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Bullets smashing through office windows are hardly a strong economic indicator, but such is the momentum of the Asian economic recovery that Design Worldwide Partnership, a Bangkok-based design consultancy, has no intention of leaving in the wake of the violent protests that paralysed the Thai capital earlier this year.

“Our building was hit, and our offices on the 11th floor had four panes damaged by bullets,” says Brenton Mauriello, chief executive of the design firm, which started in Thailand in 1994 and now has nine offices and 450 staff worldwide.

While there is understandable caution and real fear that the causes of the country’s social problems have not been addressed, Mr Mauriello says his group is committed to a region where the economic prospects, particularly in India and China, are such that the company is banking on 15 per cent growth in the next year.

“Despite seemingly endless hits to the economy, somehow Thailand continues to bounce back,” he says. “We have had the 1997 crash, Sars, bird flu, H1N1, a tsunami, a coup, yellow shirts shutting the airports, red shirts shutting the shopping districts, and the army on the streets. All these, along with a sometimes questionable political leadership, seem not to dent the ability of local entrepreneurs and large foreign investors to do business.”

Asia has all the essential ingredients of an emerging market – increasingly monied and sophisticated consumers, a booming infrastructure sector, a young population and soaring productivity – but the clashes in Bangkok between government forces and the United Front for Democracy against Dictatorship, or “red shirts”, threw into sharp relief concerns that instability is as much a part of the region as the summer monsoon.

The growth story, however, remains so strong that coups and revolutions are now absorbed into the economic landscape, eclipsing fears that would previously have slowed foreign investment to a trickle and delayed major projects for years.

“We had anticipated more damage to the economy from unrest in Bangkok,” says Karen Ward, senior global economist at HSBC. “But certainly the macro data has surprised us on the upside.”

With first-quarter gross domestic product at 12 per cent year on year, powered by strong exports, Thailand is emblematic of a region that not only has the power to shrug off domestic disturbances, but has also cut through eurozone concerns. Thai shipments to Europe for the same period grew by 19 per cent year on year.

But Thailand is just part of the story as the global economic focus shifts to India and China. The two giant economies are now pivotal to the success of medium-sized enterprises wanting to expand into the region. The biggest challenge will be how enterprises adapt to the changing face of these two economies, and how they harness the increasing skills sets and wealth of India and China. The old model, where the west owned the research and development and the brand while the east provided low-value production, is dying.

Rather than outsourcing manufacturing to developing economies, companies are taking advantage of Asia’s massive investment in education, setting up innovation and development centres in the region’s science and technology heartlands.

A case in point is alternative energy. Despite a popular conception of China leading the revolt at the failed 2009 Copenhagen climate conference, the world’s most populous nation has played a leading role in the development of renewable energy. It plans to install wind-power technology capable of generating nearly five times the energy of the Three Gorges Dam.

One company at the forefront of the clean-energy revolution in Asia is Vestas Asia Pacific, which moved to Singapore from Denmark three years ago. Sean Sutton, president of Vestas Asia Pacific, says Singapore’s position as a research and development hub made it an obvious choice.

“Singapore has developed into a premier research centre,” he says. “Its dynamic research environment, with its strict intellectual property laws and robust ethical frameworks, was among the reasons Vestas set up here.”

For investors, the risks of broadening an Asia presence – in terms of threats to intellectual property or fears over political instability or recession – have to be balanced against the consequences of missing opportunities in a market the size of India or China. Infrastructure programmes in these two countries rank among the largest in the world, with China in particular placing emphasis on projects such as high-speed rail schemes. Estimates put its total infrastructure investment between 2008 and 2018 at $2,660bn, and India’s at $620bn.

In terms of connectivity, China’s ubiquitous internet service – Beijing expects to have free wireless to the whole of the city by 2011 – shows an understanding that fast communications speed up the delivery of goods and services.

Credit growth is strong in many parts of Asia, due in large part to a young and growing population of consumers as well as debt restructuring following the Asian financial crisis in 1997.

With extremely low levels of household debt throughout the region, attention is now focusing on releveraging an Asia whose internal markets are hungry for everything from cars to high-end pharmaceuticals. China’s projected GDP growth in the second half of 2010 and into 2011 is expected to reach a robust 9 per cent – a figure that will be strongly underpinned by domestic demand.

While the region has slowed due to the global financial crisis – in China in particular, due to tightening measures aimed at cooling a rapidly heating economy – smaller businesses wanting to enter Asia have to ask how far the effects of the global financial crisis were really felt.

Asia’s banks, subject to tighter regulation since 1997, have emerged relatively unscathed from the downturn, strengthening the case for a different economic model. In countries such as China, the world is seeing the rise of a new economic hybrid – a form of state-driven capitalism. Under this model, companies are encouraged to exploit global capital markets and seek new opportunities abroad but remain instruments of the state, with politicians directing resources to favoured industries, making decisions about production and helping to negotiate deals on the supply of raw materials.

While many foreign investors are simply adapting, tailoring deals to suit the interests of powerful families in India or political cliques in China, the ensuing social instability – with millions effectively locked out of the wealth produced by the country – may yet undermine the Asian economic story.

“There continues to be a large undercurrent of resentment with the current ruling classes and government, and that needs to be addressed in a transparent and fair manner,” Mr Maurillo says. “While this challenge remains unattended or unfinished, there will remain a level of uncertainty that will temper investments.”

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