1. Indochina as a unified market
Indochina has had varied commercial appeal over the years. Thailand was once hailed as the new South- East Asian economy and multinationals rolled in, but years of protests, riots and coups left its stability in question. Vietnam has always been enticing, but has also been deemed too risky by most due to its underdeveloped and unclear legal system, while Cambodia and Laos have been dismissed on the grounds that low economic development and urbanisation make for small available markets despite their population sizes.
Myanmar, of course, was closed to most nations until recently. But times are changing and systems and stability are improving. With rising incomes, and perhaps a closer cultural affinity between the countries than exists across any other part of South-East Asia, there is an opportunity to coordinate activity - and Indochina with its 200 million citizens has become a far more attractive prospect. Our prediction is that this trend is set to grow and grow.
2. Serious about security
With stable environments, reliable energy supply and highly qualified workforces, Singapore and Malaysia are becoming data centre and back-office powerhouses and global hubs for technology procurement and outsourcing. In tandem, we are seeing a rise in cybersecurity concerns and rising growth and investment in the cybersecurity industry.
3. Retailers without borders
There are 600 million potential consumers across South-East Asia and, while reaching each of them physically is virtually impossible given the challenges posed by the geography and infrastructure of the region, the digital marketplace (both online and, increasingly, mobile) offers a unique opportunity to reach them digitally - quickly and at a comparatively low cost. This is why the e-commerce field - such as Rocket Internet AG retailers Zalora and Lazada - are supercharging their efforts to be the first to capture the diverse online consumer base of South-East Asia, while at the same time offline retailers are targeting the growing urban areas where populations and disposable income are on the rise and infrastructure poses less of a challenge.
4. Startup city
The regional startup scene is gradually picking up pace, with Singapore taking an early lead as the hub for South-East Asia. The Singapore government has launched a series of initiatives including investing in intellectual property skill development, underwriting intellectual property-backed financing and significant tax incentives for startups and venture capital to encourage growth in the sector. While very early-stage compared with the likes of Silicon Valley, signs are extremely promising. After just four years in business, Viki, a Singapore-based online video platform, was acquired in 2013 for $200m (£128m) by Japanese giant Rakuten. Meanwhile, other startups such as Redmart are making waves in areas as diverse as financial services and social media.
5. Big players are ready for M&A
The Rakuten deal is not the only example of foreign investment in the region - London-based Hailo recently announced a joint venture with SMRT Road Holdings in Singapore. There is a confluence of interest: big business from Japan and the big US online players (Google, Facebook and LinkedIn) are firmly established in Singapore and have their radars tuned to acquisition opportunities.
6. Governments are helping to drive success
Central governments are recognising the value of their technology industries and are sponsoring initiatives to generate impetus and up-skill the workforce. Singapore and Malaysia are both putting in place 10-year plans to become technology hubs for the region. Singapore’s aim is to have several billion dollar- valuation businesses before the decade is out, while Malaysia is investing heavily in nanotechnology and industrial tech parks to feed the ecosystem.
7. Pan-Asian collaboration
The need to access the full South-East Asian region to create scale is a primary driver behind pan-regional deals. We are experiencing rapid roll-out by international and regional TMT businesses through joint ventures and acquisitions that give them access to the wider region in short order - and not just the hotter or more developed economies. As the network of ASEAN treaties grows and implementation begins across the region, we expect to see increasing tax and trading incentives for regional businesses and the diverse regulatory ecosystems slowly beginning to align.
8. Localisation
Broadly speaking, the region is much less accessible to foreign investment than Europe or the US, so businesses need to embrace partnering arrangements. In a region where politics and big business are rarely far apart, and cultures can differ widely from Western norms, having a well-connected local partner can be an invaluable asset, while local businesses look to foreign investors to develop local capital - both financial and human.
9. Myanmar open for business
What began a couple of years ago with the large infrastructure industries like construction and telecoms is widening, and we are seeing a flood of interest in Myanmar in areas as diverse as healthcare and media. The country continues to evolve and is working hard with foreign partners to clarify and modernise its legal system, improve its processes and in many cases leapfrog its neighbours in the adoption of new technologies. The watchwords here are responsible and inclusive investment, which ensure that companies import not just goods, but good business practices.
Click here to view an electronic copy of our Annual Review 2015
Andrew Stott and Ian Ferguson are Olswang partners
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