ASEAN: The New Growth Frontier

By Jacqueline Woo

ASEAN: The New Growth Frontier

By Jacqueline Woo

Singapore once decoupled from the region and saw its economy take off. Now, it’s time to do the reverse, and focus on its neighbourhood.

The modest two-storey facade of Fassler Gourmet’s food factory in Woodlands Terrace belies the home-grown seafood and soup manufacturer’s reputation as one of the largest suppliers of smoked seafood in Singapore. For more than 20 years, the company, set up in 1991, had been content to cater solely to the domestic market. But last year, it made the move to sell its products outside Singapore -- to countries such as Brunei, Cambodia, Indonesia and Malaysia -- and that has opened up a world of possibilities. On going regional, chief executive Mellissa Chen says, “In Singapore, there’s defi nitely still more to do. But in terms of growing Fassler and expanding the brand, export is the way to go. That’s where the bigger growth is.”

The smoked salmon specialist now sells its products overseas in small quantities with the help of partners with a presence or a network of customers across various markets. The aim, says Ms. Chen, is to double or even triple its export business over the next fi ve to 10 years, with Malaysia and Indonesia as its key foreign markets.

The bulk of the company’s turnover still comes from the Singapore market. “ASEAN is exciting for us because the opportunity is here, right at our backyard,” Ms. Chen says, citing the fast-changing dynamics in the region, such as the emerging middle class and rising levels of disposable income. “The market is ready, and it’s something we can immediately provide,” she says, adding that the firm’s halal-certifi ed processes already lay the groundwork for it to penetrate the region’s sizeable Muslim market.

Poised for take-off

In a global economy where growth prospects are for the most part dim, ASEAN is a bright spark.

With a total market size of more than 600 million people,“If the countries work well together and, increasingly, if the markets are more integrated, it represents a tremendous opportunity for companies in ASEAN, and that includes Singapore”, says corporate titan Koh Boon Hwee. In fact, the potential to scale Fassler’s business beyond Singapore and into ASEAN was one reason Mr. Koh’s private equity fi rm Credence paid US$ 23 million to buy out the company from its founder in November 2014.

“No one can really predict how fast or how slowly things will progress, but the direction is correct. Ten or 20 years down the road, I think ASEAN, as an economic region, will be quite a formidable entity,” says Mr. Koh. “It will be twice the size of Europe, almost 1.5 times the size of the United States. And if you believe as I do, the standard of living within ASEAN will continue to grow, which means the purchasing power and the consumption ability of these 600 million people should be far better than it is today,” he adds.

“ASEAN never had it so good. It is poised for the next stage of takeoff -- though only if its members know how to play their cards right,” says Associate Professor Tan Khee Giap of the Lee Kuan Yew School of Public Policy. “If ASEAN can stay united as a political entity and become more integrated as an economic entity, it has the potential to be a signifi cant economic community close to the likes of the European Union by 2030.”

For Singapore, ASEAN’s growth as an entity will open many more doors, says SIM University senior lecturer Lim Tai Wei. “ASEAN represents a large market for Singaporean products and services, especially with an expanding middle class of consumers. Singapore is at the centre of this regional trade arrangement, and it enjoys a fast-mover advantage as an energetic advocate of free trade for decades,” he notes.

A pivotal market

“Our biggest challenge is that our drinks are 100 per cent made in Taiwan, China, so they are not duty-free in ASEAN, under the rules of origin requirement,” says Mr. Samathivathanachai. “So we’re now exploring making our products in Johor Baru. We could buy the essence or extract of the drinks from our partner in Taiwan, China and bottle them in Malaysia.”

By 2030, the continued growth of ASEAN cities couldadd US$ 930 billion to the region’s annual GDP, says Mr. Mancini. This shift will be supported by the growing consumer class, which could double to 163 million households by then, making South-east Asia “a pivotal market of the future for companies in a range of industries”. Analysts see Singapore playing a key role in supporting the growth of the rapidly-emerging digital economy, says Ms Alison Kennedy, managing director for ASEAN at Accenture Strategy. “The question for Singapore is how does it organise its economy to play in this new digital world? For me, the real potential lies in the ability to connect in digital trade,” she says, adding that Singapore has the infrastructure, for instance, to facilitate and lead secure trade transactions within ASEAN.

EY Asia-Pacifi c partner Tad Carmody adds: “You could see Singapore become an exporter of enabling systems, such as expertise, skill sets, technologies and IP. It’s not going to be an exporter of goods. Its true value is in its ability to enable -- that is exactly what all of ASEAN needs.”

Indeed, Singapore firms can take advantage of the manpower pool and relatively lower land costs in other ASEAN markets, says Mr Ivan Tan, group director for South-east Asia at trade agency IE Singapore. “We also see investment opportunities relating to infrastructure needs, consumer needs, such as food and beverage, healthcare, education, and the growing digital economy, such as E-commerce,” he says, citing Indonesia, Myanmar and Vietnam as markets ripe for investments.

Staying relevant

But ASEAN’s rise also comes with its own set of challenges for Singapore. For one thing, it could spell more competition for Singapore as other member states play “catch-up” and the playing fi eld evens out. Jakarta, for instance, has announced plans to become a regional fi nancial hub, a role Singapore has been playing for years.

Mr. Koh, former chairman of top corporates such as DBS Bank, Singapore Airlines and Singtel, says Singapore companies will find it easier to succeed in an ASEAN economy that is open, although it is less likely they will end up as the only, or biggest, winners. “Countries like Indonesia, Malaysia, the Philippines themselves will be the biggest winners. They have the advantage of having a big domestic market,” notes Mr. Koh, who also sits on the investment board of GIC, Singapore’s sovereign wealth fund. “Today, with certain degrees of protectionism, they are shielded from the competition and there is no need for them to be best in class. But a little more incentive to compete and globalise could see them succeed in an open environment.”

But Mr. Koh believes that Singapore will remain relevant.“There are certain activities that naturally make a hub. Take the financial services sector in Europe -- a lot of it is centred on London not because it’s in the centre of Europe, but because it’s where people enjoy living, working and so on.” Singapore must make sure its environment, from the rule of law to education to security, is friendly and open, and stays that way, he says, adding:“If the world’s most talented people want to live here, somehow, activity will fl ourish.”

More competition, in fact, could even be helpful for Singapore in moving up the value chain, notes SIM’s Dr. Lim. “Singapore is small and nimble and can identify niches in which it has a comparative advantage,” he says, citing areas such as urban planning and development, infrastructure project management, education, biotechnology and fi nancial services.

Accenture’s Ms. Kennedy says: “Rather than seeing the rise of ASEAN as competition, this single market can instead serve as a growth multiplier for Singapore. And Singapore has advantages it can already leverage on -- its history in trade, its location at the centre of ASEAN, and the trust that people have in the Singapore Inc. brand.”The region’s growth, she adds, will spell opportunities for local small and medium-sized enterprises, in particular, as they leverage on Singapore’s strengths to develop their businesses.

Fassler, for its part, is banking on its Singapore brand as it expands into ASEAN. Right now, import and export regulations pose a big challenge as each market has its own set of rules. “There is more time and costs involved, the logistics are not that straightforward, and there is no guarantee,” says Fassler CEO Ms. Chen. But she believes the “Made in Singapore” tag will help the company navigate its way.

“That’s the strength of running a business here - the stringent regulations and processes you have to pass, certifications, things like that. All of this is already a selling point and an advantage because Singapore is seen that way,” she says. “So yes, notwithstanding all of those challenges, we’re still forging ahead.”

Source：www.thestraitstimes.com