Mid-corporates can tap ASEAN’s infrastructure gap for growth

Bridging ASEAN’s US$2.8 trillion infrastructure gap by 2030 is a pressing issue for regional governments. But this financing deficit presents significant opportunities for mid-corporates to grow beyond their home turf while addressing the market needs.

For a start, infrastructure projects abound both locally and across borders. The region currently has 800 infrastructure projects in the pipeline in various sectors, according to Standard Chartered’s new report, titled “ASEAN – a region facing disruption; positioning mid-corporates for growth in Southeast Asia”. The transport sector alone has over 400 projects in the works, while the energy sector has about 275 projects.

Hence, private sector companies will be increasingly crucial in bridging the region’s infrastructure gap, said Standard Chartered. At the same time, this signifies opportunities for all parties across the infrastructure value chain to participate in both domestic and regional projects, the bank said.

Add global infrastructure programmes like China’s Belt & Road Initiative (BRI) to the mix, and ASEAN mid-corporates will get an additional opportunity to become involved in major infrastructure projects and further their growth via cross-border investments.

First proposed in 2013 by Chinese President Xi Jinping, China’s BRI is an ambitious megaproject estimated to be worth US$900 billion, spanning 65 countries. In 2017, China pledged another US$124 billion to the initiative.

From experience, Standard Chartered believes the way for mid-corporates to get involved in those infrastructure projects is by partnering larger corporates and governments in the region. Such partnerships can help overcome obstacles including the lack of familiarity with overseas markets, challenges around capability maturity, skills and capacity that can impact project performance that makes it more difficult for mid-corporates to succeed in large-scale projects both domestically and overseas. Entering into such collaborations would help the firms to pick up knowledge and capabilities from their larger counterparts, paving the way for them to venture into overseas markets and become regional players themselves.

During a recent roundtable, Standard Chartered’s executives and the bank’s clients gathered to share their experience of venturing into new markets and leveraging the ASEAN infrastructure opportunity for growth.

Those players who have transitioned successfully say the key lies in finding suitable partners who have the necessary funding and can help navigate the local landscape.

In the last of this two-part series, Johnson Paul, Business Development Director of Meinhardt Group; Pang Kok Lian, Chief Financial Officer of Samwoh Corporation; and Jin Aiping, Deputy Chairman of Shanghai Tunnel Engineering Co (Singapore), discuss their experiences and best practices.

Joining in the discussion are Standard Chartered’s Jiten Arora, Global Head of Commercial Banking, and Surya Bagchi, Global Head of Project and Export Finance.

What were some challenges you faced while participating in overseas projects or working with governments?

Aiping:

Infrastructure projects involve huge investments and come with much uncertainty over a long-term horizon. A strong and stable government that can plan effectively will minimise investment risks.

Kok Lian:

We're a Singapore-based company. The two biggest challenges we have experienced while exploring Myanmar in the past two years are the cultural differences and the local governing laws which are very segmented. Anyone venturing overseas to a new market needs to be ready to embrace the culture and be ready to adapt, be nimble to regulatory differences and changes. Otherwise it will be very tough.

In what ways do partnerships help surmount the challenges?

Kok Lian:

We learn from our joint venture partners their local know-how and experiences.  With strong partnership and trust, we will then be more confident to venture out of Singapore.The bank that companies partner with has an important role to play. When the bank can connect its clients with similar mindset to invest in opportunities like BRI together, it will be beneficial for companies like us. Standard Chartered has a worldwide network and can definitely do that.

Jiten:

That plays to our strength, which is the ability to help companies grow their business internationally. We help businesses build connectivity and manage risks while focusing on the opportunities they can leverage when entering new markets.   Even if your company has a specialisation, when you enter a new country in the region, you will have to understand the local talent, culture and way of doing things.  For example, if you are entering any ASEAN market and need a local partner, Standard Chartered can introduce you to the corporates that we bank there.  We have been in ASEAN for more than 150 years.

Surya:

From my experience, business partnerships in the infrastructure space minimise risks of international projects, as local partners tend to have more extensive experience operating in their markets.As some of you alluded to, ASEAN has complex business environments and ‘institutional voids’, such as the absence of regional standard regulatory systems and contract-enforcing mechanisms, making it much more difficult for a foreign company to navigate alone.

What makes a partnership work?

Johnson:

For us, it boils down to reputation and credibility. BRI has opened the door for some good opportunities in the neighbouring markets for Meinhardt, including new opportunities in several African and Central Asian markets in the last two years.  The host countries want to ensure that the standards are adequately met.    Because we are an international company with engineers who are familiar with global standards and certification processes in different jurisdictions, we stand to benefit Meinhardt has a strong track record in developing vertical cities in the 51 cities we currently operate in.  We are also very strong in the areas of project management and capacity building.   We work with a big Chinese multinational conglomerate on their logistics infrastructure programme in Southeast Asia. In addition, we also have strong partnerships with Chinese companies like Shanghai Tunnel Engineering Co., Ltd. , to deliver cross-border projects.

Aiping:

As a partner, it is about being localised. We entered Singapore many years ago and have realised that if you want to succeed in the market, you have to understand what the local government is looking for and what value they need you to contribute.Like most companies, we banked on cost competition and our experience in other countries. But in this market, we have learnt that clients look for good planning, risk management, safety and quality.When it comes to finding a good partner, we look at the company’s values. We want to deliver a good job, so partnering with a company that also has the motivation to give our clients the best is key. 

Growing in ASEAN

Meinhardt Group

With 51 offices worldwide, the group provides engineering capabilities in Infrastructure and Environment; Structures; Mechanical Electrical and Plumbing’ Project Management and Planning and Urban Development.

Annually the Group undertakes projects worth an estimated US$25 billion and ranks among the largest independent engineering firms globally by revenue. Key projects include Marina Bay Financial Centre (Singapore); KL Sentral Station (Malaysia); TAMAR Development (Hong Kong); MGM Grand Ho Tram Integrated Resort (Vietnam); Xintiandi (China); The Dubai Mall (Dubai, UAE); Muscat International Airport (Oman); Rialto Towers (Australia).

Samwoh Corporation

Established in 1975, Samwoh is a leading integrated construction company which provides full suite of engineering services, including the supply of building materials and precast concrete components, recycling of construction and industrial wastes, research and development as well as pavement consultancy services.

Key engineering projects in Singapore include numerous flyovers and underpasses, such as the vehicular flyover from Seletar West Link to Seletar Expressway. In addition, the company has many consultancy projects spanning Asia and Europe.  Locally, Samwoh also partners with established overseas firms such as Takenaka, on the expansion of Seletar Airport.

Shanghai Tunnel Engineering Co (Singapore) (STEC)

The civil engineering and construction firm was founded in 1965 in China but later established itself in Singapore in 1996.

The firm’s first project in Singapore was as a subcontractor for the Land Transport Authority’s North-East Line project, but the firm has since become one of the top civil main contractors in Singapore, working with government agencies and companies like Marina Bay Sands. STEC is also involved in work on Singapore’s major MRT lines, including the upcoming Thomson-East Coast Line.

Elsewhere, the firm also operates in China, India, Myanmar, Hong Kong, Macau and Malaysia.

 

Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction

 

 

 

Back to ASEAN

Click here