Saturday, 5 September 2009

The next big thing: markets in Indochina

With Cambodia, Laos and Vietnam growing rapidly, enterprising Singapore companies should ‘fly there tomorrow’

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Guanyu said...

The next big thing: markets in Indochina

With Cambodia, Laos and Vietnam growing rapidly, enterprising Singapore companies should ‘fly there tomorrow’

By FELDA CHAY
05 September 2009

Singapore companies should seize the opportunities offered by emerging East Asia and increase their investments in Indochina, says John Vong, an emerging markets specialist based in Phnom Penh.

Speaking at the ‘Masterclass in Business Innovation & Business Opportunities in Indochina’ seminar yesterday, he said the rapid economic growth in Cambodia, Laos and Vietnam shows these markets are likely to need more financial services. And Singapore, being a major Asian financial centre, has the expertise and know-how that allow its companies to venture into these emerging markets.

Cambodia, for instance, held a consultation last month to work out rules and regulations for its nascent stock exchange - a key sign that its financial services sector is growing despite the current economic turmoil. ‘They may not have a stock market yet, but that does not mean that you stay out. It just means you need to go in and get the first-mover advantage,’ Mr. Vong said.

According to World Bank figures, Cambodia’s gross domestic product (GDP) jumped 10.2 per cent in 2007, while Vietnam’s economy expanded 8.5 per cent and Laos posted a 7.9 per cent rise.

On top of that, start-up costs in these countries are relatively low because of the low cost of living and cheap labour, said Mr. Vong.

One way Singapore firms can venture into Indochina is to work with organisations like the International Finance Corporation (IFC), which has pumped resources into the three economies in a big way. Vietnam, for example, received US$110 million in investments from IFC in 2008. The World Bank’s private-sector investment arm said on its website that its 2009 investment target for the country is expected to be about US$300 million.

It has invested US$91 million in Cambodia to date, and expects to raise annual investment in the country from an average of US$20 million to more than US$50 million by 2010.

While the three economies have been hit hard by the financial turmoil, Mr. Vong, citing a comment by Asian Development Bank chief economist Jong-Wha Lee, said he believes they could see a V-shaped recovery as their internal economies can help compensate for external factors.

‘While foreign direct investments have fallen and the export sector has seen a drop, countries like Vietnam still see strong internal consumption,’ Mr. Vong said.

Mr. Lee said at a news conference in July in Bangkok that ‘emerging East Asia could see a V-shaped recovery, with growth dipping sharply in 2009 before regaining last year’s pace in 2010’.

Mr. Vong said these trends show Vietnam, Cambodia and Laos could well be the next China.

‘For those of you who are really enterprising, fly there tomorrow,’ he said.