Friday, February 29, 2008

The tigers that lost their roar

Other emerging economies are producing world-class companies by the dozen. Why aren't the countries of South-East Asia?
It is easy to forget, now that China and India are all the rage, that until ten years ago South-East Asia was the world's fastest-developing region.
The region has 570m people and had a head start in economic development over much of the rest of Asia. So why does it still have no global consumer brands of the stature of South Korea's Samsung and LG? Where are its equivalents of India's world-conquering Tata Steel, Ranbaxy and Wipro? Or China's market-devouring Huawei and Lenovo? Ask an investor in London or New York to name globally respected South-East Asian firms and the answer is unlikely to consist of much more than Singapore Airlines.

In a recent book, “Asian Godfathers”, Joe Studwell examines this failure in stark terms. The region's business scene remains dominated by old-fashioned, mediocre, sprawling conglomerates, run at the whims of ageing patriarchal owners. These firms' core competence, such as it is, is exploiting their cosy connections with governing elites. Their profits come from rent-seeking: being handed generous state contracts and concessions, or using their sway with officialdom to keep potential competitors out. If they need technology, they buy it from abroad. As a result the region has “no indigenous, large-scale companies producing world-class products and services.”

Corruption is another great burden on business. That is true elsewhere in Asia too, but several South-East Asian countries—notably Indonesia—are afflicted by corrupt and unreliable judicial systems, making it difficult to enforce contracts.

Although it is hard to generalise across Asia, another obstacle to developing world-class businesses is that the five main South-East Asian economies do worse than might be expected—that is, relative to their national incomes—in promoting technology and higher education. Both the lack of fair competition between businesses and the failure to widen access to education may have a common underlying cause: that South-East Asian countries remain in the grip of narrow elites.
The rise of China and India, with their huge home markets, may mean that it is too late for South-East Asia to become big in manufacturing. But it does still have the prospect of producing world-leading firms in other areas where it has an edge. Tourism and hospitality are obvious examples, especially as the region's neighbours become richer. South-East Asia could become both “the Mediterranean and the Caribbean of Asia”, enthuses YTL's Mr Yeoh.

Natural resources are another promising source of future world-beaters. Following Brazil and, closer to home, Australia, South-East Asia is beginning to build global businesses by making the most of what nature has provided. The region already dominates some types of agricultural produce.

The reasons why South-East Asia has been slower than other regions to produce world-class businesses are complex and open to debate. But they do seem to be linked to the perseverance of narrow elites and to the countries' sluggishness in overcoming old rivalries and building an integrated regional market. As a handful of promising companies are showing, not all is lost. Even in today's fierce jungle, South-East Asia can still breed tigers.

Friday, February 22, 2008

Faber Sees a Holiday in Cambodia for Investors

Extracted from Commentary by William Pesek
Bullish
"Cambodia offers an enormous potential for future capital gains,'' says Faber, the Hong Kong-based investor and publisher of the Gloom, Boom & Doom report. "It may take some time, as was the case for Vietnam and India, where stocks languished for a number of years before huge upward trends in asset prices developed. But patience was amply rewarded.''
Contrarian Bet
Cambodia is a contrarian investment with a capital "C.'' For every positive trend cited in this column, one can find a reason, or two, to avoid the place. While Cambodia has great promise, says Simon Ogus, chief executive of DSG Asia, it has a long, long way to go before many investors are willing even to consider putting money there. For one thing, he says, "the monetary system is 95 percent dollarized'' and the country lacks a bond market.
P0verty and Potential
Cambodia's challenges run deeper. Crushing poverty means all too many aren't being educated to compete globally. Good roads, bridges, and power systems are in short supply. The export-dependent economy is vulnerable to a U.S. slowdown and rising fuel costs.
Corruption means double-digit growth doesn't get very far anyway. In Transparency International's 2007 Corruption Perceptions Index, Cambodia ranked 162nd -- behind Bangladesh, Zimbabwe and Tajikistan.
Cambodia also is sitting on a discovery that will either attract investors or have them aggressively avoiding the country: oil. While deposits are still being estimated, the potential of Cambodia's petroleum industry is attracting interest from BHP and Chevron.
Yet investors are searching for the next generation of developing-market stars now that the "BRIC'' economies- Brazil, Russia, India and China- and Vietnam have been discovered. Watching neighboring Vietnam thrive also may inspire Cambodia's government.
If oil profits are used to improve education, reduce poverty and upgrade infrastructure, investors who took a chance on Cambodia will be, in Faber's words, amply rewarded.

Sunday, February 10, 2008

Home-coming

I've been in Cambodia for a week. Went straight to my hometown upon arriving at the airport to celebrate Chinese NY there. It was exhuasting but happy to unite my family, esp my cute nephews and niece. Many things have changed, for better or worse. Construction boom and income gap are obvious, and inflation is incredible. It SEEMS that Cambodia is not a poor country any more. Just back to Phnom Penh this morning. Will have to explore more. Will post some nice photos and observation latter.

Roatha007

Friday, February 01, 2008

Bringing Commerce to Cambodia

Brash, ambitious, some say ruthless, Kith Meng is building an empire in the newest tiger economy. "He's not an entrepreneur in the traditional sense of creating new businesses," notes one close friend. "What he does is go out and get the business that Cambodia needs. He brought in mobile phones, television, banking, insurance. He's the right guy at the right time."
ANZ may know banking, but Kith has the Midas touch in Cambodia. And he clearly stands apart from both the old money--made mainly in mining, logging and smuggling in the 1980s and 1990s--and the new entrepreneurs starting restaurants and tourism businesses. The older tycoons tend to be reclusive and tied by blood or marriage to the political leaders. In contrast the brash Kith is only 39, unmarried and linked to nothing but the pursuit of profit. Many call him the new face of Cambodian capitalism.
Many say his personal history explains his "go-for-the-throat" business style. "He is ruthless," concedes one close friend, "but Cambodia is a ruthless place. He doesn't mince around." Kith, for his part, says that what sets him apart from others in Cambodia's new economy is his work ethic. He describes workdays that start at dawn, ending long after dark. Only recently have friends persuaded him to devote time to short workouts. Unlike the established elite here, who tap family members, Kith recruits Western talent. "And he treats them well," says one competitor. "Kith is raw and unpolished, but I think he's genuine," adds a longtime business consultant. "He doesn't read books or magazines, but he reads people."