South-East Asia

Asean Fund Aims to Boost Regional Economic Integration

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In an effort to reduce, if not close, the gap between the dynamic region and major wealthy economies, nations throughout South-East Asia have combined resources to launch a fund of almost $500 million to build infrastructure.

According to finance ministers of Asean, the fund will support the building of roads, railways and other public projects, reducing the need for foreign assistance, and boosting regional economic integration with hopes of its completion by 2015.

Surin Pitsuwan, Asean secretary-general, said “Our community is now being built with speed. This is a milestone. The time for donations, the time for just gifts, is over. We have to be very innovative, we have to be very collaborative in our approach.”

The region has its fair share of famous buildings and businesses, and has seen impressive growth rates, but it lacks in access to major highways, railways, clean water and electricity.

Based in Malaysia, the Asean Infrastructure Fund will initiate with $485.2 million, with hopes of financing six projects every year. The fund predicts that by 2020, it will offer $4 billion in loans, and will be worth a total of $13 billion.

Countries such as China, Japan and South Korea have shown interest in joining the fund, but the region intends to keep the project internal, at least for now.

Magnetizing Malaysia

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It looks like those who want to make a sound investment might benefit from taking a peek at what’s been going on in Malaysia in recent times. The country’s “political stability and gateway to the huge market in the region,” is making it an increasingly good choice. As well, the region has received a significant economic boost due to implementations carried out under Datuk Seri Najib Tun Razak, the country’s Prime Minister.

America Ambles Towards Malaysia

So it now makes sense for Americans to make investments in Malaysia which it is doing. Since the South East Asia has a high population of nearly 600 million, this makes it a very large market. Just today, Datuk Seri Dr Jamaluddin Jarjis, the country’s Ambassador to America gave a brief to US journalists to prep them for the visit from Najib who is currently in England.

But the question on everyone’s lips is why would Americans be turning outside their already fragile-economy country to make investments elsewhere and not instead choose to help their own economy? Apparently Malaysia’s advantages render it a perfect “platform [through which] to enter the region.” In addition, America views Malaysia as “a serious player in protecting intellectual property rights and had a reliable work force with a good command of English.”

American-Malaysian Stats

If you just start looking briefly at the history of trading between the two countries, you will start to understand why there is so much excitement at future coalitions. Just last year for example, America was the fourth largest trader in Malaysia, resulting in $36.43bn, a jump of $5.4bn from the previous year. There are further investments predicted too, with the Malaysian Investment Development Authority (MIDA) anticipating American investments to jump 10 percent this year from 2010.

More Business Opportunities in SE Asia

There are continuously more and more business opportunities becoming available in South East Asia. Just yesterday, South Korea’s SK Telecom announced its $16.5m additional investment in a Malaysian broadband operator with a view to developing its presence in the SE Asian market. By 2020, it is expected that around 36 percent of the country’s population will be able to access broadband services. Right now that figure stands at half – 18 percent.

Malaysia Goes Muslim?

Another attractive feature about Malaysian investments is that the country could be used as “a partner to enter Muslim countries.” Various businesses are working with Malaysians in America in an attempt to “use our citizens as a bridge to the Muslim countries.”

Asia Investment Banks (IBs): Overcrowding?

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It seems like Asia may be encountering a few too many IBs around at the moment, (15 altogether – nine bank-backed and six non-bank backed). But which ones are doing really well? Apparently the CIMB group has a lot to say for itself, having been described as “ambitious” in its attempts at becoming a “leading universal bank in South- East Asia, providing a full array of banking services ranging from savings accounts to large corporate transactions for fund-raising.”

Going Global

What initially prompted CIMB to become global occurred in 2005 when it acquired RM500mil of GK Goh Holdings Ltd, which apparently gave the bank access to markets in the region, as well as London. Further to that, the bank purchased the Bumiptura Commerce Bank, Southern Bank, PT Bank Niaga and Bank Thai. Acquiring a “strong balance sheet” led CIMB to greater places.

IB Growth

There has been other regional growth for some of the non-bank IBs too. For example, OSK Investment Bank has established various advancement strategies while working hard on putting itself into the “smaller and mid-cap market as well as research capabilities.” Much of its profit hails from Asia, with 30 percent of its “overseas pre-tax profit” hailing from Singapore. Currently the bank is looking to establish its presence in Thailand and Cambodia. In the former country it is doing this with the purchase of BFIT Securities public Co. and in the latter it now boasts “a full-fledged commercial bank with nine branches as well as license for stockbroking and corporate finance.” OSK IB sees the necessity now to pump up its “institutional equity capability.” If it does this successfully in Hong Kong, it will be well on its way to establishing a very solid presence throughout the Asian region since it sees this country as “one of the largest financial gateways.”

There has been significant restructuring in OSK as well as new employees in an attempt to go further in its markets and develop a presence in Europe while “exposing the Asian markets to the Europeans.” As well the company is looking into what they can do in South Korea, Taiwan and China.