CONFIDENTIAL
FOR INTERNAL USE WITHIN
CLIENT COMPANY ONLY
ASEAN NEW GROWTH
ENGINE IN ASIA
BUSINESS SWEDEN
December 21st 2015
Malaysia
AGENDA
 Executive summary
 Association of Southeast Asia Nations (ASEAN) in Asia context
 Sweden in ASEAN context
BUSINESS SWEDEN
26 FEBRUARY, 2016
2
THE INCREASING IMPORTANCE OF ASEAN IN THE
GLOBAL ECONOMY IS EVIDENT
ASEAN
in
Key takeAsia
awaycontext
1
Sweden in
ASEAN
•
•
•
•
•
•
•
Outstanding performance in delivering stable growth
Proven political stability thanks to progressing regional integration
Strong position in the global and regional supply chain through numerous FTA’s
Since 2013 most attractive foreign capital destination in Asia
Significantly improved business climate over the last decade
Local conglomerates - a key driver for economic development in ASEAN
Corruption still remains a major hurdle in region overall growth
•
ASEAN is an important region in Asia for Swedish exports, over 600 Swedish companies
established
90% of regional HQ’s are in Singapore and Malaysia
Swedish exports to ASEAN region has been growing in line with exports to Asia as a whole,
however Sweden is losing the ground in export to ASEAN in comparison to other major
European economies
•
•
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
3
OPPORTUNITIES & CHALLENGES IN ASEAN
INFRASTRUCTURE
MANUFACTURING
OPPORTUNITIES
CHALLANGES
 Fossil fuel Dependency
 Access to electricity
 Financing Infrastructure
 Trading infrastructure
 Urban Transport
CONSUMPTION
 Low productivity
 Import permits
 Growing labour cost
 Local content requirements
 Technological readiness
 Protective domestic industry
(conglomerates)
 Modernization need
 Smart energy metering
 Grid expansions
 Off grid renewable
 Ports and Rail
 Urban transportation
 Automation solutions
 IT software
 Components
 Consultancy services
 Retail security and safety
solutions
 Growing demand for lifestyle
products
 Emerging e-commerce
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
26 FEBRUARY, 2016
4
AGENDA
 Executive summary
 Association of Southeast Asia Nations (ASEAN) in Asia context
 Sweden in ASEAN context
BUSINESS SWEDEN
26 FEBRUARY, 2016
5
MARKET MATURITY IS KEY TO ASSESS BUSINESS
OPPORTUNITIES FOR SWEDISH COMPANIES
GNI PER CAPITA 2014
SELECTED FOCUS
MARKETS
37320
High income
10760
Upper middle
income
5370
Lower middle income
1020 1270
Low income
SOURCE: WORLD BANK
BUSINESS SWEDEN
1650
1890 3470
3630
55150
 Sweden’s competitive export
advantage is high value-added
products, with selling points such as
improved efficiency and life time cost.
The more mature a market is, the more
attractive it is for Swedish exports.
 However, in a mature market/high
income market, opportunities are more
limited to replacement of old equipment
and aftermarket. The most attractive
markets are markets that are moving
from low income to middle and high
income markets as their development
require major investments in new
equipment and solutions to improve
efficiency and productive.
 Thus we will focus our analysis on the
market that has and are moving
towards upper middle income and high
income status. Brunei has been also
excluded as market is very small and
extremely protected
26 FEBRUARY, 2016
6
ASSESSMENT OF MARKET MATURITY
High income
Singapore
Upper middle income
Malaysia
Lower middle
income
Thailand
Indonesia
Philippines
Vietnam
Maturity
SOURCE. BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
26 FEBRUARY, 2016
7
SHIFT OF GRAVITY IN ECONOMIC ACTIVITY TOWARDS
ASIA IS EVIDENT
% SHARE OF WORLD REAL GDP
50%
50
Americas
40
Europe
30
Asia
20
10
Africa
0
1970
1980
1990
2000
2010
2020
2025
BY 2025 MORE THAN 50% OF GLOBAL GDP WILL BE GENERATED IN ASIA
SOURCE: INTERNATIONAL MONETARY FUND
BUSINESS SWEDEN
26 FEBRUARY, 2016
8
PROVEN POLITICAL STABILITY THANKS TO
PROGRESSING REGIONAL INTEGRATION
VIETNAM
PHILIPPINES
THAILAND
 Current situation:
 Current situation:
 Current situation:
 Politically stable. There are
however some factional
splits: conservative
hardliners vs. reformist
moderates.
 Political system:
 Single-party Socialist
Republic
MALAYSIA
 Current situation:
 The ruling government
remains in power despite
corruption allegations. Next
election in 2018
 Political system:
 Federation of states with
Democratic constitutional
monarchy
The Philippines is on
course for a period of
relative political stability.
Upcoming election in 2016
 Political system:
 Constitutional Republic
 Military control with coup in
May 2014 that ousted
Yingluck Shinawatra
 Elections unlikely until 2017
or even later
 Political system:
 De facto military rule
SINGAPORE
 Current situation:
 Improved political stability
with increased majority by
the ruling PAP in the recent
election in September 2015
 Political system:
 Constitutional Republic
INDONESIA
 Current situation:
 Jokowi’s popularity are at a
low with various issues
despite being in office only
one year
 Political system:
 Constitutional Republic
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
26 FEBRUARY, 2016
9
STRONGEST TRADE RELATION WITH FELLOW ASEAN
MEMBERS
The ASEAN Economic Community (AEC) shall be the goal
of regional economic integration by 2015 through:
• Single Market and Production Base
• Competitive Economic Region
• Equitable Economic Development
• Integration into the Global Economy
ASEAN was established in Bangkok at
the height of the Vietnam War by the
five original member countries:
Indonesia, Malaysia, Philippines,
Singapore, and Thailand
1967
1977
1987
Brunei
1997
2007
2015-20
Vietnam Myanmar Cambodia
Thailand Philippines
Malaysia Singapore
Indonesia
Brunei
Darussalam
join ASEAN in
January 1984
Vietnam join
ASEAN in
July 1994
Laos
Myanmar and
Lao join ASEAN
in July 1997
Cambodia join
ASEAN in April 1999.
This completes the
current member
states
SOURCE: ASEAN SECRETARIAT
BUSINESS SWEDEN
26 FEBRUARY, 2016
10
ASEAN - PAPER TIGER OR SUCCESSFUL REGIONAL
INTEGRATION?
Opportunities
•
Intra ASEAN tariffs
eliminated
•
Strong growth in intra
ASEAN trade
•
ASEAN
Challenges
Myanmar
Unification of standards
and procedures are
lagging
•
Many trade and
investment barriers
remain
•
National agendas override regional
Vietnam
Laos
Philippines
Cambodia
Access to regional
and global supply
chains
•
Thailand
Cambodja
Malaysia
Brunei
Singapore
Indonesia
BEYOND AEC, ASEAN’S MAJOR ACCOMPLISHMENT IS THAT IT HAS PROVIDED A PLATFORM TO RESOLVE
CONFLICTS ENABLING STABILITY AND ECONOMIC GROWTH
SOURCE: BUSINESS SWEDEN
BUSINESS SWEDEN
26 FEBRUARY, 2016
11
SEVEN FTA’S WITH MAJOR NEIGHBOURING ECONOMIES
IN FORCE
1. ASEAN Free Trade Area
2
2. ASEAN-China
3
3. ASEAN South-Korea
4
4. ASEAN-Japan
1
5. ASEAN- Australia and New Zealand
6. ASEAN-India
7
6
THESE FREE TRADE AGREEMENTS HAVE A SIGNIFICANT INFLUENCE ON THE REGION’S GROWTH
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
26 FEBRUARY, 2016
12
MORE FTA’S WILL FURTHER STRENGTHEN ASEAN
POSITION WITHIN REGIONAL/GLOBAL SUPPLY CHAIN
REGIONAL
COMPREHENSIVE
ECONOMIC
PARTNERSHIP
UNITED STATES
ASEAN
CHINA
LAOS
TRANS PACIFIC
PARTNERSHIP
SINGAPORE
JAPAN
INDONESIA
CANADA
BRUNEI
S.KOREA
CAMBODIA PHILIPPINES
NEW ZEALAND
CHILE
VIETNAM
INDIA
THAILAND
MYANMAR
AUSTRALIA
MEXICO
MALAYSIA
PERU
RESULTING IN LIBERALIZATION OF TRADE IN GOODS AND SERVICES AS WELL AS ATTRACTING MORE FDI’S
SOURCE: BUSINESS SWEDEN ANALYSIS
BUSINESS SWEDEN
26 FEBRUARY, 2016
13
THE ASEAN TRADE BECOMING MORE INTRA ASIA
ORIENTED
ASEAN EXPORT DEVELOPMENT
SHARE OF TOTAL EXPORT WITH MAIN PARTNERS
ASEAN IMPORT DEVELOPMENT
SHARE OF TOTAL IMPORT WITH MAIN PARTNERS
30%
30%
25%
25%
ASEAN
20%
ASEAN
20%
15%
EU
15%
US
US
Japan
10%
China
Japan
EU
10%
China
5%
5%
India
India
0%
0%
2001
2004
2007
2010
2013
2001
2004
2007
2010
2013
CHINA IS BECOMING THE MOST IMPORTANT SINGLE TRADING PARTNER
SOURCE: INTERNATIONAL TRADE CENTRE
BUSINESS SWEDEN
26 FEBRUARY, 2016
14
THE OVERALL INTRA-ASEAN TRADE HAS SURGED BY
SEVEN-FOLD OVER THE PAST DECADE
EXTERNAL-ASEAN TRADE
USD BILLION
SHARE OF MAJOR TRADE PARTNER WITH ASEAN,
2014
INTRA-ASEAN TRADE
USD BILLION
1900
Rest of the
World,
23%
x5
348
Intra
ASEAN,
24%
India, 3%
Australia,
3%
S. Korea,
5%
US, 8%
Japan, 9% EU, 10%
1993
608
China,
15%
2014
x7
82
1993
2014
DURING THE SAME PERIOD EXTERNAL-ASEAN TRADE INCREASED FIVE-FOLD
SOURCE: ASEAN STATISTICAL DATABASE
BUSINESS SWEDEN
26 FEBRUARY, 2016
15
ASEAN 6 KEEPING PACE WITH WORLD’S FASTEST
GROWING ECONOMIES
GDP GROWTH DEVELOPMENT (2000 – 2014)
16%
14%
Average
growth
China
12%
10%
9,7%
India
8%
7,0%
6%
ASEAN 6
5,2%
4%
2%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
SOURCE: WORLD BANK
BUSINESS SWEDEN
26 FEBRUARY, 2016
16
FDI INTO THE ASEAN6 HAS SURPASSED CHINA FOR THE
PAST TWO YEARS
VALUE OF FOREIGN DIRECT INVESTMENT INFLOWS
USD BILLION
140
China
120
ASEAN 6
100
ASEAN 6
(excl. Intra-ASEAN)
80
60
40
India
20
0
2007
2008
2009
2010
2011
2012
2013
2014
EUROPEAN UNION AND JAPAN ARE THE BIGGEST INVESTORS IN THE ASEAN6 REGION
SOURCE: ASEAN FOREIGN DIRECT INVESTMENT STATISTICS DATABASE, UNCTAD
BUSINESS SWEDEN
26 FEBRUARY, 2016
17
SIGNIFICANTLY IMPROVED BUSINESS CLIMATE IN MOST
ASEAN COUNTRIES OVER THE LAST DECADE…
EASE OF DOING BUSINESS INDEX RANKING 2006 VS. 2015
ASEAN6
Rank 2015
Singapore
1
Malaysia
Thailand
40
Vietnam
80
China
Philippines
Indonesia
120
India
160
-30
-20
-10
Can’t keep pace
0
10
Improving
20
30
Rank change
2006 - 2015
SOURCE: WORLD BANK – EASE OF DOING BUSINESS
BUSINESS SWEDEN
26 FEBRUARY, 2016
18
…HOWEVER CORRUPTION STILL REMAINS A MAJOR
HURDLE IN THE OVER
“Southeast Asia is home to some of
the richest, fastest-growing
economies, as well as some of the
planet’s poorest people. Battling
corruption is an integral part to
sustainable growth and reducing
income inequality”
CORRUPTION PERCEPTION INDEX RANKING 2006 VS. 2014
Rank 2014
ASEAN6
1
Singapore
40
Malaysia
80
Natalia Soebagjo, Chair of Transparency
International Indonesia.all regional
Philippines
Thailand
India
China
120
Indonesia
Vietnam
Rank change
2006 - 2014
160
-40
-20
Can’t keep pace
0
20
Improving
40
Implications for Swedish Companies
• Government bureaucracy red tape
(applying for permits, import licenses
etc.)
• Custom services have traditionally
been a challenge in majority of the
markets
• Local content requirements in some
product categories
• Local partners required by law in
certain countries/segments
SOURCE: WORLD BANK – TRANSPARENCY INDEX
BUSINESS SWEDEN
26 FEBRUARY, 2016
19
LOCAL CONGLOMERATES DOMINATES IN ALL MARKETS
AND SEEMS TO THRIVE IN SOUTH EAST ASIA
ANNUALIZED 10-YEAR TOTAL
SHAREHOLDER
PREMIUM, 2003 – 2012 (%)
16
14
14
Thailand
12
10
8
6
Vietnam
Philippines
Indonesia
4
Conglomerates in the rest
of the world
2
0
-2
Conglomerates in
ASEAN
-4
-6
-4
Pioneering Economies
Early Stage of
industrialisation
Business landscape
dominated by large
local enterprises
Immature
Malaysia
Singapore
Emerging Economies
At a more advance stage
of development
MNCs grow their
presence and create
competition for local
companies
Maturity
Mature
ECONOMIC GROWTH OF A MARKET CHANGES THE BEHAVIOR OF THE CONGLOMERATES
SOURCE: BAIN & COMPANY
BUSINESS SWEDEN
26 FEBRUARY, 2016
20
EXAMPLES OF STRONG LOCAL CONGLOMERATES IN
EACH COUNTRY IN ASEAN
Keppel Group
Singapore
An example of a successful conglomerate is
Keppel group in Singapore who in the 1980s and
1990s were broadly diversified into finance and
also fast food but as Singapore matured and
developed it sold off everything except in three
main business, offshore and marine, property and
Infrastructure.
Genting Group
Malaysia
Another good example would be Genting Group in
Malaysia who has started their hospitality industry
by building Genting casino just outside Kuala
Lumpur and then venture out to opening of
Resorts World Casino New York and Resorts
World Sentosa. As soon as this was done they
started to divest its other business like paper and
packaging to more focus on their core.
Ayala Corporation
Philippines
Ayala Corp is a holding company of the
Ayala Group of Companies. It started
out as a family-run partnership in the
mid-19th century and only became a
corporation in the early 1970s. Today it
is one of the biggest publicly-listed
conglomerates in the Philippines. Ayala
has leadership positions in real estate,
financial services, telecommunications,
water infrastructure, electronics
manufacturing, automotive
distributorship and dealership, and
business process outsourcing, and new
investments in power generation,
transport infrastructure, and education.
The Ayalas, through its private holding
company, Mermac Inc. is biggest
stockholder of Ayala Corp.
Lippo Group
Indonesia
After the second world war Lippo Group was
founded by Mochtar Riady and is today one
of Indonesia’s big family conglomerates.
Besides property, the business portfolio
encompass urban development, large scale
integrated developments, retail malls,
healthcare, hotels and leisure, as well as a
fee-based income portfolio. The firm claims
that all its ventures combines have generated
annual revenue of USD 4.7 billion.
CP Group
Thailand
Founded in 1921 The Charoen Pokphand
Group (CP) consists of three core
businesses: agro-industry & food,
telecommunications and retailing. The CP
Group currently employs over 300,000
people and the annual revenue 2013 was
USD 41 billion.
BAIN & COMPANY – TEACHING DINOSAURS TO DANCE
BUSINESS SWEDEN
26 FEBRUARY, 2016
21
AGENDA
 Executive summary
 Association of Southeast Asia Nations (ASEAN) in Asia context
 Sweden in ASEAN context
BUSINESS SWEDEN
26 FEBRUARY, 2016
22
ASEAN IS AN IMPORTANT REGION IN ASIA FOR
SWEDISH EXPORTS
China
2012
India
ASEAN
2005
2009
2011
SOURCE: BUSINESS SWEDEN
ASEAN approx.
600 companies
India approx.
200 companies
2008
Business Sweden office and
year of establishment
Gr China approx.
900 companies
SWEDISH FOOTPRINT IN ASEAN IS STRONG AND IS
GROWING EVERY YEAR
90% OF REGIONAL HQ’S ARE IN SINGAPORE AND MALAYSIA
SOURCE: BUSINESS SWEDEN
BUSINESS SWEDEN
26 FEBRUARY, 2016
24
SWEDISH EXPORTS TO ASEAN REGION HAS BEEN
GROWING IN LINE WITH EXPORTS TO ASIA AS A WHOLE
INDEX OF SWEDISH EXPORT TO ASIA & ASEAN
SPLIT OF SWEDISH EXPORT TO ASEAN IN 2014
300
Philippines
5%
ASEAN
250
Vietnam
7%
200
Asia
150
Malaysia
16%
100
50
Singapore
33%
Total export
USD 2,4 billion
Indonesia
17%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
Thailand
22%
ALTHOUGH SOMETHING HAS HAPPENED DURING THE LAST 5 YEARS
SOURCE: SCB, SWEDISH STATISTIC OFFICE
BUSINESS SWEDEN
26 FEBRUARY, 2016
25
SWEDEN IS LOSING THE GROUND IN EXPORT TO ASEAN IN
COMPARISON TO OTHER MAJOR EUROPEAN ECONOMIES
SWEDEN VS MAJOR EUROPEAN ECONOMIES EXPORT TO ASEAN 2004-2014
BILLION USD
40
GROWTH
35
98%
30
Germany
25
133%
France
20
15
10
5
173%
Sweden
30%
Austria
0
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
SWEDEN HAS EXPERIENCED SLOW GROWTH OVER THE PAST DECADE
SOURCE: INTERNATIONAL TRADE CENTRE 2015
BUSINESS SWEDEN
2016-02-26
26
SWEDISH COMPANIES DO THEIR HOMEWORK BEFORE
ENTERING THE ASEAN MARKET
HOW DID YOU DECIDE TO ESTABLISH YOURSELF IN ASEAN AND WHY?
Share of responses
Based on analysis
& research
40%
” Business potential and market growth”
Followed existing
customer
25%
“Incoming leads at European trade fairs”
After spontaneous
contact
25%
“Great business opportunities”
Overall expansion
10%
” We followed our customers as they where
mowing their operations to ASEAN”
SOURCE: BUSINESS SWEDEN SURVEY
BUSINESS SWEDEN
26 FEBRUARY, 2016
27
ONLY 24% FINDS IT DIFFICULT TO FIND A RELIABLE
BUSINESS PARTNER IN ASEAN
HOW EASY IS IT TO FIND RELIABLE BUSINESS PARTNERS IN ASEAN?
Share of responses
Very easy
6%
Easy
28%
Average
40%
Difficult
16%
Very difficult
Dont know
8%
2%
SOURCE: BUSINESS SWEDEN SURVEY
BUSINESS SWEDEN
26 FEBRUARY, 2016
28
MAKE SURE TO STAY IN THE DRIVER’S SEAT – DO NOT
LET THE DISTRIBUTOR SET THE CONDITIONS
SATISFIED WITH CURRENT
DISTRIBUTOR(S)?
Share of responses
Dissatisfied
Less than
satisfied
More satisfied
than not
17%
SATISFACTION AMONGST
RESPONDENTS WHERE
DISTRIBUTOR HAVE EXCLUSIVITY
50%
11%
40%
25%
22%
Satisfied
Very satisfied
SATISFACTION AMONG
RESPONDENTS WHERE DISTRIBUTOR
INITIATED COOPERATION
0%
33%
17%
20%
0%
25%
0%
20%
20%
BE CAREFUL IN GIVING EXCLUSIVITY TO DISTRIBUTORS, MANY COMPANIES STILL DO IT
SOURCE: BUSINESS SWEDEN SURVEY
BUSINESS SWEDEN
26 FEBRUARY, 2016
29
CONTACT US
BUSINESS SWEDEN IN MALAYSIA
Business Sweden
Suite 16-08, Level 16 GTower, 199 Jalan Tun Razak
50400 Kuala Lumpur , Malaysia
T:+60 3 2166 2531, F +60 3 2166 2532
[email protected]
http://www.business-sweden.se/Malaysia/