Middle class, infrastructure fueling growth


Investment openings in East Asia galore as demand for building projects, housing soars: Experts

East Asia offers huge development potential with the rise of the middle-class group, while infrastructure construction presents tremendous business opportunities, industry insiders and experts told a forum themed “The prospects of the East Asian market in the new global economy” in Hong Kong on Tuesday.

“Growth in ASEAN (Association of Southeast Asian Nations) is tremendous and GDP growth (of the region) is one of the highest in the world,” Patrick Ip, managing director of China-ASEAN Investment Cooperation Fund (CAF), said at the forum organized by China Daily Asia Pacific as part of the Hong Kong Summit.

The GDP per capita of the ASEAN countries is also growing at a rapid pace which, in Ip’s words, is “catching up with the Western world”.

Posing for a group photo at the Hong Kong Summit on Tuesday are (from left) Zhang Haizhou, assistant to publisher, China Daily Asia Pacific; Lin Jingzhen, deputy chief executive of Bank of China (Hong Kong); Lincoln Leong, chief executive officer of MTR Corporation; Lee Heng Guie, executive director of the Socio-Economic Research Centre of the Associated Chinese Chambers of Commerce and Industry of Malaysia; Jonathan Choi Koon-shum, chairman of the Chinese General Chamber of Commerce Hong Kong; Zhou Li, editorial board member of China Daily Group; Patrick Ip, managing director of China-ASEAN Investment Cooperation Fund; David Deng, general manager of Capital Investment and Management Department at China Merchants Group; and Kriengsak Chareonwongsak, president of Thailand’sInstitute of Future Studies for Development. Photos by Edmond Tang / China Daily

However, investments in infrastructure are not able to meet the demand at present, he noted.

“According to the Asian Development Bank, annual infrastructure spending required in Asia is around $1.7 trillion. I think governments can make up around 20 percent of the funds needed, and for the private sector, 10 percent. So, you can see there’s a huge investment gap in the infrastructure sector.”

Banking on huge opportunities in ASEAN, CAF has been actively investing in a range of sectors in the region, including shipping and logistics in the Philippines, a port in Thailand and healthcare in Singapore.

Slowdown worries

Kriengsak Chareonwongsak, president of Thailand’sInstitute of Future Studies for Development, expressed concern that East Asia’s speed of growth will slow down.

“Due to the Trump syndrome, Brexit and many other issues all over the world, trade openness has been seen to decrease this year,” he said, urging the region to work on trade openness in order to make Asia the new driving force of the world economy.

He said the level of trade openness in East Asia was the highest in 2000, contributing 110 percent of GDP (not including China), but the percentage had dropped to 85 percent in 2015.

“Competitiveness in the region is on the rise, but it’s increasing not at the speed it should be because the region has not been properly digitalized,” Kriengsak said, adding it’s a major issue in his assessment in looking at the region’s future.

But he has seen some East Asian countries changing the situation by concentrating on developing their own technologies, and scientific papers from the Asian region are increasing.

Another opportunity he found is that East Asia has the fastest growing middle-class group in the world, and their purchasing power could present a new development opportunity.

The region’s growing middle class would lead to increased demand for infrastructure and housing in those countries, Ip said.

Lin Jingzhen, deputy chief executive of Bank of China (Hong Kong) Ltd, agreed that the middle class is growing rapidly in the region, and the demand for family and personal-wealth management is rising accordingly, providing abundant opportunities for Hong Kong enterprises.

He expects Hong Kong to play a significant role as a financial services provider in global infrastructure investment, which is expected to reach $26 trillion by 2030, with East Asia contributing more than 60 percent of the amount.

Sound model needed

David Deng, general manager of the Capital Investment and Management Department of China Merchants Group Ltd (CMG), believes that developing a sound investment model is vital for enterprises to explore overseas markets, especially in Belt and Road (B&R) projects.

CMG – a State-owned conglomerate based in Hong Kong – has created a port-park-city (PPC) model, which addresses the financial implications of the B&R Initiative, he said.

By late last year, CMG’s overseas assets had reached 591.2 billion yuan ($87 billion), accounting for 8.6 percent of its total assets. The company is conducting business in six continents, involving ports, shipping, logistics, financing and trade.

Lincoln Leong, chief executive officer of Hong Kong’sMTR Corporation Ltd, stressed that international and inter-regional connectivity offers significant opportunities.

Besides Hong Kong, MTR Corporation operates on the Chinese mainland and in the United Kingdom, Sweden and Australia. “The population we carry outside Hong Kong is the same as the number here (Hong Kong),” he said.

Lee Heng Guie, executive director of the Socio-Economic Research Centre of the Associated Chinese Chamber of Commerce and Industry of Malaysia, said although East Asia’s economic growth has rebounded this year, thanks to a synchronized global recovery, a number of challenges still confront economies in the region.

He said globalization is showing a reverse trend, with new trade restrictions emerging, as well as persistent policy uncertainties, monetary policy tightening and other factors that require policymakers to take measures to ensure stronger and sustainable growth under the new economic normal.

Although integration of countries in the region is deepening, considerable regulatory and other barriers still exist, hampering the process, Lee warned, adding that the pace of financial integration has lagged behind trade integration.

Stressing the importance of regional integration, he said “information sharing” is also essential for healthy economic growth. “Governments, institutions and central banks need to share information to avoid another financial crisis. A lesson from the 1997-1998 and 2008-2009 financial crises is that (we need to) not only deepen our integration from the financial and economic (aspects), but also share information.”

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Pictured at the China Daily Roundtable session are (from left) Lin Jingzhen, Lincoln Leong, Lee Heng Guie and Patrick Ip.

(HK Edition 07/12/2017 page17)

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