Looking Beyond the Obvious: Opportunities in the ASEAN Region

There is a lot of focus around the world on China. Recently, I heard a report that wine producers in Europe are looking to China for quick sale and that Barrick Gold is looking to sell their South African assets to China National Gold Group. The IMF has forecasted China’s GDP growth rate to stay above 8% this year and grow to 8.5% in 2013. While there is little doubt that consumer spending and wage levels will continue to rise in China, it is not the only shining star in Asia. If you are expanding your business into the region, you may want to have a closer look at opportunities in other growing markets. Selecting the right market to focus your business efforts right from the beginning will yield big dividends in the long run.

Although doing business in Singapore is often described as Asia 101, it offers several advantages: first, a triple-A rated economy with a well-established business infrastructure and banking centre; second, policies that are open and supportive to new business ventures through a low corporate tax rate and finally, a geographic location that is easily accessible to some of the more ‘emerging’ economies in Asia.

In the recent IMF Economic Outlook update, the ASEAN-5, Indonesia, Malaysia, Philippines, Thailand and Vietnam are expected to grow at a rate of 5.4% this year and 6.1% next year. India’s GDP growth rate is forecasted at 6.1% in 2012 and 6.5% in 2013. Comparatively, the ASEAN region is not far behind countries such as India and China that are continually referenced in the press as growth centres due to their large population and growth prospects.

When you examine Indonesia in more detail, you find that you can tick off most of the boxes from a potential opportunity perspective such as: a large population that is growing, wages that are rising, consumer spending that is up year on year and a growth rate that currently sits at 6.3%. Last year, the Indonesian government announced that they likely would spend up to $250 million in infrastructure development in the next five years.

Furthermore, the capital markets are open to foreign investment and are growing. Market capitalization has grown to $390 billion in 2011 from $81 billion in 2005. During the same period, average daily trading volume has increased to $596 million from $170 million in 2005. Financial firms in the region are beginning to take advantage of the regulatory openness and launch new products. ITG, a US based broker, has recently set up a dark pool to facilitate trading off-exchange. Liquidnet is already there. Indonesia is one of the few countries in the region to allow trading of shares off-exchange, with no restriction on minimum order size. SGX began trading in Indonesian equity futures in June to provide investors exposure to the country’s growth.

Indonesia is not the only market that is growing in the region. Vietnam recently overtook Brazil as the largest coffee exporter in the world. Malaysia is the largest Islamic banking centre in the world and Thailand bounced back quickly from the recent floods showing its economy’s resilience.

So, if you are considering expanding your business into Asia, the ASEAN region not only provides growth opportunities but also gives you the best of both worlds.  You can set up your business in Singapore or Kuala Lumpur and benefit from their more developed financial, legal and political systems while taking advantage of their accessibility to the rest of the region. By diversifying your strategy from the norm, you may even benefit from a larger slice of the pie.

Written by Donna Bales, Founder of Balmoral Advisory

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About The Author

Donna Bales
is a product development professional with a proven track record of managing complex capital market industry initiatives during times of significant market change and market structure reform. Donna is the founder of Balmoral Advisory, a boutique advisory firm that works with exchanges, regulators, technology firms, market participants and market data vendors to identify and evaluate business opportunities, understand and respond to changing industry/market dynamics and develop and implement strategies and solutions that make sense now and in the future. In addition she acts as a strategic advisor to an international consultancy firm, CollegeHill Asia and sits on the Board of 3Q Innovation, a non-profit that focuses on retraining and replacement of older workers following protracted unemployment. Originally from Canada, Donna holds a bachelor degree in Economics from the University of Western Ontario.