramatic decline in economic performance resulted from devastating floods that inundated industrial estates, farmland and parts of the capital Bangkok. Fixed capital investment also rose last year by 13.4%. Asian Development Bank notes that this was propelled by reconstruction of flood-damaged factories, homes and other infrastructure and the replacement of capital equipment. Public construction was also stimulated by transport and telecoms projects. Thailand is located at the centre of the Indochina Peninsula and is bordered to the north by Myanmar and Lao PDR, to the east by Lao PDR and Cambodia, to the south by the Gulf of Thailand and Malaysia and to the west by the Andaman Sea and Myanmar. Thailand is home to several distinct geographic regions. The north of the country is mountainous, with the highest point being Doi Inthanon at 2,565 metres above sea level, the northeast consists of the Khorat Plateau and the east by the Mekong River. Southern Thailand has the Kra Isthmus, a narrow land bridge, which connects the Malay Peninsula with the mainland of Asia. The centre is dominated by the Chao Phraya River valley, which runs into the Gulf of Thailand. The Gulf of Thailand is also an industrial centre, with the main port in Sattahip being the entry gates for Bangkok’s Inland Seaport. Thailand is the Greater Mekong Sub-region’s most visited international destination. Other top destinations include Bangkok, Chiang Mai and the beach resorts of Pattaya and Phuket. The Andaman Sea hosts the most popular and luxurious resorts in Asia. Phuket, Krabi, Ranong, Phang Nga and Trang and their lush islands all lay along the coast of the Andaman. Thailand is a stronghold of Buddhism. Many of the rules of etiquette are by-products of the Buddhist religion. Great emphasis is placed on The Chao Phraya River and Mekong River are the sustainable resources outward forms of courtesy and politeness. The family is the cornerstone of rural Thailand. Industrial scale production of crops use both rivers and of Thai culture. Thailand has a strong hierarchical social structure. their tributaries. The Gulf of Thailand covers 320,000 square kilometres and is fed by the Chao Phraya, Mae Klon, Bang Pakong and Tapi Rivers. Thailand is a founder member of ASEAN. 134 E C

THAILAND N E R

Joined ASEAN: 8 August 1967 (Founder Member) E F E

Head of State: His Majesty King Bhumibol Adulyadej R Y R T

Area: 513,120 square kilometres N U Border countries: Myanmar, Cambodia, Lao PDR, Malaysia O C Coastline: 3,219 kilometres Capital city: Bangkok Total population: 67,448,120 Population of capital: 6,902,000 Climate: Tropical, rainy, warm, cloudy southwest monsoon from May to September. Dry, cool northeast monsoon, November to March Languages: Thai, English, ethnic and regional dialects Religions: Buddhist 94.6%, Muslim 4.6%, Christian 0.7%, other 0.1% Ethnic groups: Thai 75%, Chinese 14%, other 11% Monetary unit: Baht (THB) Natural resources: Tin, rubber, natural gas, tungsten, tantalum, timber, lead, fish, gypsum, lignite, fluorite, arable land Major exports: Textiles and footwear, fishery products, rice, rubber, jewellery, automobiles, computers, electrical appliances Main export trading countries: China 11.7%, Japan 10.2%, US 9.9%, Hong Kong 5.7%, Malaysia 5.7%, Indonesia 4.9%, Singapore 4.7%, Australia 4.3% Major imports: Capital goods, intermediate goods and raw materials, consumer goods, fuels Main import trading countries: Japan 20%, China 14.9%, UAE 6.3%, Malaysia 5.3%, US 5.3% Internet domain: .th International dialling code: +66

Sources: CIA 2013 World Factbook | World Bank 135 ASSOCIATION OF SOUTHEAST ASIAN NATIONS

Vietnam is judged by the World Bank as a development success story and VIETNAM notes that political and economic reforms launched in 1986, transformed Vietnam from being one of the poorest countries in the world, with a per capita income below US$100, to a lower middle income country with per capita income of US$1,130 at 2010. The ratio of population in poverty had fallen from 58% in 1986 to 14.5% in 2008. Most other indicators of welfare have also improved. The country’s economy slowed in 2012, with GDP of 5% slightly down on the year before. In order to reverse this trend the Government has prioritised an overhaul of public investment strategies and restructuring of state owned enterprises and the country’s financial sector. Vietnam is the most eastern country on the Indochina Peninsula. It is bordered by China to the north, Lao PDR to the northwest, Cambodia to the southwest and the South China Sea to the east. With a population of over 90 million, Vietnam is the 13th most populous country in the world. Vietnam is a country of tropical lowlands, hills and densely forested highlands, with level land covering no more than 20% of the area. The country is divided into the highlands and the Red River Delta in the north, the Giai Truong Son (central mountains), the coastal lowlands and the Mekong River Delta in the south. The nation has seven developed ports and harbours at Cam Ranh, Da Nang, Hai Phong, Ho Chi Minh City, Hong Gai, Qhi Nhon and Nha Trang. There are also more than 17,000 kilometres of navigable waterways, which play a significant role in rural life. Vietnam has a vast cultural legacy and is also endowed with a 3,444 kilometre coastline, providing ample opportunity to develop sea based tourism around spectacular bays, beaches and islands. These include areas such as Mong Cai City, Halong Bay, Hai Phong City, Nam Dinh Province and Da Nang. The native Vietnamese are the largest ethnic group containing 90% of the population of this largely Buddhist country. The teachings of Confucius highly influence the individual in Vietnamese society. This stresses for, amongst other things; loyalty, honour, sincerity and respect for age. Collectivism is a general part of society with an individual seen as secondary to a group. Vietnam joined ASEAN 28 July 1995, making it the seventh member. 136 E C

VIETNAM N E R

Joined ASEAN: 28 July 1995 E F E

Head of State: President Nguyen Minh Triet R Y R T

Area: 331,210 square kilometres N U Border countries: Lao PDR, Cambodia, China O C Coastline: 3,444 kilometres (excluding islands) Capital city: Hanoi Total population: 92,477, 857 Population of capital: 2,668,000 Climate: Tropical in the south, monsoons in the north with the hot, rainy season May to September. Warm and dry October to March Languages: Vietnamese, English, French, Chinese, Khmer Religions: Buddhist 9.3%, Catholic 6.7%, Hoa Hao 1.5%, Cao Dai 1.1%, Protestant 0.5%, Muslim 0.1%, none 80.8% Ethnic groups: Kinh (Viet) 85.7%, Tay 1.9%, Thai 1.8%, Muong 1.5%, Khmer 1.5%, Mong 1.2%, Nung 1.1%, others 5.3% Monetary unit: Dong (VND) Natural resources: Phosphates, coal, manganese, rare earth elements, bauxite, chromate, timber, hydropower Major exports: Clothes, shoes, marine products, crude oil, electronics, wooden products, coffee, rice, machinery Main export trading countries: US 17%, China 12.9%, Japan 12%, South Korea 4.5%, Germany 4.4%, Malaysia 4.4% Major imports: Machinery and equipment, petroleum products, steel products, raw materials for clothing and shoe industries, electronics, plastics, automobiles Main import trading countries: China 27.2%, South Korea 12.7%, Japan 8.5%, Singapore 8.3%, Thailand 5.3%, Hong Kong 5.2% Internet domain: .vn International dialling code: +84

Sources: CIA 2013 World Factbook | World Bank 137 ASSOCIATION OF SOUTHEAST ASIAN NATIONS Useful contacts ASEAN The ASEAN Secretariat 70A Jl. Sisingamangaraja Jakarta 12110 Indonesia Tel: +62 21 7262991 or 7243372 Fax: +62 21 7398234 or 7243504 Web: www.asean.org

UK-ASEAN Business Council UK Trade & Investment 1 Victoria Street London SW1H 0ET United Kingdom Tel: +44 20 7215 5068 Email: [email protected]

EU-ASEAN Business Council Secretariat c/o European Chamber of Commerce (Singapore) 350 Orchard Road #19-06 Shaw House Singapore 238868 Tel: +65 6836 6681 Fax: +65 6737 3660 Email: [email protected] Web: www.eurocham.org.sg

US-ASEAN Business Council 1101 17th St., NW Suite 411 Washington DC 20036 USA Tel: +1 202 289 1911 Fax: +1 202 289 0519 Email: [email protected] Web: www.us-asean.org 138 Insurance for businesses, families and individuals | acegroup.com

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