By Madelaine B. Miraflor
Singapore — Maybank Kim Eng, the leading investment bank in ASEAN region, sees the rise of China and new technology as two key forces that will drive ASEAN over the next 10 years and the Philippines stands to largely benefit from this since it has been getting a lot of funding from the world's second largest economy.
On the sidelines of Maybank Invest ASEAN conference being held now in Singapore, John Chong, Chief Executive Officer of Maybank Kim Eng Group, told reporters how the rise of China can lead the overall growth of ASEAN region in the next decade.
Maybank officials at the Invest ASEAN Conference being held in Singapore (from left): John Chong, Maybank Kim Eng Chief Executive Officer, John Lee, Maybank Singapore CEO, and Harmeet Bedi, Maybank Kim Eng Singapore CEO.
He said that between 2006 and 2016, China's outward investment into ASEAN has risen at a compound annual growth rate (CAGR) of 45 percent, from US$1.8 billion to US$ 71.6 billion, making it the largest foreign direct investment (FDI) contributor to ASEAN.
Trade between ASEAN and China has also increased by 16 percent from 2016 to 2017.
"For Maybank Kim Eng, the dual rise of China and tech presents new opportunities for us. For instance, we are looking into how we are able to provide access and open up channels for our clients to participate in this growth. We are also keen to capture the financing opportunities, particularly for the infrastructure projects," Chong said.
In particular, Chong said Maybank is on the lookout for opportunity as Philippines start to get more official development assistance (ODA) and investment pledges from China.
"China is finding assets where they can invest in. It is looking to fund like infrastructure," Chong said. "We are working on this".
Chong said that while he can't give more details, he hinted that Maybank could be working on funding deals that may have to do with a Chinese-led project in the Philippines.
"Philippines is obviously an important market and that will continue to grow for us," Chong told Philippine-based media. " definitely but I can't give more comments."
Right now, the Philippine government’s “Build, Build, Build” program is now in full swing and according to Santos Knight Frank Chairman and Chief Executive Officer Rick Santos, this venture is expected to be hugely supported by the Belt & Road Initiative (BRI) of China.
The local trend moving forward, according to Santos, is more Chinese investors partnering with local companies making offers to undertake projects such as building schools, hospitals and smaller infrastructure projects under the government’s private-public partnership (PPP) program.
"With about US$24 billion of funds pledged to the Philippines, Chinese companies see vast opportunity in the Philippines’ population demographics, rising income and urbanization trends," Jan Custodio, Senior Director of Research & Consultancy, also said earlier.
On a regional level, China committed to shell out funding of at least 1 trillion to execute some of the crucial infrastructure projects under BRI over the next 10 years.
Chong emphasized that last year alone, China strenghtened its commitment to BRI by pledging additional investment worth US$124 billion.
Given China's high savings rate and its push to strenghten regional connectivity via the BRI, the capital flows to ASEAN will continue increasing and accelerating in the next few years, he emphasized.
Likewise, ASEAN region accounts for the largest share of Chine merger and acquisition investment, making up about 30 percent of total M&A investment to Belt & Road countries for the period of 2005 to 2016.
Moving forward, Maybank also sees new and disruptive technology as a driving change that would enable the ASEAN marketplace. But Chong believes that the tech environment in the region is still at an early phase of growth
"So I think every country, not just the Philippines, has to have a clear strategy a clear policy on how to build and support this technology growth and how they are going to build the ecosystem that surrounds this entire growth including the talent and skill it is not just about the infrastructure," Chong said.
The funding to ASEAN tech startups have particularly surged in the last two years. In the first eight months of 2017, disclosed equity funding was around US$6.5 billion, which grew more than double from the US$3.1 billion recorded in 2016. This was despite lesser deals.
Chong said the majority of ASEAN's tech deals in recent past are still at the seed-stage and while e-commerce is growing rapidly in ASEAN, the penetration rate remains relatively low at between 2 percent to 5 percent as compared to more established markets like China (19 percent), Korea (20 percent), and the United States (10 percent).
The tech sector is also increasingly attracting more China M&A investment in recent years, reflecting the rapid offshore expansion of China's emerging tech titans.
Based on Maybank Kim Eng's research, the IT communications sector attracted the largest share of China's M&A Investment to BRI countries in 2016.
"There would be no slowdown in tech deals moving forward," Chong further said.
Among the notable tech M&As in ASEAN include Alibaba’s purchase of Singapore-based ecommerce player Lazada, JD.com Inc.’s investment in Indonesian online marketplace Tokopedia, and Tencent’s investment in Indonesia’s ride-hailing service Go-Jek.