Asia’s imports of consumer goods as well as modern services, such as telecommunications, information, and financial services, have risen sharply over the past decade. Second, sustained investments to build up physical and human capital. China’s fixed asset investment in education and infrastructure has expanded rapidly, growing by about 20% annually since 2009. Indonesia, Thailand and the Philippines have ramped up development spending to address infrastructure deficits. Vietnam has been making heavy investments in education, at almost 20% of total public expenditure. This is beginning to show results in its global ranking in PISA – the Programme for International Student Assessments. Third, growing economic integration within the region. Asia already has extensive cross-border production networks, particularly in the electronics and automobile industries. China’s Belt and Road Initiative will facilitate not just infrastructure investment in the region but, more importantly, strengthen connectivity. As new projects gain traction, there will be increased regional flows of trade, capital, and people in the next five to ten years. Finally, I want to touch on a new source of untapped potential – the CLMV countries: Cambodia, Laos, Myanmar and Vietnam. They are increasingly plugged into the global economy and regional supply chains, participating as downstream manufacturers in regional production networks. In Vietnam, manufacturing now makes up a third of the economy. - Vietnam has developed into one of the world’s top electronics exporters, with Samsung producing about 40% of its phones there.
A recent study by PwC found that investors were most upbeat about emerging cities in the region – such as Bangalore, Mumbai, Manila and Ho Chi Minh City. Rapid urban migration has created strong residential demand in these cities. Logistics and business parks are also thriving on the back of a booming outsourcing industry. The story is similar for infrastructure. Amid government efforts to ramp up infrastructure development, institutional capital has a growing role to play. According to a report by Marsh & McLennan, about 40% of infrastructure projects in emerging Asia are considered bankable. These projects have the necessary conditions to attract sources of funding beyond bankbased finance. While institutional investors have traditionally participated in the secondary market for completed infrastructure, they are increasingly financing construction-phase projects to capture higher risk-adjusted returns. Singapore as a gateway to Asian opportunities Singapore is well-positioned to serve global institutional investors in their steer towards alternatives in Asia. Singapore is a developed pan-Asian asset management centre with a strong pool of global and regional players. Fund managers here have a deep network, are able to readily access deals, and can support Asian companies throughout their life cycle. Eight of the top ten global PE firms have an office in Singapore. So do some of the top global real estate managers. MAS is taking steps to deepen Singapore’s VC and PE ecosystem and enhance the operating environment for VC and PE managers. We will start with simplifying the regulatory framework for VC managers in the next few months.