South-east Asia's roaring economies

Economies are booming across the region, helped by a combination of stronger exports, a slew of infrastructure projects and higher domestic consumption.

In Singapore, the economy is set to grow by 3 per cent to 3.5 per cent this year. The Straits Times looks at some of the region's star performers.


Indonesia: Data mining shows economic thrust

Scale models of bullet trains on display at a Jakarta mall. The buoyant investment climate has supported the economy as President Joko Widodo pushed to build more infrastructure across the country.
Scale models of bullet trains on display at a Jakarta mall. The buoyant investment climate has supported the economy as President Joko Widodo pushed to build more infrastructure across the country. PHOTO: AFP

A quick way to gauge the strength of South-east Asia's biggest economy is by looking at Katadata, an online business and economic research firm.

The Indonesian company boosted its staff strength to 70 recently, from 40 just last year. The subscribers to its research - with data ranging from credit consumption to fresh milk production - include financial institutions such as the World Bank, several government ministries and energy firms.

"Nearing the end of 2017, we are getting numerous deals. We are optimistic... Katadata will grow even faster next year," the company's managing director Ade Wahyudi told The Straits Times.

Within just a week apart earlier this month, the company launched two new products: a data portal on domestic oil and gas blocks, and in-depth research that caters to corporate leaders.

The hunger for data in South-east Asia's biggest economy is a reflection of the fast-paced economic expansion, as players aim to gain an edge over their competitors using the latest figures, or by converting data into infographics for easier public consumption.

The Indonesian economy is expected to grow by 5.1 per cent this year and 5.3 per cent next year, according to the Asian Development Bank. This is no small feat for a country with 250 million people.

Gross domestic product expanded by 5.02 per cent last year.

Professor Ari Kuncoro, dean of the economic faculty at the University of Indonesia, said domestic consumer spending will remain the main driver of growth, while exports have started to pick up. In the January to August period, Indonesia booked positive export growth for the first time at least in five years.

Looking at growth through a geographic lens, consumer spending was higher in places rich with commodities, according to a Nielsen report on Indonesia's fast-moving consumer goods and retail update that was published in June. "Kalimantan, West Java and South Sumatra have good growth due to commodity price recovery, while others go low growth," the report said.

The majority of coal mines in Indonesia are located in Kalimantan, while West Java has vast sugar cane and coconut plantations, and South Sumatra has abundant rubber and oil palm plantations.

The buoyant investment climate has also supported the economy as President Joko Widodo pushed to build more roads, airports and seaports to grow the economy and reduce infrastructure disparity across the country. The planned projects include a high-speed railway linking Jakarta and Bandung.

The sectors that really shine are telecommunications, transport and warehousing, and business services. These sectors grew more than 8 per cent in the second quarter this year.

 


Malaysia: Infrastructure boom boosts GDP

Cranes at the Forest City project in Johor. Malaysia's construction firms have seen great growth in the number of projects to execute, but there remains a concern over the glut in the property market.
Cranes at the Forest City project in Johor. Malaysia's construction firms have seen great growth in the number of projects to execute, but there remains a concern over the glut in the property market. PHOTO: BLOOMBERG

Like its peers, Sunway Construction has a happy problem amid a boom in Malaysian infrastructure projects.

It won RM4 billion (S$1.3 billion) in new deals in the last quarter, double its target, helped by a RM2.18 billion tender win to expand part of the Light Rail Transit line.

Sunway Construction's deputy managing director Liew Kok Wing told The Straits Times that the industry has so many projects to execute that competing firms are busy pinching talent from each other.

"You bump into the same faces when you move from (one project to another)", he said.

The service sector in South-east Asia's third-biggest economy is now worth more than half the economy, but construction firms have seen the biggest increase in order books, registering over 6 per cent growth in all quarters.

According to the Construction Industry Development Board, the sector is expected to grow by 8 per cent to RM170 billion this year. AmBank Research analyst Joshua Ng credited various government infrastructure projects for boosting the sector, saying "earnings prospects remain strong with most players sitting on record order books".

Malaysia is embarking on the third phase of its Mass Rapid Transit line that is expected to cost up to RM40 billion, even as the second phase is ongoing and it expands its Light Rail Transit line in the Klang Valley, in the districts that encompass Kuala Lumpur.

Malaysia's strong economic growth has forced analysts and the government to revise upwards their projections for this year and the next. Market predictions of gross domestic product (GDP) expanding around 4.5 per cent in the first three quarters of the year have been surpassed.

Growth accelerated instead from 5.6 per cent in the first three months of the year to 6.2 per cent in the July-to-September period.

The government now expects GDP growth of 5.2 per cent to 5.7 per cent this year, compared with a 4 per cent to 5 per cent projection made a year ago.

This is stronger than the 4.2 per cent growth last year. The economy is forecast by the government to grow 5 per cent to 5.5 per cent next year.

Maybank Investment Bank said the economy will be driven next year by an increase in both public and private spending, even as oil prices rise. The Finance Ministry has indicated it will deliver more cash handouts next year - an election year - should fuel prices remain high, thus boosting retail spending in the country.

One dark cloud on the horizon though is the glut in the property market, with the central bank saying oversupply has reached a 10-year high. The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia has estimated that unsold property is now worth RM35.5 billion.


Thailand: Tourism, exports brighten forecast

The hotel and restaurant sector in Thailand grew a steady 6.7 per cent in the third quarter, propelled by robust foreign and domestic tourism receipts, as well as higher hotel occupancy.
The hotel and restaurant sector in Thailand grew a steady 6.7 per cent in the third quarter, propelled by robust foreign and domestic tourism receipts, as well as higher hotel occupancy. PHOTO: EPA-EFE

The evening rays are just flooding into the Bangkok hotel lobby as a guest in T-shirt and bermudas walks past its sliding doors. Stacked high in his arms are gift boxes from luxury brands like Louis Vuitton and Burberry.

This is just another day for Modena by Fraser hotel, where leisure travellers make up 60 per cent of the guests.

"They walk around and try Thai food and, most importantly, shop - (for) both luxury products and Thai products. All the guests come to Thailand for shopping," its general manager Piyalak Penkunaporn told The Straits Times.

Occupancy at the one-year-old hotel grew 10 per cent in the July to September period over the preceding quarter, and is expected to grow by at least the same figure in its second year of operation, she said.

The hotel and restaurant sector in South-east Asia's second-biggest economy grew a steady 6.7 per cent in the third quarter, propelled by robust foreign and domestic tourism receipts, as well as higher hotel occupancy. The sector is one of the good performers in the Thai economy that helped push overall gross domestic product growth to a higher-than-expected 4.3 per cent in the July to September period.

Other star performers in the third quarter were exports, which grew 12.5 per cent in tandem with the economic expansion of trading partners and higher commodity prices in the world market.

Private consumption by Thailand's 68 million people grew 3.1 per cent in the third quarter, creeping up from 3 per cent in the preceding period.

The National Economic And Social Development Board expects the Thai economy to expand between 3.6 per cent and 4.6 per cent next year. But economists warn that the global economic outlook that is driving positive sentiments in Thailand could change.

Dr Benjarong Suwankiri from TMB Bank told ST: "Resurfacing political risks across the globe (in the European Union, Saudi Arabia, and United States) could hamper sentiments towards global economic growth."

Domestically, one big unknown is whether political conflict will arise after an election which Prime Minister Prayut Chan-o-cha has said would be held next November.

While economists expect public investment to rise next year, Mr Charnon Boonnuch from Tisco Economic Strategy Unit warns that there may be further delays if the major infrastructure projects are not started before the next election.

Private consumption by Thailand's 68 million people grew 3.1 per cent in the third quarter, creeping up from 3 per cent in the preceding period.


Philippines: Economy whets consumer appetite

Long queues at a Chooks To Go outlet outside Manila. The Philippines' largest rotisserie chicken chain has over 1,500 kiosks across the country, and its popularity has been a symbol of high consumer demand.
Long queues at a Chooks To Go outlet outside Manila. The Philippines' largest rotisserie chicken chain has over 1,500 kiosks across the country, and its popularity has been a symbol of high consumer demand. ST PHOTO: RAUL DANCEL

When people are happy, they tend to go out more to enjoy themselves.

Just ask Chooks To Go. The Philippines' largest rotisserie chicken chain has over 1,500 kiosks scattered across the archipelago of 100 million people. Like most food companies here, it barely winces amid downturns and weathered the bird flu worries earlier this year.

Today, the strong economy is helping its push to expand its other brands, including two more roasteries, Uling Roasters, which uses flavours created for a planned African foray, and Reyal, which has less conventional flavours made from honey, chilli pepper and garlic.

"Filipinos always love good food," Mr Mel Orencia, brand development manager at Chooks To Go, told The Straits Times. "In fact, their appetite for the coming holiday will be more intense, so we expect record-breaking revenues this December."

Economists say consumer demand is still the main growth driver. Money from millions of Filipinos abroad and a still-burgeoning outsourcing industry continues to pour in. There was also a bump in exports in the third quarter.

That money, in turn, is being spent on items from luxury items to essentials like clothing and food.

"We are in a favourable environment. I believe (growth) is doing us a lot of favour," Mr Orencia said.

Gross domestic product clocked year-on-year growth of 6.9 per cent in the third quarter, beating analysts' expectations of 6.6 per cent.

That made the Philippines the second-fastest-growing economy in Asia, behind only Vietnam, which recorded 7.5 per cent in the third quarter, and outpacing China's 6.8 per cent.

Said Economic Planning Secretary Ernesto Pernia: "With a year-to-date growth average at 6.7 per cent, we are optimistic that we are on track in meeting the full-year target range of 6.5 per cent to 7.5 per cent GDP growth for 2017."

Mr Pernia said he expects the coming years to be as robust, as the government begins rolling out projects lined up under President Rodrigo Duterte's ambitious eight-trillion-peso "Build, Build, Build" infrastructure programme.

Still, his predecessor Cielito Habito advised caution, saying that while third-quarter consumer spending remained healthy, growth in private consumer spending, which accounts for 40 per cent of total spending, had eased from 7.5 per cent last year to 5.6 per cent this year, probably due to rising prices.

Government expenditure also slowed from 9.6 per cent to 5.3 per cent. "It was actually exports that saved the day, with a doubling in its growth from 9.9 per cent to 19.2 per cent," said Mr Habito.

"What does it all mean? Achieving our desired growth path will entail getting households, government and business firms to spend more, and faster. That means making good on 'Build, Build, Build' and ensuring a better investment climate, among other things," he said.


Vietnam: Fastest-growing in the region

Vietnamese workers moving baskets of shrimp at the Khanh Sung Seafood Company in the My Xuyen district in southern Vietnam. The fishery sector was among the industries that helped the country's economy expand 7.46 per cent from July to September.
Vietnamese workers moving baskets of shrimp at the Khanh Sung Seafood Company in the My Xuyen district in southern Vietnam. The fishery sector was among the industries that helped the country's economy expand 7.46 per cent from July to September. PHOTO: AFP

Rice wine and dried fruit are staples during the exchange of gifts during Tet, or the Vietnamese New Year. In recent years, some locals have begun giving organic produce as gifts, as rising incomes whet the appetite for these premium products.

Ms Pham Phuong Thao, the chief executive officer of organic product distributor Organica, has seen a steady rise in the number of customers and change in their spending habits over its four-year history.

"Their expenditure has jumped," she told The Straits Times. "They do not only buy organic food for infants, but also for their elderly parents. And now they buy for themselves, for their daily consumption."

Vietnam's economy expanded a sizzling 7.46 per cent from July to September, supported by strong growth in its agriculture, forestry and fishery sector, its industry and construction sector, as well as its service sector.

The growth figure is the strongest among the 10 economies of South-east Asia.

Wholesale and retail trade , which forms part of its service sector, grew by 8.16 per cent from the first nine months of this year over the same period last year.

Manufacturing, meanwhile, grew 12.77 per cent from January to September over the same period last year, while construction expanded 7.17 per cent.

Business activity has been lively, with over 93,000 new enterprises registered in the first nine months of the year, an increase of 15.4 per cent from last year.

Dr Tran Dinh Thien, who heads the Vietnam Economics Institute, told The Straits Times: "The government has been removing constraints on businesses, so many sectors are expected to improve."

In July, Vietnam's central bank unexpectedly cut lending rates to boost economic growth, leading to worries of higher inflation in the nation of 93 million people. The State Bank of Vietnam cut its refinancing rate by 25 basis points to 6.25 per cent, for example.

Vietnam's General Statistics Office said in late September that the country was on track to achieving its full-year growth target of 6.7 per cent.