Sands of Time - Where investors see their future

MYANMAR will be the rising star of intra-Asian investment , according to a new research report from the Economist Intelligence Unit which says 42 per cent of 525 senior executives intend to open a new factory or office there over the next five to 10 years . . .

OVER the next decade, Myanmar, Vietnam and Thailand will become top intra-Asian investment destinations, with Myanmar registering the strongest interest, according to a new Economist Intelligence Unit report sponsored by ANZ Banking Group.
The report says 42 per cent of all respondents intend to open a new factory or office in Myanmar in the next five to 10 years.
In other key findings, the report says that —
n New trade and investment corridors
between markets such as North Asia and Southeast Asia, and China and India, are likely to strengthen.
   Many manufacturers will shift production from China to lower-cost markets in Southeast Asia and India. Service companies will focus on regional expansion efforts in Southeast Asia.
n China will become an even more important link for regional trade and investment in Asia.
  Despite slowing growth, China is a vital part of Asia’s economic activity, through policy and diplomacy-driven initiatives and increased international use of the renminbi as a trade and fundraising currency.

n Many Chinese companies are taking an Asia-wide approach to their sales strategies, another sign of China’s increasingly regional role. However, many of Asia’s corporate chiefs will struggle to follow suit.
   The region’s varied consumer preferences, regulatory structures and development gaps will continue to make a one-size-fits-all approach challenging.

n Companies in Asia will finance their regional growth plans primarily through bank loans and equity markets rather than bonds, and US dollar and Euro-denominated funding will remain dominant.

n Asia’s business leaders are generally optimistic about the resilience of the region’s capital markets, and their ability to provide sufficient funding to support ambitions to expand.
   Many companies are also hopeful that the region’s integration will have a positive effect on capital market transparency.

The report is based on a survey of senior executives at 525 companies in Australia,
China, Hong Kong, India, Indonesia, Singapore and Taiwan, as well as interviews with business leaders and experts.
It also examines how growing integration affects the business strategies of firms in the region, profiling companies in three industries — information technology, consumer electronics and energy.
As mentioned above, the survey indicates that many firms in Asia plan to extend their regional operations.
South Korea is seen as increasingly important, with 54 per cent of firms in China, 49 per cent of companies in Indonesia and 35 per cent of companies in Hong Kong identifying South Korea as a top market for expansion in the next five years. In total, 41 per cent of companies in the manufacturing sector targetted South Korea, the second-highest choice after China.
The trade corridor between China and India will be busy as well. In the survey, 52 per cent of firms in India chose China as a top expansion market, while 35 per cent of respondents in China chose India.
A very significant share of manufacturers surveyed (82 per cent) chose China as a top destination for expansion in the next five years.
The survey results suggest that, at least in the next five years, manufacturing in China will remain robust, despite a well-publicised increase in labour costs throughout the country.
The report notes that, in 2014, manufacturing costs in Shanghai, Jiangsu and Guangdong province – important production areas in China – were actually lower than in South Korea,
Brazil, Taiwan and Mexico. Perhaps encouraged by the emergence of the ASEAN Economic Community (AEC), scheduled to formally come into being by the end of 2015, intra-ASEAN trade and investment is poised to grow.
Just under half of the companies surveyed in Singapore (48 per cent) identified Indonesia as a top market for expansion in five years, and 39 per cent of Indonesian firms said the same about Malaysia.
Regional expansion will be driven primarily by emerging-market enterprises. Firms in China and Indonesia have the most capital- intensive expansion plans, with 60 per cent or more of respondents planning to invest in new infrastructure over the next five years.
Companies in China, India and Indonesia are the most likely to be hiring, with at least 50 per cent of respondents in these countries saying they will add to their existing labour force.
But over the longer term, intra-regional investment will shift sharply away from China.
Seven-in-10 (71 per cent) say they are planning to add factories and/or offices in China in five years, while only 22 per cent say the same of Myanmar, which has seen foreign investment rise since a series of reforms in 2011-12.
On a 10-year horizon, 42 per cent of respondents say they will open a new factory or office in Myanmar, while only 23 per cent will be looking at doing the same in China in that timeframe.
In the services sector, almost half (48 per cent) of respondents from both the financial services and professional  services sector say that, in 10 years, they will open offices in Myanmar.
Vietnam and Thailand will also see intra-Asian investment pick up within the next decade, also led by the professional services sector. www.integrasian.economist.com