Asia News Update

Global: Countries can learn from Singapore regarding “water stress” levels  

Source: Quartz, 16 April 2014

Burgeoning Automotive Industry Lends Momentum to the Engineering Plastics Market in Southeast Asia

A study evaluating water-related risks in 181 countries and 100 river basins around the world found that nearly 40% of the world’s countries suffer from high or extreme levels of “water stress”.  As climate change and growing populations contribute to an increasingly dry world, countries could learn something from Singapore. The World Resources Institute (WRI) conducted the study and classifies “highly” water-stressed countries as those that withdraw between 40% and 80% of their available water each year, while “extremely highly” stressed nations are those that draw more than 80%. There are 37 countries in this “extreme” category, with Singapore being one of them, holding an average water stress score of 5.0, the highest possible ranking.

Singapore’s high score is due to its lack of freshwater lakes and aquifers, but a mix of technology, conservation and imports have kept water flowing. For instance, Singapore captures 20% of its water supply from rainwater, another 10% from desalination, another 30% through recycling water, and the rest is imported from Malaysia. WRI’s study shows that highly water-stressed countries are not always those that you would expect. Besides the obvious candidates in desert regions, they include Spain, Portugal, Italy, Indonesia, Japan, South Africa and even Belgium. Singapore’s strategy could be useful for other highly water-stressed countries, which historically may not have faced water shortages but are now faced with high water-stress due to rising demand and lack of new supplies.


Malaysia: Energy-efficient vehicles leasing program expected to launch 

Source: The Malaysian Reserve, 9 April 2014

A program to lease energy-efficient vehicles (EEVs) to Malaysians is expected to launch in a few months in an attempt to increase awareness for green vehicles. Led by the Malaysian Automotive Institute (MAI), the collaboration program involves several companies. The “jump-start” initiative will be launched in special centres in the Klang Valley and in other areas where there is demand and viable opportunities for the business model. Through the leasing initiative, Malaysians are encouraged to experience the EEVs before buying one.

The initiative will also encourage companies to develop and introduce new technologies such as charging stations and batteries. In February, MAI, ARCA Corp Sdn Bhd, AutoCRC Ltd and Swinburne University of Technology signed a memorandum of understanding to set up the first lithium-ion battery manufacturing plant in the country. MAI has also been engaging with several municipal councils and highway concessionaires to install EEV infrastructure along the highway. In addition, they are currently working with several charging station and solar energy procedures and developing the business case by phases and will align the number of EEVs that are coming into the country. 

Indonesia: Indonesia looks to become next important auto hub

Source: The Jakarta Post, 14 April 2014

Indonesia is headed toward becoming an important automobile-production hub for developing countries. Despite higher interest rates and surging production costs, car sales were higher than expected in the first quarter of the year, with a surge to 328,254 units, a 10.93% year-to-year increase. If this growth rate continues throughout the year, sales may surpass the industry’s annual target of around 1.2 million units.

Strong sales growth, driven by the purchasing power of the emerging middle class, will enable local car manufacturers to further increase production capacity, which in turn, will encourage the entry of more auto parts suppliers into the domestic market. Currently, Indonesia only has 800 auto parts suppliers, compared to the 2,300 suppliers in Thailand. Led by market leader Toyota, Indonesia has now exported vehicles to more than 70 countries worldwide, with car exports reaching US 4.45 BN 2013. Less than 5 % of Indonesia’s population of 240 million owns vehicles and to boost the size of the domestic market, the government removed the luxury tax 2013 on cheap cars sold at USD 8,800 each.

Japan: Obama administration to hold new talks to agree on the opening of auto industry

Source: Detroit News, 7 April 2014

The Obama administration will hold new talks with Japan aimed at reaching agreement on opening the world’s third-largest market to more U.S. auto exports. The talks come ahead of a visit to Japan by President Barack Obama later in April. The United States and 11 nations are working to negotiate a proposed Pacific free-trade pact. Access to the Japanese market by U.S. vehicles and agriculture products remains the key stumbling block. The proposed Trans-Pacific Partnership trade pact is facing strong opposition from U.S. automakers and the United Auto Workers union. 

In recent weeks the top two Democrats in Congress both said they oppose fast-track legislation that would allow for a quick up or down vote on an agreement without changes. The acting deputy U.S. Trade Representative Wendy Cutler will visit Tokyo to continue TPP negotiations “related to market access and autos with Japanese counterparts,” the Obama administration said. U.S. Trade Ambassador Michael Froman will be in Japan for three days of talks and will meet with Japanese Minister for Economic and Fiscal Policy Akira Amari to discuss key areas such as agriculture and autos. 


China: BASF and Sinopec open acrylic acid and SAP facilities

Source: Chemicals Technology, 11 April 2014

Germany-based BASF and Chinese state-owned oil and petrochemical major Sinopec have opened new acrylic acid and superabsorbent polymers (SAP) facilities at BASF-YPC petrochemical complex in Nanjing, China. The new facilities will allow the companies to strengthen the C3 (propylene) value chain and cater to the increasing downstream demand. The SAP plant, which will have an annual capacity of 60,000t, will meet the domestic demand for baby diapers, adult incontinence products and feminine care products. BASF Greater China and functions Asia Pacific president Albert Heuser said that BASF is investing in Asia Pacific to produce 75% of the company's Asia Pacific sales locally, in order to ensure faster, more energy-efficient and reliable supply.

"With the start-up of these projects, we continue to build on the success of our strong partnership with Sinopec, and reinforce our commitment to serving the hygiene industry in China and Asia as well as around the world," said Heuser. Sinopec Chemical Department vice-chief engineer, director Chang Zhenyong said, "The start-up of these projects will continuously improve the company's ability to meet the demands of our customers. It will create new opportunities for sustainability and will make a positive contribution to clean production." Additionally, a new butyl acrylate facility will commence production at the JV later this year. Established in 2000, BASF-YPC Verbund site is 50:50 joint venture of BASF and Sinopec where SAP, butyl acrylate and acrylic acid production will be backward integrated into C3 manufacturing.

South Korea: Songwon to buy specialty chemical business of SeQuent Scientific

Source: VC Circle, 15 April 2014

Songwon Industrial Group, a South Korea-based supplier of antioxidants for plastics, has entered into an agreement to buy the specialty chemical division of Bangalore-based integrated pharmaceutical company SeQuent Scientific Limited, as per a stock market disclosure. However, the financial details of the transaction are not disclosed. The acquisition includes SeQuent's polymer stabiliser business and production site in Panoli, Gujarat, together with the local R&D team. The transaction, which is expected to close in the third quarter of 2014, is subject to customary closing conditions.

"The local manufacturing presence will support Songwon's ambition to build a leading position in India while serving the specific needs of the Indian market. The production site in Panoli gives Songwon access to a state of the art manufacturing facility to produce high value-added polymer stabilisers such as Songnox PEPQ and other specialty chemicals," Jongho Park, CEO and chairman of Songwon, said in the statement. The proceeds from the division sale will be used to cut down debt and provide growth capital to SeQuent, which has presence in various pharmaceutical segments, including APIs, animal health, analytical services, CRAMS and speciality chemicals. SeQuent is one of the world's largest producers of anthelmintics, a drug used in treating infections caused by parasitic worms, and a stronger player in the veterinary API business.

India: Lubrizol begins construction of new CPVC facility

Source: Chemicals Technology, 8 April 2014

Lubrizol has announced that it will build a new TempRite chlorinated polyvinyl chloride (CPVC) compounding facility in Daheja, India. Located in the Gujarat industrial development (GIDC), it will be constructed with an investment of USD 50m. The plant, which will have a production capacity of 55,000 metric tons of compounds a year, is being built as part of the previously announced USD 400m global expansion of its resin and compounding manufacturing capacity. Lubrizol said that the plant will serve the growing needs of the Indian market, and support the growth of CPVC business in South Asia, the Middle East and East Africa.

TempRite engineered polymers South Asia head Manoj Dhar said: "With the projected growth of our FlowGuard hot and cold plumbing system products, this plant will be instrumental in enabling us to better meet the growing demands in the market." TempRite engineered polymers global general manager John Nunnari said that Lubrizol is committed to supplying quality piping solution products for its customers and manufacturing partners.

Construction & Property Development

Australia: Index shows contraction for Australian construction industry

Source: RTT News, 6 April 2014

An index monitoring the activity in the construction industry of Australia has seen a seasonally adjusted score of 46.2 in March, up from 44.2 in February. Construction activity has once again contracted for the third straight month, as a score below 50 signals decline while a score above 50 indicates expansion. Among the individual components of the survey, the new orders sub-index saw its contraction slow dramatically, jumping from 39.5 in February to 48.3 in March. In addition, the employment sub-index continues to weaken, falling from 46.0 in February to 42.7.

While the sub-index for construction climbed from 45.3 in February to 48.3 in March, the house building dipped from 52.2 in the previous month to 50.8. Likewise, apartment building fell from 46.6 in the previous month to 45.6. Commercial construction tumbled from 59.9 to 56.5 points, and engineering construction surged from 39.7 to 45.5. The Australian Industry Group and Housing Industry Association has said that the sector and broader economy needs a sustained recovery in new home building, commensurate with average construction levels being considerably high over the coming decades as compared with those achieved over the past 20 years.  

China: Property market in Yingkou goes cold 

Source: The Wall Street Journal, 15 April 2014

Cities like Yingkou in China’s northeast rust belt were among the earliest cities in the country to be overbuilt. In 2005, now-Premier Li Keqiang was party secretary of Liaoning province, where Yingkou is located. There was a massive restructuring project to wean the region from its reliance on steel, coal and mining. Yingkou, along with other cities, sold vast amounts of land to developers in order to build apartments for workers, who they hoped, would populate the new factories, malls and industrial parks to come. Unfortunately, investments were slow to materialize and newcomers were scare, with a city of 2.4 million having slow population growth.

Chairman of Xinhuixin Real Estate Group has said that 70% of sales were to people who received compensation from the local government after they were evicted from their homes to pave the way for projects such as the ones currently being built. Building apartments before there is a demand has worked well for China in the past, most notably in Pudong. However, the model has since seemed to run its course, with many cities competing to build housing projects and industrial parks. Since the early 1990s, China’s overall returns on investments have fallen by about a third, with the country overinvesting by 10% of GDP. The city of Yingkou now has five years’ worth of unsold apartments, with at least three large projects totaling more than two-dozen 20-story apartment buildings being abandoned due to low sales. 

Singapore: Standoff between buyers and developers in property market

Source: CNBC, 15 April 2014

Singapore’s property market is seeing a standoff between bargain-seeking buyers and property developers with March’s new home sales dropping 83% from a year earlier. Property prices and sales are closely watched for cues on whether the government can safely guide the market to a soft landing amid expectations that interest rates will rise. Some of Singapore’s borrowers holding high debt loads may dump their properties into an already slowing market if interest payments do rise.

Sales of new private homes were 480 units March, compared with 2,793 in March of 2013 and 739 in February. Prices have surged over 60% since 2009, propelled by extremely low global interest rates and quantitative easing in developed economies. The city now ranks as the fourth most expensive real-estate market globally, after Monaco, Hong Kong, and London. One of the government’s cooling measures, the Total Debt Servicing Ratio (TDSR), which aims to ensure that buyers’ monthly payments do not exceed 60% of their income, are limiting potential buyers’ ability to get bank loans. 

Consumer & Retail

Australia: Consumer confidence ticks higher in April

Source: RTT News, 8 April 2014

Consumer confidence in Australia saw a mild increase for April, the latest survey from Westpac Bank and the Melbourne Institute revealed - rising 0.3 % to a score of 99.7. That follows the 0.7 % decline in March to a reading of 99.5 - and it marks the second straight month below 100 points, which separates optimism from pessimism. Among the individual components of the survey, the index for family finances versus a year earlier jumped 6.7 %, while the outlook for economic conditions over the next 12 months surged 10.5 %.

The expectations index added 2.7 %, and the outlook for family finances over the next 12 months gained 2.2 %. "The Reserve Bank Board next meets on May 6, one week before the Federal Budget is announced. The Governor has indicated in recent statements that a period of rate stability is likely. Today's consumer sentiment report supports that policy approach. It indicates that neither the labor market nor the housing market require rates to rise," Westpac chief economist Bill Evans said. But the index for people believing that it is a good time to buy a major household item plunged 8.7 % - hitting a 23-month low. The index for current conditions dropped 2.7 %, while the outlook for economic conditions over the next five years tumbled 4.2 %.

Thailand: March consumer confidence index lowest in 12 years

Source: Pattaya Mail, 11 April 2014

The political impasse and vacuum in the administrative system have plunged Thailand’s Consumer Confidence Index (CCI) in March to its lowest level in 149 months, more than 12 years, the University of the Thai Chamber of Commerce (UTCC) stated. Thanawat Polvichai, director of the university’s Economic and Business Forecast Centre, said the CCI has slipped for the last 12 consecutive months to 68.8 in March - the worst since November 2001 due to the months-long political turmoil, the Thai economic slowdown and uncertainty in the revival of global economy.

He said the CCI for the overall economy also dropped for 11 consecutive months to 58.7 - its lowest in 150 months, since October 2001. Dr Thanawat said the CCI regarding economic prospects also fell sharply to 51.5 - its lowest in 28 months or from December 2011. The centre predicted a continued decline in public consumption until the end of Q2 owing to Thailand’s worsening economy without any sign of improvement. If the new government takes office in the second half of the year and the appointment of a new panel for the Board of Investment is completed, foreign capital and national spending will flow into the economic system, revitalizing the Thai economy in Q4 and triggering this year’s economic growth to 2-3 %. 

Japan: Consumers shun shops following tax hike

Source: SBS, 10 April 2014

Japanese consumers are keeping their wallets firmly closed after the first sales tax rise in 17 years, with luxury items and appliances suffering as one major department store reported a 25 % drop in sales. The precipitous plunge comes after millions of shoppers made a last-minute dash to stores before the national levy rose to 8.0 % from 5.0 % on April 1, a rise that sparked fears of a drop in consumer spending in turn derailing Japan's nascent economic recovery.

Like many retailers, department store Takashimaya had seen a big jump in sales March, with demand particularly brisk for handbags and other luxury items ahead of the rate hike - seen as critical for containing Japan's spiralling national debt. Sales were down about one-quarter in the first week of April compared with a year ago. Other major department stores including Mitsukoshi and Sogo have seen sales drop off between 10 % and 20 %, while Bic Camera - Japan's biggest consumer electronics and appliance chain - said demand was stronger than expected, although sales were still down as much as one-fifth in some cases.

Energy, Resources & Environment

Malaysia: Malaysia’s first geothermal plant project now underway 

Source: The Star, 7 April 2014

Malaysia’s first geothermal plant to be located in Sabah’s east coast is expected to start producing electricity in two years. The geothermal power plant in Tawau is being developed by Tawau Green Energy Sdn Bhd and is projected to add 30MW to Sabah’s grid by the second quarter of 2016. Managing director Ramzi Raad, who has 26 years’ experience in heavy equipment, earth-moving machinery and power-generation equipment under his belt, heads the company. The initial phase will include digging exploratory wells to establish the parameters and potential of the geothermal reservoir.

Output from the plant will be sold to Sabah Electricity Sdn Bhd via 132KV interconnections to the grid under a 21-year renewable energy power purchase agreement. Additionally, the project is expected to offset roughly 200,000 tonnes of CO2 emissions annually. Calculations estimated that the area to be explored had potential to host a geothermal power plant with the capacity of 67MW at a depth of 2.5km. Tawau Green Energy has also said that it would create a resource centre bringing stakeholders and specialists in the geothermal energy industry together to provide capacity building for this new industry in Malaysia. The resource center would provide training and short courses in applied geosciences, geothermal exploration, geothermal drilling as well as steamfield and power plan design and operations. 

Indonesia: World’s first net-zero skyscraper to be located in Jakarta

Source: Sustainable Business, 8 April 2014

Indonesia will soon see the world’s first net-zero skyscraper, to be located in the centre of Jakarta. The Pertamina Energy Tower will be finished in 2019 and will be 99 stories high, becoming home to the headquarters of national energy company Pertamina. In addition to the 20,000 people who will work there, it will be the centerpiece of a campus that has a mosque, a sports centre and a 2000-seat auditorium for the performing arts. 

Shaped like a funnel, it will have the capability to capture wind from the top and have it run through a series of vertical turbines, providing 25% of the building’s electricity. On the two sides of the buildings are sun shading “leaves”, or semi-mobile curtains that allow daylight to enter while shielding the building from glare and heat from the sun. Radiant cooling systems will also replace air conditioners. Additionally, other buildings on campus will be covered by solar panels, but the central energy plant that powers the complex will run on geothermal. Designed to be a symbol of Indonesia’s commitment to sustainable development, the firm behind it is Skidmore, Owings & Merrill (SOM), known for combining innovation with energy efficiency and sustainability. 

India: Upcoming elections may put nuclear energy at risk 

Source: Oil Price, 13 April 2014

On April 7, India began its democratic elections, with 815 million voters casting their votes at 930,000 different polling stations over the week. Voters choose 543 parliamentarians, who in turn will nominate a prime minister. If the results indicate no actual majority, alliances will be formed and a coalition government will come to power. There are currently three dominating political parties: the Bharatiya Janata Party (BJP), the incumbent Congress Party, which has been in power for much of India’s history, and the Aam Aadmi Party (AAP). To the surprise of many, AAP saw some levels of success in 2013’s state elections, despite being a much younger party. 

The AAP has run its platform with strong emphasis on the need to combat corruption in India and being strongly against nuclear energy. The party has co-opted members of the People’s Movement against Nuclear Energy (PMNE), encouraging them to run in certain districts. Given India’s reliance on imported coal, oil and natural gas, nuclear energy has become an answer for many policymakers, despite accounting for less than 3% of the country’s total energy generation. Policymakers are trying to increase output with expansion in nuclear energy to meet 25% of India’s electricity needs by 2050. Meanwhile, AAP has concerns regarding greater oversight and transparency when it comes to nuclear energy, supporting improved infrastructure capabilities and emphasis on grass roots activism. With AAP opposing nuclear energy, any degree of electoral gain made by the party would pose a risk to India’s nuclear energy future. 

Financial Services

China: Trust companies targeted in shadow-bank crackdown  

Source: Reuters, 14 April 2014

In a bid to counter systemic risk posed by the country’s shadow-banking sector, China has issued stricter guidelines governing trust companies, which raise funds through the selling of high-yielding investments, or wealth management products (WMPs), and then use the proceeds to fund loans to risky borrowers such as property developers, local governments and other banks. The new rules enacted by the China Banking Regulatory Commission (CBRC) aim to reduce liquidity risk associated with off-balance-sheet WMPs, by forbidding trusts from operating “fund pools”, that enable them to fund cash payouts on maturing products with the proceeds from new WMP sales. Trusts face pressure to use these fund pools because they offer more attractive yields on the WMPs they sell, with products typically with maturity of a year or less.

Policymakers have encouraged the rise of non-bank lending as a means to diversify China’s bank-dominated financial system, while issuing targeting rules to curb riskier practices. The guidelines also require that trust companies develop clear mechanisms for shareholders to provide emergency support during periods of liquidity stress. Rather than pooling cash and assets from different products into common pools, regulators want trusts to strictly match each WMP with a specific set of underlying assets. Assets under management at Chinese trust firms rose to USD 1.8 TR at the end of 2013, surpassing insurance companies to become the largest sector of China’s financial system behind commercial banks.

Singapore: Monetary policy kept steady despite slowing economy

Source: Wall Street Journal, 13 April 2014

Despite the economy’s slow growth, Singapore’s central bank has kept monetary policy steady, a sign that it is more worried about inflationary pressures than the possibility of a slowdown. The Monetary Authority of Singapore has said it will continue to pursue a policy of modest and gradual appreciation of the local dollar, with the slope and width of the currency’s trading band and midpoint staying the same. The decision comes as advance estimates from the Ministry of Trade and Industry showed gross domestic product growing just 0.1% quarter-on-quarter in the January-March period on a seasonally adjusted and annualized basis. This was down sharply from the fourth quarter’s 6.1% growth, as contraction in services offset growth in manufacturing and construction.

Compared with a year earlier, the economy is estimated to have grown 5.1%, just below expectations, compared with revised 5.5% annual growth in the fourth quarter. The central bank’s decision to keep policy steady shows that inflation, driven by full employment conditions domestically is its biggest worry. The central bank’s core inflation measure averaged 2.0% year-over-year between October and February, up from 1.6% in the first nine months of 2013. The MAS has said it will stay vigilant about external developments and “stands ready to curb excessive volatility” in the nominal effective exchange rate. 

Australia: National Australia Bank deems Bitcoin as ‘too risky’

Source: The Guardian, 10 April 2014

The National Australia Bank (NAB) is severing ties to digital currencies, deeming them too risky. Starting May 2, 2014, business customers who primarily trade in Bitcoin and similar cryptocurrencies will have their accounts closed. Letters sent to customers say that an internal review has concluded that digital currency providers pose an unacceptable level of risk to NAB’s business and reputation.  While NAB has never banked or traded in digital currencies, they have provided banking services to companies that do. CoinJar, one of Australia’s largest Bitcoin traders, which use NAB to take deposits from clients has said that it was disappointed with the decision which would affect many other companies, but praised the bank for providing notice.

The decision comes after recent moves by the Bank of Ireland and Bank of Montreal to distance themselves from customers who trade in digital currencies. It also comes a month after the Japanese bank Mizhuo was named in US and Canadian lawsuits concerning the bankruptcy of Mt Gox exchange, to whom it provided banking services. Mt Gox had announced in February that it had been robbed of all its bitcoins in a massive cyber attack. Despite this, experts say that local Australian digital currency providers were far smaller than massive exchanges such as Mt Gox and therefore posed far less risk. 

Logistics & Transportation

Sri Lanka: Ports authority planning to spend USD 10 billion investment

Source: Port Technology, 14 April 2014

During a meeting between the Sri Lanka-Germany Business Council of the Ceylon Chamber of Commerce, Sri Lankan Ports Authority (SLPA) Chief, Dr. Priyath Bandu Wickrama announced plans to invest heavily in port development. According to the SLPA chief the Sri Lankan government is planning to invest up to US$10 billion to help develop the ports sector in the years leading up to 2020. Dr. Wickrama noted that since 2008, the government had already invested $2.2 billion to develop the port and related infrastructure.

A marketing campaign is now underway to attract investors from across the globe, alongside a number of major shipping lines to help fund the improvements. Speaking at the meeting, Dr. Wickrama stated that the authority was hoping “to attract major shipping and related industrialists to set up offices in Colombo” Sri Lanka’s largest port. The announcement comes at a time of growth and increased productivity across the nation; the SLPA recorded a 12.3 % increase in TEU transhipment operations 2013, with Colombo handling up to 3,208,117 TEU.

India: Ports back on growth trail

Source: Port Finance International, 9 April 2014

India’s 12 ‘major ports’ have stopped a two-year decline in cargo throughput by registering a modest growth of 1.78% in the fiscal year ending 31 March 2014. Figures released by Indian Ports Association reveal that the 12 ports controlled by the federal government together handled 555.50 million tonnes, up from 545.79Mt the previous year. The overall growth was propelled mainly by rising imports of coking coal to feed power plants.  

Cargo movement had declined in previous years because of a combination of factors such as slow economic recovery worldwide, a complete or partial ban on mining iron ore (whose exports sustain a number of ports), lopsided tariff regulations that discouraged container port operators from striving for higher throughput, and work stoppages. These factors continued to plague a number of major ports 2013 too, but conditions improved, albeit slowly, which helped a few ports register impressive growth, ensuring that the volumes of all major ports combined beat the downward trend. Leading the recovery was Paradip, in the iron ore rich eastern state of Odisha. It registered a whopping 20% growth with an all-time record throughput of 68 million tonnes.

Australia: Sydney gets second airport

Source: BBC, 15 April 2014

Australia has approved the construction of a second international airport in Sydney at the cost of USD 2.4 billion. The new facility will be located at Badgerys Creek, in western Sydney. Planning and design work would start immediately, Prime Minister Tony Abbott said, with construction expected to begin in 2016. Funding would come mostly from the private sector. The green light from Mr Abbott's government comes nearly 70 years after the idea was first debated.

The debate on the need for a second airport in Australia's largest city dates back to 1946. Badgerys Creek was a proposed site but the idea was then shelved for fear of backlash from local voters. Around 20 sites were considered before the government approved the new facility about 45km west of Sydney's central business district. Based on early estimates, the first flights in and out of the airport are not expected until the mid-2020s. Speaking outside parliament in Canberra, the prime minister said Sydney's second airport would create up to 60,000 jobs when it became fully operational.

Manufacturing & Industrial

Singapore: Economy grows 5.1% in Q1 off the back of strong manufacturing

Source: Channel News Asia, 14 April 2014

Singapore's economy grew by 5.1% in the first quarter of 2014 from a year ago as an improvement in manufacturing offset a slowdown in services. Singapore’s GDP rose by a modest 0.1 % in Q1 2014 on a quarter-on-quarter seasonally adjusted annualised basis, following the 6.1 % expansion in Q4. On a year-on-year basis, the manufacturing sector grew by 8.0 %, following the 7.0 % expansion in the previous quarter. The faster pace of expansion was largely due to a sharp rebound in biomedical manufacturing output and stronger growth in chemicals output.

The 5.1 % growth rate was, however, lower than the median expansion of 5.4 % forecast by economists and below the 5.5 % growth achieved in the previous quarter. Economists said the advance estimate of 5.1 % is a conservative one and likely to be revised upwards. Senior Economist of DBS Bank, Irvin Seah, said: "You got to take the set of figures with a pinch of salt, because the recent track record for the advance estimate number hasn't been that good. For example, 2013, in three out of four quarters, the advance estimate totally missed the mark, in the sense that, you know, the advance estimate shows that the economy is heading one directions, and then when the final figure came out, you know, it was the other direction."

Australia: Manufacturing requires improved skilled levels or risks being left behind

Source: Smart Company, 8 April 2014

Australia needs to step up its manufacturing skills in the next decade or risk falling behind other nations, according to a new study by the Australian Workforce and Productivity Agency. The manufacturing workforce study report examined Australia’s manufacturing shift from heavy industrial manufacturing to technologically advanced manufacturing. It recommended key areas in which Australia needs to lift its game in order to remain competitive. A broad recommendation was for Australia to transition to a sustainable, globally competitive manufacturing base. To do this, enhancing management skills and positioning the workforce for adjustment and renewal are needed.

Australian Industry Group chief executive Innes Willox said the report showed Australia needs to transition to a more diverse, high-end manufacturing base. He said the country needs a stronger focus on research, innovation and “more niche manufacturing of complex high value added goods”. Other recommendations in the report included the promotion of manufacturing as a rewarding career choice, focusing on creating capable apprentices and increasing engagement with universities to secure a pipeline of skilled workers. A core suggestion was addressing the increasing demand for STEM skills (science, technology, engineer and mathematics). It was also suggested that Australia increase the diversity of skills in the manufacturing workforce.

China: Economy grows 7.4% in Q1, due to high manufacturing output

Source: BBC, 16 April 2014

China's economy expanded by 7.4% in the first quarter of the year, better than what many were expecting. But it is a slowdown from 7.7% growth in the final quarter of 2013. Other data released with the gross domestic product (GDP) figure showed industrial output rising 8.8% in March from one year ago. Retail sales for the month of March spiked by 12.2%, underscoring China's efforts to boost economic growth via domestic consumption.

2013 China set its growth target for 2014 at 7.5%, part of efforts to stabilise the economy after years of fast-paced expansion. China's growth data is closely watched around the region. A slowdown could hurt Asian economies especially those which export commodities and industrial components to the world's second largest economy. A sluggish start for the year is not uncommon, due to the Lunar New Year holiday when many businesses and factories shut down operations for about two weeks. But recent data from the manufacturing as well as industrial sectors have been weak, raising fears of a prolonged slowdown.

Pharmaceuticals & Healthcare

China: Opportunities for private hospitals to improve healthcare system in Shanghai 

Source: ECNS, 14 April 2014

Reports show that Shanghai needs more to be done before hospitals can really offer comprehensive medical resources to patients. Ma Jin, a city legislator and researcher at Jiaotong University’s medical school has said that the real beneficiaries from more private investment would be non-profit, non-public medical organizations, as for-profit private hospitals already have separate pricing systems registered with the local price bureau. While non-profit private medical organizations enjoy tax exemptions, shareholders are not allowed to have bonuses, there are limitations on personnel expenditures and financial disclosure is required.

Currently, non-profit, private medical organizations account for less than 10% of Shanghai’s overall medical facilities, with most being psychiatric rehabilitation centres and nursing homes for seniors. By attracting more social capital to VIP services in non-profit private medical facilities, there would be opportunity to expand the supply of basic medical services, as organizations are likely to use money from their VIP services to subsidize basic medical care. While the government is easing more restrictions on the market, its supervisory role is still important, in order to prevent service fraud, price fraud or monopolies. Another challenge involves hiring doctors, with private hospitals often having difficulty attracting good talent. The best doctors in China usually work for public hospitals, which provide them with a stable job and better medical facilities. 

South Korea: Pharmaceutical market expected to be worth $24.3 Billion by 2020

Source: Digital Journal, 9 April 2014

High levels of access to healthcare insurance and increasing demand for healthcare services from an aging population are expected to drive the growth of the pharmaceutical market. In 2008, the South Korean pharmaceutical market was worth USD 15.4 BN and was estimated to grow to USD 18.6 BN in 2013. Therapeutic segments such as cardiovascular and oncology is expected to grow the fastest due to an aging population, accounting for approximately 12% of the population. Market growth is also influenced by initiatives taken by the government such as the Korean Small Business Innovation Research program, encouraging R&D and sustainable growth in the pharmaceutical industry. Additionally, in order to boost private investment, the government has designated 44 pharmaceutical companies to provide special benefits such as tax reduction and exemption, preferential government research funding and the postponement of drug price cuts.

The country’s generic market increased from USD 3.5 BN in 2008 to an estimated USD 4.9 BN in 2013; the market grew at a CAGR of 7% between 2008 and 2013. The South Korean medical device market was valued at USD 3.3 BN in 2008 and is projected to grow at a CAGR of 5.5% to an estimated USD 6.3 BN in 2020. In 2013, the major segments of the medical device market were ophthalmic devices (17.6%), in vitro diagnostics devices (13.9%), nephrology and urology devices (10.5%), orthopedic devices (10.3%), and dental devices (10%). The healthcare system offers universal healthcare coverage to all citizens, divided into two components: health insurance and medical aid. 

Vietnam: Canadian company to build international standard hospital in Vietnam 

Source: Tuoitre News, 15 April 2014

A Canadian company has obtained a license to build a multi-million-dollar international standard hospital in northern Vietnam. Triple Eye Infrastructure has obtained approval from authorities in Hai Duong Province to develop a 200-bed modern hospital that will cost approximately USD 225 MN to build. The amount is up USD 25 MN from initial estimates. The company initially wanted to invest USD 200 MN in the project during 2012 and start work during the first quarter of 2013 but failed to do so because of procedural issues.

Vietnam lacks high-standard hospitals and citizens spend billions of dollars annually to obtain treatment overseas. By having an international standard hospital located in Vietnam, there exists a large potential for financial success. Operations are expected to begin in 2016, with the hospital to be located at Dai An Industrial Park, offering healthcare services to over 20,000 workers as well as people from Hai Duong and neighbouring provinces. The project is Triple Eye’s first investment in Vietnam and the hospital with be the first international infirmary in Hai Duong. 

Private Equity

Singapore: Temasek focuses on private-equity investments  

Source: Wall Street Journal, 9 April 2014

Temasek Holdings Pte. Ltd. Has partnered with six institutional investors to set up a fund of funds that focuses on private-equity investments. Astrea II, the second such vehicle set up by Temasek has holdings in 36 unnamed private-equity funds, with the largest investor having a 38% stake. Paris-based investment firm Ardian, formerly known as AXA Private Equity, will manage Astrea II. Ardian is one of Temasek’s six partners in the new fund of funds; the remaining partners were not named. Astrea II comes roughly eight years after the creation of Astrea I, the first of Temasek’s series of private-equity co-investment vehicles. 

One of Temasek’s long held aspirations is to have long term minded retail investors and the Astrea vehicles will help them test market interest and fine-tune their thinking and product positioning for eventual participation by retail investors. While Temasek has not elaborated on when they may start selling investment products to the general public, they have said that the company could first offer bonds to retail buyers before bringing in higher risk-return investment opportunities. Establish in 1974, Temasek managed a portfolio worth USD 172 BN as of March 31, 2013. The state investor owns controlling stakes in Singapore Airlines Ltd. and Singapore Telecommunications Ltd. 

China: ‘Princelings’ dominating private-equity industry 

Source: Quartz, 11 April 2014

Alvin Jiang, the 28-year-old grandson of former president Jiang Zemin and head of China’s hottest private equity firms, stands to make millions from two of China’s largest initial public offerings – those of e-commerce giant Alibaba and state debt trade China Cinda Asset Management. Jiang is one of many in the growing number of offspring of Chinese officials dominating China’s private equity industry. Traditionally, the offspring of China’s elite political families, often known as “princelings”, have gone toward real estate, state-owned enterprises or government positions, but over the past several years, many have moved into finance, where returns are potentially much higher. 

China is home to at least 15 investment firms founded or led by princelings, with operations raising at least USD 17.5 BN since 1999. The Chinese public has long seen politics and business being closely intertwined but by helping to channel money into growing companies, some believe private equity will help modernize China’s financial system. Despite this, critics say that nepotism, or even the appearance of it can damage China’s entire financial system. There is a bias towards firms with political links, pushing out foreign operations as well as domestic ones with fewer connections. As a result, princeling-run private equity firms are often criticized for unprofessionalism and poor investments. In addition, China’s conflict-of-interest laws are weak and the opaque nature of private equity deals make it even harder to scrutinize.  

India: IIFL acquires India Alternatives Private Equity Fund

Source: The Economic Times, 7 April 2014

Brokerage firm IIFL’s wealth management division has announced that it has acquired a majority stake in private equity fund India Alternative for an undisclosed sum. IIFL Wealth Management has acquired the stake in India Alternatives Investment Advisors, the investment manager to India Alternatives Private Equity Fund, which already has USD 38.2 MN in commitments. The India Alternative Fund invests in mid-stage growth companies and is registered with capital market regulator Sebi. 

According to reports, it has made three investments since 2010, two in the education space and the third, in an undergarments maker. IIFL, which already manages a private equity fund specifically for the realty space has committed a significant contribution to the India Alternative Fund. The India Alternative fund is now looking at investments in the consumer and consumables, healthcare and pharmaceuticals space.  The Wharton School alumni Shivani Bhasin Sachdeva founded IAF.  

Telecommunication, Technology & Media

Singapore: Government aims to target investments in ‘disruptive technologies’

Source: Reuters, 10 April 2014

Singapore is hoping that building expertise in high-tech niches such as 3D printing and robotics will let it sustain a large manufacturing sector despite the exit of many labour-intensive industries to cheaper bases elsewhere in Asia. In line with government efforts to lift productivity and cut reliance on foreign workers - whose big numbers have made citizens unhappy - Singapore's Economic Development Board (EDB) no longer courts multinational companies that want to employ many low-cost employees. But it keenly wants to pull in more companies for cutting-edge production.

P&G has recently opened a SGD 250 million research centre in the city-state and has signed an agreement with Singapore's science and technology agency giving it access to Singapore's universities and hospital research facilities. Rolls Royce signed a SGD 75 million deal with one university 2013 to do research into computational engineering and other areas. The EDB, which has helped drive the island's transformation from a trading outpost to an economic powerhouse, lured technology companies in the late 1960s and 1970s with incentives and low-cost labour.

India: Taiwanese Asus aims for 10% of tablet market

Source: Economic Times, 15 April 2014

At the moment they have single digit market sharebetween 3-5 %. The Indian tablet market is estimated to be about 50 lakh units. They aim to grow their share to 10 % this year.  The company, which has partnered Google for its Nexus 7 tablet, sells its own brand of tablets under the FonePad range. It sells hybrid tablets (which can be used as a netbook) under the Transformer Book range.  They have been introducing products relevant to the Indian market and will continue to do so. This year, they plan to launch 3-5 more products across our FonePad and Transformer Book range. 

The company today launched its Fonepad 7 dual SIM tablet, priced at Rs 12,999.  The seven-inch device allows 3G calling and has HD display, 5MP rear camera, 1.2 MP front camera and supports 64GB microSD memory chips.  It is equipped with Intel Atom Z2520 1.2GHz dual core processor and runs on Android Jellybean operating system, which can be upgraded to the latest KitKat OS after June. Tablet sales in India, one of the largest growth markets for the smart device, are expected to remain flat this year on account of mandatory BIS compliance and increasing demand for 'phablets'.  In 2013, tablet sales in India grew 56.4 % to 4.14 million units against 2.66 million units in 2012, according to industry estimates, primarily driven by strong demand for low-cost models from stables of Micromax and Lava, among others. 

China: Start up Smartisan receives USD 29 million to emulate Xiaomi and build a smartphone

Source: Tech In Asia, 14 April 2014

Smartisan has announced it closed the funding round at RMB 180 million (US$29 million), placing its overall valuation above the RMB 1 billion (US$161 million) mark. The company didn’t reveal where the money came from, but thanked previous investors in the announcement. Chinese software maker Smartisan has secured RMB 150 million (US$24 million) in funding to help the small, largely unknown startup launch a smartphone. The funding hasn’t been confirmed or detailed yet, notes 36Kr, but Smartisan’s Luo Yonghao stated publicly on his Sina Weibo account that its first ever phone will be unveiled on May 20. There’s no word yet on the hardware, but it’ll cost around RMB 3,000.  

Smartisan makes an Android ROM – that’s basically just a re-themed version of Android. As we noted when Smartisan got series A funding in December, an Android ROM is only of use to a tiny handful of Android geeks and tweakers. If they want to reach the public, they’ll need to create some hardware. And that’s exactly what the startup will soon do. Smartisan is following in the footsteps of Xiaomi, the Chinese startup that also came into being with little more than their tweaked Android UI. Then in the summer of 2011, Xiaomi released its first phone. 2013, Xiaomi sold 18.7 million phones and aims at 40 million by the end of 2014. Xiaomi is already outselling Apple in the country.