1 00:00:05,989 --> 00:00:08,770 Speaker 1: Welcome to Kobe Time, a podcast series on markets and 2 00:00:08,779 --> 00:00:12,239 Speaker 1: Economies from Devious Group research. I'm Tambe, chief economist. Welcoming 3 00:00:12,250 --> 00:00:14,770 Speaker 1: you to our 131st episode 4 00:00:15,779 --> 00:00:19,340 Speaker 1: at CBI time. Repeat guests are rare and repeat guests 5 00:00:19,350 --> 00:00:22,780 Speaker 1: within a year. It's never happened, but today we will 6 00:00:22,790 --> 00:00:25,879 Speaker 1: make an exception. Charles Oron was our guest last November. 7 00:00:25,889 --> 00:00:29,940 Speaker 1: On episode 112, we talked about China and Southeast Asia 8 00:00:29,950 --> 00:00:33,630 Speaker 1: in that episode. And after that, we talked and we 9 00:00:33,639 --> 00:00:37,849 Speaker 1: decided to do a collaboration. So today's podcast is about 10 00:00:37,860 --> 00:00:39,779 Speaker 1: the outcome of that collaboration, 11 00:00:40,500 --> 00:00:43,459 Speaker 1: Charles Orson founded, ran and grew BA in Southeast Asia 12 00:00:43,470 --> 00:00:47,559 Speaker 1: from 1993 to 2007. He's presently the chair of the 13 00:00:47,700 --> 00:00:50,509 Speaker 1: S Sana Council, a Singapore based Think tank backed by 14 00:00:50,520 --> 00:00:53,720 Speaker 1: Monks Hill Ventures. It is focused on growth potential of 15 00:00:53,729 --> 00:00:57,299 Speaker 1: Southeast Asia. Charlie. Welcome back to Copy Time. Thank you, Turner. 16 00:00:57,900 --> 00:00:59,799 Speaker 1: It's great to have you Charlie. So you and I 17 00:00:59,810 --> 00:01:02,490 Speaker 1: had a couple of conversations late last year. And then 18 00:01:02,500 --> 00:01:04,440 Speaker 1: at the beginning of this year, we got some people 19 00:01:04,449 --> 00:01:07,489 Speaker 1: together and we started doing some work. What did we do, Charlie? 20 00:01:08,620 --> 00:01:11,129 Speaker 2: Well, we had, I guess the journey began two years 21 00:01:11,139 --> 00:01:14,269 Speaker 2: ago when we did the Southeast State, the first edition 22 00:01:14,279 --> 00:01:16,598 Speaker 2: of the report and we looked out 10 years 23 00:01:17,330 --> 00:01:19,510 Speaker 2: to forecast growth and to do that, we had to 24 00:01:19,519 --> 00:01:21,989 Speaker 2: look historically at what had gone on in the region. 25 00:01:22,510 --> 00:01:24,430 Speaker 2: Uh I think we did a good job, you know, 26 00:01:24,440 --> 00:01:27,139 Speaker 2: for a first effort, let's say I give myself a 27 00:01:27,150 --> 00:01:29,750 Speaker 2: b uh but you could see a couple of gaps. 28 00:01:29,760 --> 00:01:33,239 Speaker 2: I think one was, none of us had a really 29 00:01:33,250 --> 00:01:34,589 Speaker 2: strong economics background. 30 00:01:35,230 --> 00:01:37,959 Speaker 2: Uh Number two, the way a consulting firm looks at 31 00:01:37,970 --> 00:01:40,160 Speaker 2: capital markets is different than the way a bank looks 32 00:01:40,169 --> 00:01:43,129 Speaker 2: at capital markets. I think number three, I kind of 33 00:01:43,139 --> 00:01:44,489 Speaker 2: miss deep collaboration. 34 00:01:45,199 --> 00:01:47,739 Speaker 2: Best work I did at Bain was always with somebody else. 35 00:01:48,250 --> 00:01:50,769 Speaker 2: Uh Even the the large accounts that I worked on, 36 00:01:50,779 --> 00:01:53,389 Speaker 2: I always co led them, which wasn't the Norman Bin, 37 00:01:53,400 --> 00:01:55,650 Speaker 2: but it was the way I preferred to work. So 38 00:01:55,660 --> 00:01:58,180 Speaker 2: I approached you to see if you'd be interested in collaborating. 39 00:01:58,190 --> 00:02:00,660 Speaker 2: And uh I was lucky to say you said yes 40 00:02:00,669 --> 00:02:03,540 Speaker 2: and sure enough, I think it's fit like a glove. 41 00:02:03,550 --> 00:02:07,089 Speaker 2: Um I think where your your expertise in economics with 42 00:02:07,099 --> 00:02:10,809 Speaker 2: the IMF with D BS perfectly complements what, what my 43 00:02:10,820 --> 00:02:12,770 Speaker 2: background in business, some economics 44 00:02:13,080 --> 00:02:17,190 Speaker 2: and also thinking through uh market entry, which is probably 45 00:02:17,199 --> 00:02:20,350 Speaker 2: one of the most relevant lenses for, for looking at 46 00:02:20,360 --> 00:02:21,258 Speaker 2: country strategy, 47 00:02:21,860 --> 00:02:25,580 Speaker 1: right? So just for the viewers and listeners edification, the 48 00:02:25,589 --> 00:02:30,070 Speaker 1: way it worked was um Charlie brought in Anana Council 49 00:02:30,080 --> 00:02:32,179 Speaker 1: and his contacts and resources from Bain. 50 00:02:32,449 --> 00:02:35,959 Speaker 1: And Bain was kind enough to assign episodically full time 51 00:02:35,970 --> 00:02:38,490 Speaker 1: consultants to work on the project. We had support from 52 00:02:38,500 --> 00:02:41,839 Speaker 1: Glas Baig whos at San Council and then Ma T 53 00:02:41,949 --> 00:02:44,770 Speaker 1: Yen Hunt Chu and Radhika Rao, three economists from D 54 00:02:44,779 --> 00:02:49,169 Speaker 1: BS site came together. And Charlie, the idea was initially 55 00:02:49,199 --> 00:02:52,470 Speaker 1: that you with your experience and with support from Bain 56 00:02:52,479 --> 00:02:56,250 Speaker 1: would draw a picture of what brings Southeast Asia where 57 00:02:56,258 --> 00:02:57,380 Speaker 1: it is today. Is it 58 00:02:58,460 --> 00:03:00,050 Speaker 2: when you look back 59 00:03:00,979 --> 00:03:05,660 Speaker 2: the golden years for Southeast Asia were really before 1997 60 00:03:06,250 --> 00:03:10,660 Speaker 2: those are the years where economies were growing. 78, even 61 00:03:10,669 --> 00:03:14,429 Speaker 2: 10 plus percent a year. We've forgotten that um maybe 62 00:03:14,440 --> 00:03:16,449 Speaker 2: China had a few years like that, but it's been 63 00:03:16,460 --> 00:03:18,740 Speaker 2: 30 years since Southeast Asia has had that, that kind 64 00:03:18,750 --> 00:03:19,270 Speaker 2: of growth. 65 00:03:20,360 --> 00:03:23,339 Speaker 2: And we asked ourselves, you know, why is that, why, 66 00:03:23,350 --> 00:03:26,740 Speaker 2: why has Southeast Asia not slowed the level of Latin 67 00:03:26,750 --> 00:03:31,079 Speaker 2: America or the Middle East or, or Africa? But nonetheless, 68 00:03:31,089 --> 00:03:33,559 Speaker 2: is really not grown the way that China or India 69 00:03:33,570 --> 00:03:36,830 Speaker 2: or other developing markets have and certainly given its potential, 70 00:03:36,839 --> 00:03:41,220 Speaker 2: it feels like it was falling short of potential. What are, what, 71 00:03:41,229 --> 00:03:43,539 Speaker 2: what we came up with at the time was that 72 00:03:43,550 --> 00:03:47,600 Speaker 2: Southeast Asia had focused a bit more on stability than 73 00:03:47,610 --> 00:03:48,419 Speaker 2: on growth 74 00:03:48,860 --> 00:03:51,479 Speaker 2: and largely as a result of the 97 crisis and 75 00:03:51,490 --> 00:03:53,199 Speaker 2: that had carried through all the way to the state 76 00:03:53,740 --> 00:03:57,669 Speaker 2: when we did this report two years ago, it was 77 00:03:57,679 --> 00:03:59,750 Speaker 2: just coming out of COVID, we were just coming out 78 00:03:59,759 --> 00:04:00,199 Speaker 2: of COVID 79 00:04:01,130 --> 00:04:04,570 Speaker 2: and it was hard to escape that. It was hard 80 00:04:04,580 --> 00:04:07,630 Speaker 2: to look out. You, you call it recency bias, I think. 81 00:04:07,880 --> 00:04:09,509 Speaker 2: But it was hard to look out 10 years when 82 00:04:09,520 --> 00:04:12,050 Speaker 2: you've just been through the worst crisis in the world in, 83 00:04:12,059 --> 00:04:15,389 Speaker 2: in years. And it affected the CO co the region 84 00:04:15,399 --> 00:04:17,799 Speaker 2: in an unusual way and it affected different countries at 85 00:04:17,809 --> 00:04:21,049 Speaker 2: different levels depending on, you know, the mix of tourism 86 00:04:21,059 --> 00:04:23,709 Speaker 2: and export and how dependent they were on China versus us, 87 00:04:23,720 --> 00:04:24,178 Speaker 2: et cetera. 88 00:04:24,738 --> 00:04:28,059 Speaker 2: Um The good news is two years later, we could 89 00:04:28,070 --> 00:04:31,089 Speaker 2: see that the green shoots that were evident two years 90 00:04:31,100 --> 00:04:32,959 Speaker 2: ago have prospered 91 00:04:33,649 --> 00:04:36,920 Speaker 2: and in fact, a number of the transitions in government 92 00:04:36,928 --> 00:04:40,279 Speaker 2: that have taken place have led us to believe that 93 00:04:40,290 --> 00:04:43,250 Speaker 2: most Southeast Asian governments are going to be more pro 94 00:04:43,339 --> 00:04:46,149 Speaker 2: growth in the next 4 to 5 years. We really 95 00:04:46,160 --> 00:04:49,010 Speaker 2: can't see beyond that politically than they have been for 96 00:04:49,019 --> 00:04:51,390 Speaker 2: the last 20 or 30. We see that particularly in 97 00:04:51,399 --> 00:04:56,209 Speaker 2: the Philippines under Marcos Malaysia, under Anwar. Uh I think 98 00:04:56,220 --> 00:04:59,450 Speaker 2: in Indonesia, they started earlier, Prabowo was considered very pro 99 00:04:59,470 --> 00:05:01,670 Speaker 2: growth and sorry. Um Jacoby 100 00:05:01,880 --> 00:05:05,260 Speaker 2: and Prabowo is committed to following his footsteps and then 101 00:05:05,269 --> 00:05:08,260 Speaker 2: Singapore has always been pro growth and Lawrence Wong may 102 00:05:08,269 --> 00:05:11,500 Speaker 2: try some new things, but it's exciting to see where 103 00:05:11,510 --> 00:05:15,179 Speaker 2: he plans to head. Um Vietnam seems to have just 104 00:05:16,059 --> 00:05:19,399 Speaker 2: secured a more stable outcome after two years of some, 105 00:05:19,529 --> 00:05:21,559 Speaker 2: you know, a lot of changes in the, both the 106 00:05:21,570 --> 00:05:24,440 Speaker 2: Prime Minister and the President. And um and there's a 107 00:05:24,450 --> 00:05:26,600 Speaker 2: lot of uh a lot of the insiders we talked 108 00:05:26,609 --> 00:05:29,399 Speaker 2: to who are quite optimistic that Vietnam is now ready 109 00:05:29,410 --> 00:05:32,089 Speaker 2: to kind of have pursue stable growth for the next 110 00:05:32,100 --> 00:05:34,410 Speaker 2: 5 to 10 years. So it's a different time than 111 00:05:34,420 --> 00:05:38,350 Speaker 2: two years ago. And so even though the approach was similar, 112 00:05:38,450 --> 00:05:42,118 Speaker 2: our optimism has increased in that two year period. 113 00:05:42,450 --> 00:05:45,790 Speaker 2: And so for the first time, in a long time, 114 00:05:45,980 --> 00:05:48,540 Speaker 2: we are willing to say, we believe Southeast Asia will 115 00:05:48,549 --> 00:05:51,959 Speaker 2: grow faster than China for the next 10 years. And 116 00:05:51,970 --> 00:05:55,170 Speaker 2: in addition, in absolute terms, will attract more foreign direct 117 00:05:55,178 --> 00:05:58,890 Speaker 2: investment than China. And that was a hypothesis a year 118 00:05:58,899 --> 00:06:01,989 Speaker 2: or two ago. But we decided we weren't ready to, 119 00:06:02,000 --> 00:06:05,019 Speaker 2: to lay it in uh to put it in on print. 120 00:06:05,029 --> 00:06:05,760 Speaker 2: And now we are 121 00:06:06,609 --> 00:06:09,260 Speaker 1: so Charlie uh just going back to the process over 122 00:06:09,269 --> 00:06:11,670 Speaker 1: the last six months on San Council Ba 123 00:06:11,750 --> 00:06:14,428 Speaker 1: D BS got together, we did quite a bit of 124 00:06:14,440 --> 00:06:17,578 Speaker 1: data work. You sort of look back at some of 125 00:06:17,589 --> 00:06:20,529 Speaker 1: the analytics from your earlier report, you sort of refresh them, 126 00:06:20,540 --> 00:06:23,329 Speaker 1: you have been on a listening tour around the world 127 00:06:23,549 --> 00:06:25,500 Speaker 1: and you brought in some of those perspectives from those 128 00:06:25,510 --> 00:06:27,928 Speaker 1: who had read your earlier report and then we went 129 00:06:27,940 --> 00:06:31,130 Speaker 1: ahead and wrote the report down. We now have a website. 130 00:06:31,140 --> 00:06:32,719 Speaker 1: It will be in the show notes, the link and 131 00:06:32,730 --> 00:06:34,329 Speaker 1: the visualization and all the work in there. 132 00:06:34,809 --> 00:06:39,269 Speaker 1: The title of a report is navigating high winds. You 133 00:06:39,279 --> 00:06:43,209 Speaker 1: have some views on high winds, not just from geopolitics, 134 00:06:43,220 --> 00:06:45,329 Speaker 1: but just very specifically vis a vis China. So let's 135 00:06:45,339 --> 00:06:46,730 Speaker 1: start with that discussion, 136 00:06:46,959 --> 00:06:50,339 Speaker 2: right? So high winds, unfortunately, they are not all tail winds, 137 00:06:50,470 --> 00:06:53,470 Speaker 2: but fortunately, they're not all head winds as well. 138 00:06:54,260 --> 00:06:54,539 Speaker 2: Yeah, 139 00:06:55,369 --> 00:06:57,910 Speaker 2: there are a lot of analysts including us who are 140 00:06:57,920 --> 00:07:01,178 Speaker 2: optimistic about the prospects for the next few years because 141 00:07:01,190 --> 00:07:03,988 Speaker 2: of what many analysts refer to as China plus one. 142 00:07:04,459 --> 00:07:07,849 Speaker 2: China plus one is the idea that being dependent on 143 00:07:07,859 --> 00:07:11,950 Speaker 2: China for all of your sourcing is a mistake. 144 00:07:12,529 --> 00:07:14,769 Speaker 2: Now, it could be a mistake because you have all 145 00:07:14,779 --> 00:07:16,989 Speaker 2: your eggs in one basket. Uh It could be the 146 00:07:17,000 --> 00:07:20,269 Speaker 2: the wonderful place to source from. But uh in, in 147 00:07:20,279 --> 00:07:23,239 Speaker 2: times like COVID, when you could had trouble getting exports 148 00:07:23,250 --> 00:07:25,890 Speaker 2: out or you, your management couldn't fly into the market. 149 00:07:25,899 --> 00:07:29,029 Speaker 2: You you realize that having your eggs in different baskets 150 00:07:29,040 --> 00:07:32,410 Speaker 2: made more sense as a as a manufacturer. A second 151 00:07:32,420 --> 00:07:33,299 Speaker 2: could be political. 152 00:07:33,609 --> 00:07:37,070 Speaker 2: Um You could be either under guidance from your respective 153 00:07:37,079 --> 00:07:40,339 Speaker 2: government or just have your own concerns and decide you 154 00:07:40,350 --> 00:07:42,309 Speaker 2: want at least some of your production outside of China. 155 00:07:42,320 --> 00:07:45,100 Speaker 2: And so some people are diversifying for that reason. The 156 00:07:45,109 --> 00:07:47,950 Speaker 2: third could be, your costs are escalating in China. Uh 157 00:07:47,959 --> 00:07:51,190 Speaker 2: China is, has started to decline in terms of its 158 00:07:51,200 --> 00:07:55,200 Speaker 2: working age population. Um There's a great competition for the 159 00:07:55,209 --> 00:07:57,690 Speaker 2: best workers in China. And so people have seen uh 160 00:07:57,700 --> 00:08:01,989 Speaker 2: wage inflation in China, that's uh ahead of inflation in China. 161 00:08:02,209 --> 00:08:04,540 Speaker 2: And that has caused some concerns particularly at the very 162 00:08:04,549 --> 00:08:08,059 Speaker 2: low end, semi skilled or unskilled labor value, a low 163 00:08:08,070 --> 00:08:12,429 Speaker 2: value added and something that naturally falls now outside of China. 164 00:08:12,850 --> 00:08:16,130 Speaker 2: Um I think the last could be tariffs which sometimes 165 00:08:16,140 --> 00:08:18,390 Speaker 2: is related to national security but not always you, it'd 166 00:08:18,399 --> 00:08:20,459 Speaker 2: be hard for me to argue that solar panels or 167 00:08:20,470 --> 00:08:23,480 Speaker 2: wind turbines are a national security issue is more a 168 00:08:23,489 --> 00:08:27,500 Speaker 2: desire to protect local industries, same with electric vehicles or batteries. 169 00:08:27,769 --> 00:08:31,380 Speaker 2: And as a result, not just us firms, but Chinese 170 00:08:31,390 --> 00:08:35,880 Speaker 2: firms are being forced to establish bases offshore uh in 171 00:08:35,890 --> 00:08:39,909 Speaker 2: order to not evade tariffs, but to comply with law 172 00:08:40,059 --> 00:08:42,829 Speaker 2: and use a different export base in order to, to 173 00:08:42,840 --> 00:08:47,968 Speaker 2: uh receive lower tariff uh paid lower tariff levels. So it's, 174 00:08:47,979 --> 00:08:50,400 Speaker 2: it's all very rational in a, in a world where 175 00:08:50,520 --> 00:08:52,949 Speaker 2: uh some markets are becoming more protectionist. 176 00:08:53,190 --> 00:08:55,890 Speaker 2: It doesn't matter what your reason is. The outcome is, 177 00:08:55,900 --> 00:08:58,450 Speaker 2: you're going to move some of your manufacturing outside of China. 178 00:08:59,219 --> 00:09:01,598 Speaker 2: Now, that's a nice tailwind. 179 00:09:02,369 --> 00:09:05,640 Speaker 2: Southeast Asia has always been friendly to M and C investment. 180 00:09:06,289 --> 00:09:09,280 Speaker 2: Um One thing people forget is that in the eighties 181 00:09:09,289 --> 00:09:12,770 Speaker 2: and nineties while Korea and Japan were on a tier 182 00:09:12,780 --> 00:09:14,959 Speaker 2: in terms of growth. And so so was Taiwan, at 183 00:09:14,969 --> 00:09:18,460 Speaker 2: that point, they weren't that receptive to foreign investment. It 184 00:09:18,469 --> 00:09:20,590 Speaker 2: was very hard to invest in the markets. A lot 185 00:09:20,599 --> 00:09:23,030 Speaker 2: of hurdles, hard to participate in the domestic market. 186 00:09:23,559 --> 00:09:27,070 Speaker 2: And suddenly starting with Singapore, Southeast Asia threw up its 187 00:09:27,080 --> 00:09:29,179 Speaker 2: openness market and said we want you to come here 188 00:09:29,190 --> 00:09:32,079 Speaker 2: e especially if you're there to export, there was all 189 00:09:32,090 --> 00:09:34,929 Speaker 2: kinds of incentives, you could have 100% ownership. There was 190 00:09:35,130 --> 00:09:38,000 Speaker 2: uh they built infrastructure for you. And so some of 191 00:09:38,010 --> 00:09:41,169 Speaker 2: the most interesting investments in the world landed here in 192 00:09:41,179 --> 00:09:44,210 Speaker 2: Southeast Asia. It didn't take much, it took cheap land, 193 00:09:44,219 --> 00:09:47,819 Speaker 2: cheap taxes, cheap labor, but mainly a willingness to allow 194 00:09:47,830 --> 00:09:49,119 Speaker 2: M and CS to invest here. 195 00:09:49,539 --> 00:09:53,099 Speaker 2: Um It was open for business over the next 30 years, 196 00:09:53,109 --> 00:09:57,119 Speaker 2: it got a lot harder. Suddenly others started to copy 197 00:09:57,130 --> 00:10:00,718 Speaker 2: this approach of trying to attract M and C investment 198 00:10:00,729 --> 00:10:03,179 Speaker 2: as supposed to resist it. And the most successful dose 199 00:10:03,190 --> 00:10:03,679 Speaker 2: was China 200 00:10:04,369 --> 00:10:07,400 Speaker 2: and China went from very difficult to do business in 201 00:10:07,409 --> 00:10:10,510 Speaker 2: when I was working in China in the nineties. Um 202 00:10:10,520 --> 00:10:14,609 Speaker 2: it was very difficult to get 100% ownership of an entity. 203 00:10:14,619 --> 00:10:17,150 Speaker 2: It was hard to get access to the local market. 204 00:10:17,280 --> 00:10:19,859 Speaker 2: You were often you found it difficult to operate for 205 00:10:19,869 --> 00:10:24,289 Speaker 2: various reasons. Um The road transport was not good. Rail 206 00:10:24,299 --> 00:10:28,250 Speaker 2: transport was very difficult to access and very slow. So you, you, 207 00:10:28,260 --> 00:10:31,319 Speaker 2: you went to China because you saw the long term prospect, 208 00:10:31,330 --> 00:10:32,468 Speaker 2: but it wasn't cheaper 209 00:10:32,729 --> 00:10:35,580 Speaker 2: and, and then gradually it all changed. And now we're 210 00:10:35,590 --> 00:10:40,659 Speaker 2: in a situation where the competitiveness of China is just 211 00:10:40,669 --> 00:10:44,590 Speaker 2: staggering to people who are not deeply involved in manufacturing, 212 00:10:45,049 --> 00:10:47,299 Speaker 2: the scale of the facilities you put in. There are 213 00:10:47,309 --> 00:10:49,909 Speaker 2: usually the largest you have in the world, the scale 214 00:10:49,919 --> 00:10:53,270 Speaker 2: of the ecosystem supplying you, whether it's a chemical provider 215 00:10:53,280 --> 00:10:56,659 Speaker 2: or certain kinds of components or accessories. A lot of 216 00:10:56,669 --> 00:10:58,689 Speaker 2: those are produced in China and it's cheapest to get 217 00:10:58,700 --> 00:11:01,640 Speaker 2: them in China. The the facilities to help you export 218 00:11:01,650 --> 00:11:03,590 Speaker 2: are some of the best in the world. Now, you 219 00:11:03,599 --> 00:11:06,309 Speaker 2: can access almost any port in the world directly from China. 220 00:11:06,479 --> 00:11:08,549 Speaker 2: And so the list goes on, 221 00:11:08,760 --> 00:11:12,359 Speaker 2: but it's also generally very easy to work with government 222 00:11:12,369 --> 00:11:14,478 Speaker 2: in China. If you're setting up some kind of manufacturing 223 00:11:14,489 --> 00:11:17,479 Speaker 2: facility and you're not just working with the national government. 224 00:11:17,489 --> 00:11:19,869 Speaker 2: In fact, rarely do you interact with the national government. 225 00:11:19,880 --> 00:11:24,380 Speaker 2: It's usually you're choosing between different kind of city ecosystems 226 00:11:24,679 --> 00:11:27,780 Speaker 2: that will back you and support you. But you have 227 00:11:27,789 --> 00:11:29,539 Speaker 2: to be careful who you pick because just as you 228 00:11:29,549 --> 00:11:33,140 Speaker 2: pick one to support you, others may then be annoyed 229 00:11:33,159 --> 00:11:36,270 Speaker 2: that you chose one of their rivals. There's tremendous rivalry 230 00:11:36,280 --> 00:11:40,289 Speaker 2: between the different cities in China to attract investment and 231 00:11:40,299 --> 00:11:44,679 Speaker 2: to see the companies that invest locally prosper. So China 232 00:11:44,690 --> 00:11:49,090 Speaker 2: has become a big competitor, competitor So I was talking, 233 00:11:49,099 --> 00:11:51,250 Speaker 2: I was in one of the Southeast Asian countries late 234 00:11:51,260 --> 00:11:52,900 Speaker 2: last week talking to a 235 00:11:53,390 --> 00:11:54,890 Speaker 2: some a minister there. 236 00:11:55,669 --> 00:11:56,609 Speaker 2: And he said, look 237 00:11:57,429 --> 00:11:59,359 Speaker 2: 30 years ago, we were almost the only game in 238 00:11:59,369 --> 00:12:02,250 Speaker 2: town Vietnam didn't exist. China didn't exist. We really just 239 00:12:02,260 --> 00:12:07,609 Speaker 2: competed against Singapore some degree, Philippines, Malaysia and Indonesia. And 240 00:12:07,619 --> 00:12:10,099 Speaker 2: now we compete with at least 10 countries. We, we 241 00:12:10,109 --> 00:12:12,960 Speaker 2: compete with Mexico, we compete with India. We compete with 242 00:12:12,969 --> 00:12:15,869 Speaker 2: different provinces in China. We compete with Eastern Europe. So 243 00:12:15,880 --> 00:12:19,010 Speaker 2: nothing falls into our lap. We have to win everything. 244 00:12:19,280 --> 00:12:22,909 Speaker 2: So while the there are opportunities that are coming out 245 00:12:22,919 --> 00:12:26,989 Speaker 2: of China, they are heavily contested and nothing will fall 246 00:12:27,000 --> 00:12:28,260 Speaker 2: into a country's lap. 247 00:12:28,900 --> 00:12:32,119 Speaker 1: I think your line that is very evocative of that 248 00:12:32,130 --> 00:12:35,750 Speaker 1: issue is that the era of just drawing investment through 249 00:12:35,760 --> 00:12:38,679 Speaker 1: cheap land, labor doesn't work anymore. You got to do 250 00:12:38,690 --> 00:12:43,320 Speaker 1: more than that. A there is this hyper competitiveness within China. 251 00:12:43,380 --> 00:12:45,859 Speaker 1: So just because labor cost is rising in China does 252 00:12:45,869 --> 00:12:48,200 Speaker 1: not guarantee that the capital would flow out. And if 253 00:12:48,210 --> 00:12:51,000 Speaker 1: even if it does, you better offer some of those 254 00:12:51,010 --> 00:12:53,010 Speaker 1: competitive aspect, otherwise not going to come. Yes. 255 00:12:53,119 --> 00:12:55,900 Speaker 2: Yes. And the one probably the biggest 256 00:12:56,900 --> 00:13:00,119 Speaker 2: tail wind in Southeast Asia is the attitude of government 257 00:13:00,130 --> 00:13:01,320 Speaker 2: to the MNC S. 258 00:13:02,109 --> 00:13:04,700 Speaker 2: But I would say probably the biggest headwind to Southeast 259 00:13:04,710 --> 00:13:08,750 Speaker 2: Asia is the general education level of the population. And 260 00:13:08,760 --> 00:13:11,260 Speaker 2: there are objective ways to assess that the piece of 261 00:13:11,270 --> 00:13:14,630 Speaker 2: scores which take place in eighth grade. There are indices 262 00:13:14,640 --> 00:13:18,500 Speaker 2: of human capital, competitiveness, et cetera. But it's also experience 263 00:13:18,510 --> 00:13:21,500 Speaker 2: of people on the ground. Those that are educated are 264 00:13:21,510 --> 00:13:23,510 Speaker 2: some of the best. It's not a, it's not a 265 00:13:23,520 --> 00:13:25,460 Speaker 2: raw capability, there's nothing there. 266 00:13:25,710 --> 00:13:28,770 Speaker 2: But the reality is the amount spent on education, the 267 00:13:28,780 --> 00:13:34,289 Speaker 2: availability to the full mass population is limited everywhere but 268 00:13:34,299 --> 00:13:35,250 Speaker 2: Singapore and Vietnam. 269 00:13:35,940 --> 00:13:40,020 Speaker 2: And so one reason we have seen Vietnam outperform the 270 00:13:40,030 --> 00:13:44,339 Speaker 2: other Southeast Asian countries we believe is they have everything else, right? 271 00:13:44,349 --> 00:13:49,479 Speaker 2: But they have a far more educated general population than Philippines, Indonesia, 272 00:13:49,489 --> 00:13:50,359 Speaker 2: Thailand and Malaysia. 273 00:13:51,159 --> 00:13:54,429 Speaker 2: And also their English speaking skills tend to be above 274 00:13:54,440 --> 00:13:57,390 Speaker 2: those countries as well for the mass population. And we 275 00:13:57,400 --> 00:13:59,478 Speaker 2: think that's made it easier for a lot of MC 276 00:13:59,489 --> 00:14:01,640 Speaker 2: to operate there. And therefore they've, they've had a better 277 00:14:01,650 --> 00:14:04,590 Speaker 2: experience and they've been willing to, to invest again. 278 00:14:05,830 --> 00:14:11,169 Speaker 1: Um Charlie, a skeptic would look at Southeast Asia's track record, 279 00:14:11,179 --> 00:14:14,520 Speaker 1: say after the Asian financial crisis and will say, well, 280 00:14:15,299 --> 00:14:19,440 Speaker 1: they recover from the crisis, they had some growth performance, 281 00:14:19,450 --> 00:14:23,320 Speaker 1: but it doesn't seem like they really embraced manufacturing. So 282 00:14:23,330 --> 00:14:27,359 Speaker 1: talk us through the level of industrialization in South Asia 283 00:14:27,369 --> 00:14:29,039 Speaker 1: and where we are right now. 284 00:14:29,859 --> 00:14:30,150 Speaker 2: If uh 285 00:14:30,820 --> 00:14:33,229 Speaker 2: part of what I'll share is the anecdotal and part 286 00:14:33,239 --> 00:14:35,780 Speaker 2: will be, you know, data. Um 287 00:14:36,380 --> 00:14:39,239 Speaker 2: When I was here in the eighties, 288 00:14:39,890 --> 00:14:42,890 Speaker 2: uh I started work in Singapore in 1986. I was 289 00:14:42,900 --> 00:14:44,989 Speaker 2: doing a lot of work in the oil and gas sector. 290 00:14:45,700 --> 00:14:50,000 Speaker 2: And Singapore already had a leadership position as a what 291 00:14:50,010 --> 00:14:53,000 Speaker 2: we call screen producer, which meant very little of what 292 00:14:53,010 --> 00:14:55,719 Speaker 2: they produced in the local refineries for the local market. 293 00:14:55,979 --> 00:14:57,909 Speaker 2: And depending on what needs, there were, there was suddenly 294 00:14:57,919 --> 00:15:01,340 Speaker 2: a diesel shortage in Thailand or there was a surplus 295 00:15:01,349 --> 00:15:05,070 Speaker 2: of light crude oil from Indonesia back in the days 296 00:15:05,080 --> 00:15:08,359 Speaker 2: when they exported heavily. Um They, the, the, the the 297 00:15:08,369 --> 00:15:12,320 Speaker 2: facility here was so flexible that they could quickly tweak 298 00:15:12,580 --> 00:15:15,080 Speaker 2: the settings on the refinery and produce what was needed 299 00:15:15,090 --> 00:15:17,599 Speaker 2: with the crude that was cheapest and it was, it 300 00:15:17,609 --> 00:15:20,599 Speaker 2: was an arbitrage opportunity. It meant the refineries here were very, 301 00:15:20,609 --> 00:15:25,669 Speaker 2: very profitable. So Indonesia, Malaysia, Thailand all saw this and decided, 302 00:15:25,780 --> 00:15:29,179 Speaker 2: why are we letting Singapore win this? After all, we 303 00:15:29,190 --> 00:15:32,700 Speaker 2: have cheaper land most in those days, Malaysia and Indonesia 304 00:15:32,710 --> 00:15:35,989 Speaker 2: were both major producers of oil. At that point, Thailand 305 00:15:36,000 --> 00:15:38,859 Speaker 2: actually hadn't found significant gas reserves and maybe they found, 306 00:15:38,869 --> 00:15:41,750 Speaker 2: but they weren't being brought to the surface. And so 307 00:15:42,030 --> 00:15:44,200 Speaker 2: they wanted to build large 308 00:15:44,969 --> 00:15:48,700 Speaker 2: refining facilities and neither really succeeded. They, they succeeded in 309 00:15:48,710 --> 00:15:51,780 Speaker 2: building refineries and with some attached chemicals that serve the 310 00:15:51,789 --> 00:15:54,559 Speaker 2: local market, but they weren't able to be a producer 311 00:15:54,570 --> 00:15:55,309 Speaker 2: for the region. 312 00:15:56,400 --> 00:15:59,580 Speaker 2: What also occurred at the time is Taiwan was doubling 313 00:15:59,590 --> 00:16:02,570 Speaker 2: down on their chemicals capability. Korea was as well and 314 00:16:02,580 --> 00:16:04,869 Speaker 2: so was the Middle East. So it was a competitive market. 315 00:16:04,880 --> 00:16:08,359 Speaker 2: It didn't create the kind of margins that maybe you could, 316 00:16:08,369 --> 00:16:12,080 Speaker 2: if you weren't operating a refinery perfectly, you could really 317 00:16:12,090 --> 00:16:12,780 Speaker 2: make money on. 318 00:16:13,539 --> 00:16:15,390 Speaker 2: And that was when I first learned that there was 319 00:16:15,400 --> 00:16:17,640 Speaker 2: a lot more to the where you put a a 320 00:16:17,650 --> 00:16:20,640 Speaker 2: manufacturing facility than low cost labor, low cost land. 321 00:16:21,830 --> 00:16:25,000 Speaker 2: Over the subsequent 20 years, we could see some really 322 00:16:25,010 --> 00:16:27,849 Speaker 2: smart efforts to build manufacturing, but we also saw some 323 00:16:27,859 --> 00:16:31,059 Speaker 2: real failed ones. So for example, Indonesia spent and I 324 00:16:31,070 --> 00:16:34,020 Speaker 2: believe it's correct to say billions of dollars trying to 325 00:16:34,030 --> 00:16:36,739 Speaker 2: develop an aerospace industry under Habibi. 326 00:16:37,109 --> 00:16:40,119 Speaker 2: And I don't believe they may have produced about eight planes, 327 00:16:40,130 --> 00:16:42,700 Speaker 2: but it, it squandered quite a bit of money that 328 00:16:42,710 --> 00:16:44,890 Speaker 2: could have gone into some sectors that would have been 329 00:16:44,900 --> 00:16:48,440 Speaker 2: more appropriate. I don't think Malaysia got a significant payback 330 00:16:48,450 --> 00:16:51,820 Speaker 2: from the proton project, which was again a significant a 331 00:16:51,830 --> 00:16:53,919 Speaker 2: a way of approaching it. So we want our own 332 00:16:53,929 --> 00:16:56,840 Speaker 2: auto industry. We don't want to rely on MN CS. 333 00:16:57,090 --> 00:17:00,750 Speaker 2: Whereas Thailand approached the market by saying, let's attract Japanese 334 00:17:00,760 --> 00:17:03,630 Speaker 2: and C investment in automotive. So they took the best 335 00:17:03,640 --> 00:17:06,349 Speaker 2: players and allowed them to use Thailand as a base 336 00:17:06,359 --> 00:17:09,020 Speaker 2: and gave them more control. And the winner after all 337 00:17:09,030 --> 00:17:12,939 Speaker 2: that was Thailand. Thailand became the leader in producing combustion 338 00:17:12,949 --> 00:17:14,310 Speaker 2: engine vehicles. 339 00:17:14,718 --> 00:17:18,058 Speaker 2: So as you look through different sectors, you can actually 340 00:17:18,068 --> 00:17:20,859 Speaker 2: see that not every step was a misstep, but not 341 00:17:20,869 --> 00:17:24,418 Speaker 2: every step was a solid step towards attracting a sector, 342 00:17:24,428 --> 00:17:27,098 Speaker 2: attracting a promising company, getting them to set it up 343 00:17:27,109 --> 00:17:30,338 Speaker 2: as a base and then continue to invest behind that 344 00:17:30,348 --> 00:17:30,818 Speaker 2: base 345 00:17:32,260 --> 00:17:34,790 Speaker 2: cast forward. And uh 346 00:17:35,449 --> 00:17:37,869 Speaker 2: the big competitors started to become China 347 00:17:38,829 --> 00:17:44,429 Speaker 2: and China started to attract far more investment than Southeast Asia. 348 00:17:44,439 --> 00:17:47,410 Speaker 2: And I I just had this gut feeling that uh 349 00:17:47,420 --> 00:17:50,589 Speaker 2: in the words of Ross Perot who was a famous 350 00:17:50,599 --> 00:17:53,449 Speaker 2: uh independent candidate for president, 351 00:17:53,760 --> 00:17:56,909 Speaker 2: uh he probably was the reason Bill Clinton beat uh 352 00:17:56,920 --> 00:18:00,510 Speaker 2: George Bush senior for his second term because he drew 353 00:18:00,520 --> 00:18:03,109 Speaker 2: away enough votes. But he said the North American free 354 00:18:03,119 --> 00:18:06,479 Speaker 2: Trade agreement will create this massive sucking sound of jobs 355 00:18:06,489 --> 00:18:09,379 Speaker 2: to the South. And, and I, I'm kind of 356 00:18:10,089 --> 00:18:13,430 Speaker 2: perjured that or whatever the right term is. And I 357 00:18:13,439 --> 00:18:15,280 Speaker 2: think we've seen a bit of a sucking sound to 358 00:18:15,290 --> 00:18:18,449 Speaker 2: the north. And so we looked at data on manufacturing 359 00:18:18,459 --> 00:18:22,300 Speaker 2: value added in uh Southeast Asia and we also looked 360 00:18:22,310 --> 00:18:24,140 Speaker 2: at a couple of academic papers, one by a guy 361 00:18:24,150 --> 00:18:27,739 Speaker 2: named Dan Roderick, who's a, who's a phd at, at Harvard. 362 00:18:27,900 --> 00:18:30,188 Speaker 2: And they all led us to the same conclusion that 363 00:18:30,349 --> 00:18:33,010 Speaker 2: the developing world, it it is not just the developed 364 00:18:33,020 --> 00:18:34,859 Speaker 2: world that has lost jobs 365 00:18:35,160 --> 00:18:39,300 Speaker 2: and manufacturing to China, it's also the developing world. And 366 00:18:39,310 --> 00:18:42,659 Speaker 2: his paper was title the premature indus deindustrialization of the 367 00:18:42,670 --> 00:18:45,369 Speaker 2: developing world. And when we looked at the data, we 368 00:18:45,380 --> 00:18:48,139 Speaker 2: saw a similar pattern. But now what's interesting if you 369 00:18:48,150 --> 00:18:50,140 Speaker 2: go into the details of the data which I encourage 370 00:18:50,150 --> 00:18:53,510 Speaker 2: you to do. It's on the website is that Malaysia 371 00:18:53,520 --> 00:18:59,459 Speaker 2: and Singapore and I believe Thailand have started to improve things. 372 00:18:59,949 --> 00:19:05,869 Speaker 2: But Indonesia and the Philippines continued their decline for this entire, since, 373 00:19:05,880 --> 00:19:09,219 Speaker 2: since the early two thousands. So Southeast Asia peaked in 374 00:19:09,229 --> 00:19:11,939 Speaker 2: terms of manufacturing value added in the two thousands, with 375 00:19:11,949 --> 00:19:15,089 Speaker 2: one exception, Vietnam, but three have started to turn the 376 00:19:15,099 --> 00:19:17,448 Speaker 2: corner in the last 10 years. And so it, what 377 00:19:17,459 --> 00:19:22,390 Speaker 2: it told us is good policy and particularly follow through 378 00:19:22,420 --> 00:19:25,520 Speaker 2: on your commitments with Mn CS that have have invested 379 00:19:25,530 --> 00:19:28,290 Speaker 2: in your country will often result in 380 00:19:28,589 --> 00:19:33,449 Speaker 2: continued presence in manufacturing. However, if you don't fall through 381 00:19:33,459 --> 00:19:35,839 Speaker 2: your commitments, if you play games with some of the rules, 382 00:19:35,849 --> 00:19:38,510 Speaker 2: if you make it harder to import parts or chemicals, 383 00:19:38,520 --> 00:19:41,550 Speaker 2: if you force downs streaming into new sectors that they 384 00:19:41,560 --> 00:19:44,909 Speaker 2: hadn't intended to go into, if you cut off exports 385 00:19:44,920 --> 00:19:47,569 Speaker 2: for a period of time, because it will keep prices 386 00:19:47,579 --> 00:19:50,629 Speaker 2: low in the domestic market. All those send signals to 387 00:19:50,640 --> 00:19:53,939 Speaker 2: people that this is not a desirable place to invest 388 00:19:53,949 --> 00:19:55,400 Speaker 2: and that might, you might get away with it if 389 00:19:55,410 --> 00:19:56,729 Speaker 2: there are only three or four options. 390 00:19:57,020 --> 00:19:59,400 Speaker 2: But as, as, as I learned in Thailand last week, 391 00:19:59,410 --> 00:20:02,760 Speaker 2: there are a lot of options for any investor considering investment. 392 00:20:02,910 --> 00:20:06,399 Speaker 2: And so we see continuity and policy following through on 393 00:20:06,410 --> 00:20:11,239 Speaker 2: your commitments, trust is probably the key driver of raising 394 00:20:11,250 --> 00:20:14,119 Speaker 2: both FD I and manufacturing. Value added. 395 00:20:14,949 --> 00:20:18,640 Speaker 1: So Charlie, uh in doing the presentation, we have done 396 00:20:18,650 --> 00:20:22,060 Speaker 1: several presentations already with this report. Um And I've seen 397 00:20:22,069 --> 00:20:25,150 Speaker 1: that people sort set upright when you show the chart 398 00:20:25,160 --> 00:20:27,969 Speaker 1: on the premature destri. So I highly recommend 399 00:20:28,329 --> 00:20:30,669 Speaker 1: uh listeners to the podcast to look up the website. 400 00:20:30,829 --> 00:20:32,579 Speaker 1: But the second area where I see a lot of 401 00:20:32,589 --> 00:20:34,349 Speaker 1: people pay a lot of attention. I think it's gotten 402 00:20:34,359 --> 00:20:37,989 Speaker 1: some newspaper headline also is the fact that majority of 403 00:20:38,000 --> 00:20:40,250 Speaker 1: the FD I that's come into the region over the 404 00:20:40,260 --> 00:20:42,369 Speaker 1: last 5, 1015 years has been the same 405 00:20:42,479 --> 00:20:42,689 Speaker 1: thing. 406 00:20:42,739 --> 00:20:44,978 Speaker 2: Yeah, I, I continue to be surprised by the number. 407 00:20:44,989 --> 00:20:47,630 Speaker 2: In fact, one night I bolted awake in a cold 408 00:20:47,640 --> 00:20:49,849 Speaker 2: sweat thinking what if we got that number wrong because 409 00:20:49,859 --> 00:20:53,069 Speaker 2: it's so glaring. But the data was, or is that 410 00:20:53,079 --> 00:20:57,109 Speaker 2: from 2013 to 2018, Southeast Asia 411 00:20:58,310 --> 00:21:02,050 Speaker 2: uh of Southeast Asia's FD I Singapore attracted 56%. 412 00:21:02,880 --> 00:21:04,979 Speaker 2: And then in the next five years, it went up 413 00:21:04,989 --> 00:21:05,979 Speaker 2: to 62. 414 00:21:07,689 --> 00:21:10,969 Speaker 2: Now this is a net FD I number. Um And, 415 00:21:10,979 --> 00:21:14,040 Speaker 2: but still Singapore is a major investor in other countries. So, 416 00:21:14,050 --> 00:21:17,140 Speaker 2: you know, the net number doesn't necessarily just favor Singapore. 417 00:21:17,819 --> 00:21:21,319 Speaker 2: Um And uh one of one of our council members 418 00:21:21,329 --> 00:21:24,438 Speaker 2: from uh Indonesia, Geeta Weir Jwan. I didn't put it 419 00:21:24,449 --> 00:21:26,719 Speaker 2: well at an investor conference I was at in, in, 420 00:21:26,729 --> 00:21:29,438 Speaker 2: in Malaysia. He said, look, it all comes down to 421 00:21:29,449 --> 00:21:31,040 Speaker 2: trust and 422 00:21:31,949 --> 00:21:35,688 Speaker 2: we think we can attract these companies with a deal. 423 00:21:36,430 --> 00:21:38,699 Speaker 2: But what the first thing they do is they talk 424 00:21:38,709 --> 00:21:40,989 Speaker 2: to their friends and they said, what has been your 425 00:21:41,000 --> 00:21:44,819 Speaker 2: experience in this country? And if they've ever had a 426 00:21:44,829 --> 00:21:47,680 Speaker 2: difficult experience, whether it was customs or immigration or getting 427 00:21:47,689 --> 00:21:50,399 Speaker 2: work permits or getting chemicals in an appropriate time or 428 00:21:50,410 --> 00:21:55,448 Speaker 2: spare parts or somebody asking for, for, um, for some 429 00:21:55,459 --> 00:21:58,839 Speaker 2: share of the revenue share of the business itself. These 430 00:21:58,849 --> 00:22:01,849 Speaker 2: things happen in developing world, then they aren't going to 431 00:22:01,859 --> 00:22:02,810 Speaker 2: share a good story. 432 00:22:03,170 --> 00:22:06,589 Speaker 2: And, and ultimately Singapore has people's trust. There's a great 433 00:22:06,599 --> 00:22:10,439 Speaker 2: article in today's straits Times by the pfizer Ceo and 434 00:22:10,449 --> 00:22:13,750 Speaker 2: he talked about why they keep investing billions of dollars 435 00:22:13,760 --> 00:22:16,520 Speaker 2: into Singapore and he didn't use the word trust. But 436 00:22:16,530 --> 00:22:19,209 Speaker 2: every if you distilled his words down, it came down 437 00:22:19,219 --> 00:22:21,790 Speaker 2: to that, that we have had a strong working relationship 438 00:22:21,800 --> 00:22:25,169 Speaker 2: with the Singapore government for years and we believe in 439 00:22:25,180 --> 00:22:27,630 Speaker 2: what they, that, that they'll do what they say they'll do. 440 00:22:27,849 --> 00:22:30,969 Speaker 2: So I, I uh now do I think Singapore can 441 00:22:30,979 --> 00:22:32,109 Speaker 2: keep this up? No. 442 00:22:32,979 --> 00:22:36,079 Speaker 2: Um I this is a very small place and if 443 00:22:36,319 --> 00:22:40,319 Speaker 2: Southeast Asia really gets its act together, then you start 444 00:22:40,329 --> 00:22:43,449 Speaker 2: to be optimistic that more while Singapore will probably still 445 00:22:43,459 --> 00:22:46,879 Speaker 2: grow ft I, the greater growth will take place in 446 00:22:46,890 --> 00:22:48,238 Speaker 2: other parts of Southeast Asia 447 00:22:48,560 --> 00:22:52,438 Speaker 2: and we can see it occurring already. Uh For example, 448 00:22:52,449 --> 00:22:54,729 Speaker 2: if there really is a uh an sez as a 449 00:22:54,739 --> 00:22:58,780 Speaker 2: special economic zone between Singapore and Johor, we would expect 450 00:22:58,790 --> 00:23:02,189 Speaker 2: some of Singapore's investment and foreign investors to divert investment 451 00:23:02,199 --> 00:23:04,959 Speaker 2: that would have gone to Singapore to Johor. But this 452 00:23:04,969 --> 00:23:08,489 Speaker 2: will benefit both Singapore and Johor. Uh We know Thailand 453 00:23:08,500 --> 00:23:10,979 Speaker 2: is very eager to attract more of the investments that 454 00:23:10,989 --> 00:23:13,380 Speaker 2: they see going to Malaysia, Vietnam and Indonesia. 455 00:23:13,680 --> 00:23:16,619 Speaker 2: And we know Vietnam is keen to reverse a recent 456 00:23:16,630 --> 00:23:20,540 Speaker 2: slide in kind of the league tables. And uh they're 457 00:23:20,550 --> 00:23:22,920 Speaker 2: very disappointed that they lost a couple of investments. One 458 00:23:22,930 --> 00:23:26,780 Speaker 2: was with Intel um to uh I believe it was Poland. 459 00:23:27,079 --> 00:23:29,979 Speaker 2: And so this is a, this is a region that 460 00:23:29,989 --> 00:23:33,119 Speaker 2: is committed to attracting a greater share in FD I 461 00:23:33,130 --> 00:23:36,000 Speaker 2: and realize the next 5 to 10 years might be 462 00:23:36,010 --> 00:23:38,899 Speaker 2: a unique period to secure Greenfield investments. 463 00:23:39,560 --> 00:23:42,819 Speaker 1: But Charlie, when we talk about having 464 00:23:44,170 --> 00:23:46,530 Speaker 1: an environment of trust and rule of law and governance 465 00:23:46,540 --> 00:23:50,650 Speaker 1: that is conducive to investment, we're still talking about investment 466 00:23:50,660 --> 00:23:53,910 Speaker 1: that will go into the export oriented sector of the economy. 467 00:23:54,400 --> 00:23:57,989 Speaker 1: And does that open up the areas of vulnerability as well? 468 00:23:58,339 --> 00:23:59,609 Speaker 2: You're absolutely right. 469 00:24:01,920 --> 00:24:04,228 Speaker 2: I don't think the the West is as discerning as 470 00:24:04,239 --> 00:24:06,459 Speaker 2: this but pretty much everywhere. In Asia, 471 00:24:07,449 --> 00:24:10,869 Speaker 2: the rules are different if you were planning to be exporting, 472 00:24:11,079 --> 00:24:14,900 Speaker 2: uh you're in a special economic zone, um you're treated 473 00:24:14,910 --> 00:24:17,160 Speaker 2: differently and you just have to comply with whatever you 474 00:24:17,170 --> 00:24:20,310 Speaker 2: might even allow, be allowed to export only 90% or 475 00:24:20,319 --> 00:24:24,479 Speaker 2: only 80% whether it's automotive or it could be solar panels, 476 00:24:24,489 --> 00:24:27,389 Speaker 2: it could be to get the special tax breaks, etcetera. Now, 477 00:24:27,400 --> 00:24:30,670 Speaker 2: part of that is a reasonable political consideration 478 00:24:31,069 --> 00:24:34,228 Speaker 2: that in order to get to, to persuade the public 479 00:24:34,239 --> 00:24:35,959 Speaker 2: that we should give this kind of tax break is 480 00:24:35,969 --> 00:24:38,449 Speaker 2: to say, well, look, they're creating jobs that otherwise wouldn't 481 00:24:38,459 --> 00:24:41,930 Speaker 2: exist here and they're not really competing with a local company, 482 00:24:41,939 --> 00:24:44,589 Speaker 2: they're doing something that no local company can do. So 483 00:24:44,599 --> 00:24:48,419 Speaker 2: I understand the political rationale for it. The challenge is 484 00:24:48,430 --> 00:24:48,869 Speaker 2: that 485 00:24:49,569 --> 00:24:54,050 Speaker 2: most of these economies would benefit from more competition in 486 00:24:54,060 --> 00:24:58,089 Speaker 2: their domestic market. And if you as we go to 487 00:24:58,099 --> 00:25:02,430 Speaker 2: other sources of growth beyond export led manufacturing, things like 488 00:25:02,439 --> 00:25:07,930 Speaker 2: the green transition, entrepreneurial activity, uh growing new sectors, particularly 489 00:25:07,939 --> 00:25:11,439 Speaker 2: in the services side, almost all of them benefit significantly 490 00:25:11,449 --> 00:25:14,859 Speaker 2: from local competition. It tends to attract more investment which 491 00:25:14,869 --> 00:25:17,270 Speaker 2: is a surprise to people. It tends to attract uh 492 00:25:17,280 --> 00:25:18,869 Speaker 2: result in more innovation, 493 00:25:18,949 --> 00:25:23,709 Speaker 2: more, more and better outcomes for consumers. Competition is good. 494 00:25:23,920 --> 00:25:26,630 Speaker 2: There's always a tendency to want to protect local players 495 00:25:26,640 --> 00:25:30,969 Speaker 2: and to be worried about MNC protection IMNC is taking 496 00:25:30,979 --> 00:25:33,780 Speaker 2: over the market. We do find that yeah, there are 497 00:25:33,790 --> 00:25:37,688 Speaker 2: certain businesses where you could look and say their global 498 00:25:38,020 --> 00:25:41,609 Speaker 2: scale gives them an unfair advantage against a local player. 499 00:25:41,619 --> 00:25:43,689 Speaker 2: And we have to, we have to adjust the rules 500 00:25:43,699 --> 00:25:44,729 Speaker 2: to some degree 501 00:25:44,979 --> 00:25:49,119 Speaker 2: so that there is strong competition, but it's still fair competition, 502 00:25:49,130 --> 00:25:51,839 Speaker 2: it would, it would be like uh weight class or 503 00:25:51,849 --> 00:25:54,889 Speaker 2: certain kind of handicapping. But if you exclude them from 504 00:25:54,900 --> 00:25:58,400 Speaker 2: the market entirely, then what you'll end up with less competition, 505 00:25:58,699 --> 00:26:02,060 Speaker 2: it has to be done. Sector by sector, financial services 506 00:26:02,069 --> 00:26:05,438 Speaker 2: is typically done separately because of the unique characteristics of, of, 507 00:26:05,449 --> 00:26:08,000 Speaker 2: of financial crises. Versus if, if you know, if you 508 00:26:08,010 --> 00:26:10,599 Speaker 2: had a shortage of croissants, it wouldn't bring down the 509 00:26:10,609 --> 00:26:12,530 Speaker 2: economy in the same way it would if, if you 510 00:26:12,540 --> 00:26:15,958 Speaker 2: had a bank run. So II I understand particularly why 511 00:26:15,969 --> 00:26:19,599 Speaker 2: financial services might be regulated differently. But in general, we 512 00:26:19,619 --> 00:26:22,560 Speaker 2: f one of our main recommendations in addition to addressing 513 00:26:22,839 --> 00:26:26,920 Speaker 2: the short shortcomings in education is to have more competition 514 00:26:26,930 --> 00:26:29,040 Speaker 2: in local markets in order to attract investment and get 515 00:26:29,050 --> 00:26:29,780 Speaker 2: better outcomes. 516 00:26:30,420 --> 00:26:33,540 Speaker 1: So that that outcome brings me to the point that 517 00:26:33,949 --> 00:26:38,180 Speaker 1: we in this report have identified seven traditional drivers of 518 00:26:38,189 --> 00:26:42,139 Speaker 1: growth uh from ease of doing business to competition policies 519 00:26:42,150 --> 00:26:45,920 Speaker 1: to institutions, to your point of workforce quality and then 520 00:26:45,930 --> 00:26:51,670 Speaker 1: infrastructure stability and the investment environment overall. Um does one 521 00:26:51,680 --> 00:26:54,959 Speaker 1: country just stand out that it's better in all these 522 00:26:54,969 --> 00:26:56,439 Speaker 1: traditional broad drivers? 523 00:26:56,959 --> 00:26:59,329 Speaker 2: I mean, Singapore has traditionally stood out and it, and 524 00:26:59,339 --> 00:27:01,218 Speaker 2: it's been a leader, let's be clear, not just in 525 00:27:01,229 --> 00:27:03,979 Speaker 2: Southeast Asia, but in the world in terms of attracting 526 00:27:03,989 --> 00:27:06,619 Speaker 2: MNC investment. And if you look at the outcomes, 527 00:27:07,329 --> 00:27:10,839 Speaker 2: you'd say it worked, you know, and, and in fact, if, if, 528 00:27:10,849 --> 00:27:13,829 Speaker 2: if I were Korea or Japan and I could wind 529 00:27:13,839 --> 00:27:16,849 Speaker 2: back the clock. I would have been more receptive to 530 00:27:16,859 --> 00:27:20,790 Speaker 2: foreign investment because I think their economies ended up slowing 531 00:27:21,199 --> 00:27:25,500 Speaker 2: mainly because they, the there was over consolidation among these 532 00:27:25,510 --> 00:27:28,189 Speaker 2: big exporting firms. The Tribals, in the case of, 533 00:27:28,640 --> 00:27:31,569 Speaker 2: of uh Korea, the trading firms in case in Japan, 534 00:27:31,579 --> 00:27:35,739 Speaker 2: they ended up dominating both local services and export oriented 535 00:27:35,750 --> 00:27:38,689 Speaker 2: manufacturing and somewhat stifling the economies and neither has really 536 00:27:38,699 --> 00:27:42,359 Speaker 2: grown as fast as one would think they should given 537 00:27:42,369 --> 00:27:44,760 Speaker 2: the quality of their workforce and all the other factors 538 00:27:44,770 --> 00:27:47,900 Speaker 2: that they they have as a country. Um 539 00:27:49,199 --> 00:27:52,959 Speaker 2: Vietnam also stands out now uh what two years ago 540 00:27:52,969 --> 00:27:54,859 Speaker 2: when we saw the growth rates for Vietnam, I have 541 00:27:54,869 --> 00:27:57,569 Speaker 2: to admit I was, I was caught by surprise. Uh 542 00:27:57,579 --> 00:27:59,819 Speaker 2: the work I had done in Vietnam in the nineties, 543 00:27:59,829 --> 00:28:01,550 Speaker 2: I had found it one of the more challenging countries 544 00:28:01,560 --> 00:28:04,760 Speaker 2: to work in. Um There was a uh 545 00:28:05,510 --> 00:28:11,849 Speaker 2: a very challenging power sharing between the, the central government, 546 00:28:12,099 --> 00:28:14,689 Speaker 2: the provincial governments and the military. 547 00:28:15,390 --> 00:28:20,389 Speaker 2: And we were doing quite complex deals in Vietnam, buying 548 00:28:20,400 --> 00:28:24,660 Speaker 2: up uh assets uh in, in a manufacturing sector in 549 00:28:24,670 --> 00:28:27,069 Speaker 2: order to serve the domestic market, which is always the 550 00:28:27,079 --> 00:28:30,780 Speaker 2: trickiest place to play. And in each one, each of 551 00:28:30,790 --> 00:28:35,670 Speaker 2: those three entities had objectives that they wanted served. And 552 00:28:35,680 --> 00:28:38,349 Speaker 2: if either thought the other was getting more than them, 553 00:28:38,410 --> 00:28:40,780 Speaker 2: the deal was off and, and, and, and it was 554 00:28:40,790 --> 00:28:42,930 Speaker 2: just hard to, to get things done. 555 00:28:43,300 --> 00:28:46,880 Speaker 2: And so, you know, my career took different paths and 556 00:28:46,890 --> 00:28:49,119 Speaker 2: when I came back to work in Vietnam, I was, 557 00:28:49,130 --> 00:28:53,209 Speaker 2: oh my gosh, this is now just on fire. And 558 00:28:53,219 --> 00:28:54,920 Speaker 2: I went in, uh, I went to a couple of 559 00:28:54,930 --> 00:28:56,400 Speaker 2: industrial parks and 560 00:28:57,270 --> 00:29:00,300 Speaker 2: one guy who's particularly nice to me. I still owe 561 00:29:00,310 --> 00:29:02,829 Speaker 2: him a golf game because he, he just opened up 562 00:29:02,839 --> 00:29:04,849 Speaker 2: his plant to me and let me ask any question 563 00:29:04,859 --> 00:29:07,270 Speaker 2: I want. And one of the questions I asked is OK, 564 00:29:07,280 --> 00:29:09,180 Speaker 2: you have two other plants, one in Mexico and one 565 00:29:09,189 --> 00:29:12,040 Speaker 2: in Arizona. Is it true? The Vietnamese workers are more 566 00:29:12,050 --> 00:29:14,959 Speaker 2: productive than those in Mexico and the US. And he said, oh, 567 00:29:15,290 --> 00:29:16,089 Speaker 2: you bet 568 00:29:16,869 --> 00:29:18,630 Speaker 2: he goes, let me give you an anecdote if I 569 00:29:18,640 --> 00:29:21,770 Speaker 2: were to go to the US and demand that the 570 00:29:21,780 --> 00:29:25,489 Speaker 2: workers spend the weekend working and I'd pay them overtime, 571 00:29:25,609 --> 00:29:26,569 Speaker 2: half of them would quit. 572 00:29:27,550 --> 00:29:31,530 Speaker 2: If I went to Mexico and demanded that they work overtime, 573 00:29:31,540 --> 00:29:33,369 Speaker 2: they'd all say yes, but only half would show up 574 00:29:33,920 --> 00:29:37,430 Speaker 2: in Vietnam. If I didn't give them overtime, half would quit. 575 00:29:38,130 --> 00:29:40,130 Speaker 2: He said they want to work 60 hours a week. 576 00:29:40,410 --> 00:29:42,680 Speaker 2: And if I don't give them 60 hours, they'll start 577 00:29:42,689 --> 00:29:44,550 Speaker 2: looking for another job because they have a certain amount 578 00:29:44,560 --> 00:29:47,130 Speaker 2: of money. They, they wanna take home every day. But 579 00:29:47,140 --> 00:29:50,560 Speaker 2: he said, just aside from, from that attitude, he just 580 00:29:50,569 --> 00:29:52,180 Speaker 2: said the quality of the work and I you know, 581 00:29:52,189 --> 00:29:54,380 Speaker 2: he let me observe them working for a couple of hours. 582 00:29:54,390 --> 00:29:56,160 Speaker 2: We went to different workstations and 583 00:29:56,400 --> 00:29:59,579 Speaker 2: I could see the, it wasn't a, a super complex product, 584 00:29:59,589 --> 00:30:02,540 Speaker 2: but it was a very uh uh delicate one. They 585 00:30:02,550 --> 00:30:05,619 Speaker 2: were producing surgical gowns for, for surgeries in the US. 586 00:30:05,630 --> 00:30:07,479 Speaker 2: And they had to be done, as you might imagine 587 00:30:07,489 --> 00:30:10,219 Speaker 2: in a way that was uh resulted in a sterile document. 588 00:30:10,430 --> 00:30:15,140 Speaker 2: That was absolutely perfectly done because you couldn't have leakage. And, 589 00:30:15,439 --> 00:30:17,420 Speaker 2: and they were, you know, he just said the quality, they, 590 00:30:17,430 --> 00:30:21,040 Speaker 2: they almost stopped inspecting because they just never found issues in, 591 00:30:21,050 --> 00:30:23,380 Speaker 2: in this particular facility. So 592 00:30:24,089 --> 00:30:26,410 Speaker 2: that's just an anecdote. But when you, when you talk 593 00:30:26,420 --> 00:30:29,050 Speaker 2: to others in Vietnam, what you heard time and time 594 00:30:29,060 --> 00:30:30,069 Speaker 2: again was 595 00:30:30,729 --> 00:30:33,510 Speaker 2: we were given a deal and not only did the 596 00:30:33,520 --> 00:30:36,170 Speaker 2: government fulfill that deal, but they kept coming back just 597 00:30:36,180 --> 00:30:38,069 Speaker 2: to say, how could we get you to invest more? 598 00:30:38,750 --> 00:30:41,699 Speaker 2: Whereas in some countries, if I asked the same question, 599 00:30:41,709 --> 00:30:45,160 Speaker 2: they'd say after we got established, we didn't, the people 600 00:30:45,170 --> 00:30:47,300 Speaker 2: that we worked with left and then we no longer 601 00:30:47,310 --> 00:30:50,800 Speaker 2: knew who to call. And, and gradually some of the 602 00:30:50,810 --> 00:30:53,229 Speaker 2: parts of the deal started to fall away. Like I was, 603 00:30:53,239 --> 00:30:56,540 Speaker 2: I was in one situation recently where somebody's power bill 604 00:30:56,550 --> 00:30:59,079 Speaker 2: had gone up three times in the last few years. 605 00:30:59,560 --> 00:31:01,489 Speaker 2: And it's because it's something that the government says is 606 00:31:01,500 --> 00:31:04,530 Speaker 2: outside their control, the, the, the power, the costs are 607 00:31:04,540 --> 00:31:07,060 Speaker 2: being set by the private sector and they could not 608 00:31:07,069 --> 00:31:09,979 Speaker 2: control it, but they were no longer competitive with other, 609 00:31:09,989 --> 00:31:13,839 Speaker 2: other markets in Southeast Asia. And so when time came 610 00:31:13,849 --> 00:31:15,420 Speaker 2: to set up a new facility, they put it in 611 00:31:15,430 --> 00:31:19,400 Speaker 2: Malaysia and, and the government was quite upset that they said, look, I, 612 00:31:19,410 --> 00:31:21,349 Speaker 2: I mean, you, you allowed the power to go up 613 00:31:21,359 --> 00:31:24,579 Speaker 2: on us. So governments are going to have to recognize 614 00:31:24,589 --> 00:31:24,900 Speaker 2: that 615 00:31:25,160 --> 00:31:29,209 Speaker 2: if they don't have competitive provision of utilities and eventually 616 00:31:29,219 --> 00:31:32,550 Speaker 2: that's going to be green utilities, then they won't be 617 00:31:32,560 --> 00:31:35,020 Speaker 2: able to win business even if they give them low 618 00:31:35,030 --> 00:31:37,859 Speaker 2: taxes and cheap land and, and you know, uh relatively 619 00:31:37,869 --> 00:31:39,550 Speaker 2: cheap labor is available in the market, 620 00:31:39,849 --> 00:31:40,089 Speaker 1: right? 621 00:31:40,250 --> 00:31:42,339 Speaker 1: So Charlie in the report, I think we have like 622 00:31:42,349 --> 00:31:46,540 Speaker 1: a 12 by six matrix where we summarize these scores 623 00:31:46,550 --> 00:31:49,010 Speaker 1: revolving around the points they're making that, you know, which 624 00:31:49,020 --> 00:31:51,380 Speaker 1: country offers the best business environment and which country offers 625 00:31:51,390 --> 00:31:52,300 Speaker 1: the most competition. 626 00:31:52,609 --> 00:31:54,609 Speaker 1: And to your point, Singapore and Vietnam are the ones 627 00:31:54,619 --> 00:31:57,109 Speaker 1: that take most of the Laurels. It is interesting nonetheless 628 00:31:57,119 --> 00:32:00,479 Speaker 1: that Malaysia scores the highest in public infrastructure investment as 629 00:32:00,489 --> 00:32:04,660 Speaker 1: a share of GDP going forward as strategic investments become 630 00:32:04,670 --> 00:32:07,599 Speaker 1: more critical about the government's role in some of these 631 00:32:07,609 --> 00:32:10,650 Speaker 1: investments become important. I think that gives Malaysia a degree 632 00:32:10,660 --> 00:32:12,829 Speaker 1: of strength. And then one of the things that we 633 00:32:12,839 --> 00:32:15,369 Speaker 1: brought into this report was trying to get financial stability 634 00:32:15,380 --> 00:32:18,069 Speaker 1: and buffer markers and there, Indonesia, 635 00:32:18,459 --> 00:32:22,680 Speaker 1: I suppose because of the post 97 recovery was tepid 636 00:32:22,849 --> 00:32:26,530 Speaker 1: has kept external debt to a rather minimum. And as 637 00:32:26,540 --> 00:32:28,750 Speaker 1: a result in a world where we might be embracing 638 00:32:28,760 --> 00:32:32,270 Speaker 1: more volatility, Indonesia's external debt burden is the best in 639 00:32:32,280 --> 00:32:33,040 Speaker 1: terms of management. 640 00:32:33,069 --> 00:32:33,560 Speaker 2: Although 641 00:32:33,569 --> 00:32:36,959 Speaker 2: although Prabowo has been on record saying that he intends 642 00:32:36,969 --> 00:32:40,489 Speaker 2: to borrow more to funds from the infrastructure and, and 643 00:32:40,500 --> 00:32:42,050 Speaker 2: that he has a room. Yeah, and that, and he 644 00:32:42,060 --> 00:32:43,930 Speaker 2: is the room to do that. Let me say something 645 00:32:43,939 --> 00:32:46,160 Speaker 2: on Malaysia. I mean, in all these reports, you want 646 00:32:46,170 --> 00:32:47,290 Speaker 2: to be hypothesis led. 647 00:32:47,890 --> 00:32:52,130 Speaker 2: And going in six months ago, our hypothesis was Malaysia 648 00:32:52,140 --> 00:32:56,520 Speaker 2: would continue to have relatively anemic growth. And that is 649 00:32:56,530 --> 00:32:59,810 Speaker 2: one of the hypotheses that we decided we were wrong about. 650 00:33:00,050 --> 00:33:03,680 Speaker 2: We see a lot of indicators that Malaysia is turning 651 00:33:03,689 --> 00:33:05,699 Speaker 2: the corner and I, I'd point to three things. I 652 00:33:05,709 --> 00:33:09,160 Speaker 2: think one is just purely anecdotal that a number of 653 00:33:09,170 --> 00:33:09,599 Speaker 2: the 654 00:33:10,050 --> 00:33:12,989 Speaker 2: business leaders that I either inter interact with directly or 655 00:33:13,000 --> 00:33:16,369 Speaker 2: indirectly through other people that I know are saying that 656 00:33:16,380 --> 00:33:19,099 Speaker 2: if they have a good opportunity that Anwar or his 657 00:33:19,109 --> 00:33:21,930 Speaker 2: team will pull all stops to try to do a 658 00:33:21,939 --> 00:33:24,589 Speaker 2: deal to attract the business in a way that they 659 00:33:24,599 --> 00:33:28,319 Speaker 2: haven't felt for years that they're, they're focused on getting 660 00:33:28,329 --> 00:33:31,189 Speaker 2: more of this investment. I think the second is that 661 00:33:31,489 --> 00:33:35,060 Speaker 2: um the special economic zone with Joor sends a lot 662 00:33:35,069 --> 00:33:35,949 Speaker 2: of signals, 663 00:33:36,319 --> 00:33:42,060 Speaker 2: but it also creates interesting competition between Penang Kl, the 664 00:33:42,069 --> 00:33:45,849 Speaker 2: Kang Valley and Johor and it's a dynamic we've seen 665 00:33:45,859 --> 00:33:48,859 Speaker 2: in Vietnam, we've seen in China as well that when 666 00:33:48,869 --> 00:33:52,060 Speaker 2: different regions of a country start to compete with each other, 667 00:33:52,359 --> 00:33:56,319 Speaker 2: you end up with better outcomes and businesses have options 668 00:33:56,329 --> 00:33:59,619 Speaker 2: and they like that and, and the, and, and people 669 00:33:59,630 --> 00:34:03,930 Speaker 2: can't get away with taking things easy. Um Penang was 670 00:34:03,939 --> 00:34:05,540 Speaker 2: probably in the driver's seat 671 00:34:05,890 --> 00:34:09,389 Speaker 2: recently simply because of some very good decisions that were 672 00:34:09,399 --> 00:34:12,379 Speaker 2: made 20 or 30 years ago to attract a number 673 00:34:12,389 --> 00:34:16,550 Speaker 2: of leading players uh affiliate with the uh the semiconductor sector, 674 00:34:16,560 --> 00:34:21,060 Speaker 2: consumer electronic sector, they produce build servers and things there 675 00:34:21,070 --> 00:34:23,179 Speaker 2: that are now in high demand due to to the 676 00:34:23,189 --> 00:34:26,520 Speaker 2: data centers and also a decision in the mid nineties 677 00:34:26,530 --> 00:34:28,989 Speaker 2: to develop Cyber JIA is what was called there, the 678 00:34:29,000 --> 00:34:31,550 Speaker 2: Multimedia Super Corridor, if you're old enough to remember, 679 00:34:31,780 --> 00:34:34,520 Speaker 2: and they attracted a lot of data centers into uh 680 00:34:34,659 --> 00:34:38,819 Speaker 2: just south of KL. And so suddenly two sectors that 681 00:34:38,830 --> 00:34:39,919 Speaker 2: are super hot 682 00:34:40,510 --> 00:34:44,250 Speaker 2: semiconductors and data centers. Malaysia is in the best position. 683 00:34:44,510 --> 00:34:47,570 Speaker 2: When you see this investment in infrastructure, you realize that 684 00:34:47,580 --> 00:34:51,689 Speaker 2: they have also got the utilities and the road infrastructure 685 00:34:51,699 --> 00:34:54,760 Speaker 2: and port infrastructure to handle these investments. And then the 686 00:34:54,770 --> 00:34:57,770 Speaker 2: third is I think Malaysia has been very smart and 687 00:34:57,780 --> 00:35:00,780 Speaker 2: I would recommend all the countries in Southeast Asia to 688 00:35:00,790 --> 00:35:05,169 Speaker 2: form commercial relationships with both the West and China. Um 689 00:35:05,949 --> 00:35:09,580 Speaker 2: China is the biggest export partner of every Southeast Asian country. 690 00:35:10,080 --> 00:35:13,049 Speaker 2: It will we think over time become the largest investor 691 00:35:13,060 --> 00:35:16,340 Speaker 2: in Southeast Asia. They have the leading low cost position. 692 00:35:16,350 --> 00:35:19,780 Speaker 2: A lot of important manufactured products. They can build infrastructure 693 00:35:19,790 --> 00:35:22,449 Speaker 2: cheaper than others, they can build solar panels and wind 694 00:35:22,459 --> 00:35:25,860 Speaker 2: turbines cheaper than others. And so to ignore that opportunity 695 00:35:25,870 --> 00:35:28,879 Speaker 2: to work with China, to develop your infrastructure and to 696 00:35:28,889 --> 00:35:31,399 Speaker 2: provide it to other investors in the region, I think 697 00:35:31,409 --> 00:35:32,520 Speaker 2: would be foolhardy. 698 00:35:32,860 --> 00:35:35,449 Speaker 2: And so we're we're bullish on Malaysia because we see 699 00:35:35,459 --> 00:35:39,810 Speaker 2: them pursuing three tracks will raise their growth rate beyond their, 700 00:35:39,820 --> 00:35:40,888 Speaker 2: their recent history. 701 00:35:41,199 --> 00:35:43,649 Speaker 1: Surely, I'm just gonna add two quick things. But first, 702 00:35:43,659 --> 00:35:45,800 Speaker 1: I was in Kal for two days over the weekend 703 00:35:46,129 --> 00:35:50,149 Speaker 1: and I haven't seen this kind of energy in Kel ever. 704 00:35:50,379 --> 00:35:53,370 Speaker 1: Uh It to me always struck me as a city 705 00:35:53,379 --> 00:35:56,239 Speaker 1: that was built around commodity monetization 706 00:35:56,520 --> 00:35:59,678 Speaker 1: at some tourism. Now it seems like a really serious 707 00:35:59,689 --> 00:36:04,070 Speaker 1: opportunity minded businessmen from China, from elsewhere in the world, 708 00:36:04,080 --> 00:36:06,770 Speaker 1: coming to Malaysia and looking at the signals that you 709 00:36:06,780 --> 00:36:08,790 Speaker 1: are precisely talking about. So the two things that I 710 00:36:08,800 --> 00:36:11,620 Speaker 1: want to add is one is the green aspect that 711 00:36:11,629 --> 00:36:15,339 Speaker 1: if indeed we need data centers that have clean energy 712 00:36:15,350 --> 00:36:17,759 Speaker 1: as their driving force, Malaysia is in a position to 713 00:36:17,770 --> 00:36:19,719 Speaker 1: deliver that I think that would hold them in very 714 00:36:19,729 --> 00:36:22,500 Speaker 1: good shape, especially with respect to Johor because if there 715 00:36:22,510 --> 00:36:24,509 Speaker 1: are certain FD I coming into Singapore, 716 00:36:24,850 --> 00:36:27,100 Speaker 1: it wants to spill over into the Malaysian side of 717 00:36:27,110 --> 00:36:29,810 Speaker 1: the border. It better be green energy. Otherwise the big 718 00:36:30,149 --> 00:36:32,549 Speaker 1: emacs of the world would not go for it. And 719 00:36:32,560 --> 00:36:33,860 Speaker 1: the second is while 720 00:36:34,939 --> 00:36:38,090 Speaker 1: Malaysia is playing a fairly delicate but fairly successful so 721 00:36:38,100 --> 00:36:40,709 Speaker 1: far game of courting investment, both from the West as 722 00:36:40,719 --> 00:36:43,250 Speaker 1: well as from China. I think there's a third pillar 723 00:36:43,260 --> 00:36:46,379 Speaker 1: which is the Middle East among the South countries, even 724 00:36:46,389 --> 00:36:49,120 Speaker 1: though Indonesia is also a Muslim majority population, 725 00:36:49,370 --> 00:36:52,500 Speaker 1: Malaysia seems to be very good at this. They have 726 00:36:52,510 --> 00:36:55,540 Speaker 1: a thriving supermarket, they have very good relationship with the 727 00:36:55,550 --> 00:36:58,830 Speaker 1: Middle Eastern wealth funds. And I think that as more 728 00:36:58,840 --> 00:37:02,138 Speaker 1: and more projects and we are talking about multibillion dollar 729 00:37:02,149 --> 00:37:07,219 Speaker 1: projects in Johor elsewhere that get into fruition, we'll see 730 00:37:07,229 --> 00:37:09,259 Speaker 1: large part of that being 731 00:37:09,350 --> 00:37:12,320 Speaker 1: under being funded or underwritten by Middle Eastern capital. 732 00:37:12,340 --> 00:37:13,830 Speaker 2: I think you made a good point. I mean, one 733 00:37:13,840 --> 00:37:18,129 Speaker 2: of the advantage of the Western and Chinese investment is 734 00:37:18,139 --> 00:37:21,620 Speaker 2: often tied you into a global supply chain kind of 735 00:37:21,629 --> 00:37:23,590 Speaker 2: a ready made market. A lot of the products that 736 00:37:23,600 --> 00:37:26,409 Speaker 2: are exported from Southeast Asia aren't finished goods, they're intermediate 737 00:37:26,419 --> 00:37:28,409 Speaker 2: that go on to other markets and become part of 738 00:37:28,419 --> 00:37:31,300 Speaker 2: the finished goods. I think Middle East has always wanted 739 00:37:31,310 --> 00:37:35,000 Speaker 2: to invest in in Southeast Asia but finding the right 740 00:37:35,010 --> 00:37:37,840 Speaker 2: vehicle because they they often don't have companies that have 741 00:37:37,850 --> 00:37:38,850 Speaker 2: global supply chains 742 00:37:39,149 --> 00:37:43,969 Speaker 2: but is Southeast Asia builds up infrastructure, particularly the green infrastructure, 743 00:37:44,159 --> 00:37:46,489 Speaker 2: the logical place to source some of that funding will 744 00:37:46,500 --> 00:37:49,429 Speaker 2: be the Middle East. And, and you're right, Malaysia more 745 00:37:49,439 --> 00:37:51,449 Speaker 2: than I think almost any market in the world and 746 00:37:51,459 --> 00:37:53,699 Speaker 2: you see it in the tourism as well. You know, 747 00:37:53,709 --> 00:37:55,689 Speaker 2: when you're in, when you're in Thailand, there are tourists 748 00:37:55,699 --> 00:37:59,129 Speaker 2: from everywhere but you see particularly from China, Korea, Japan. 749 00:37:59,379 --> 00:38:02,530 Speaker 2: But when you're in Malaysia, you see a lot of, uh, of, uh, 750 00:38:02,540 --> 00:38:04,330 Speaker 2: tourists from the Middle East and, 751 00:38:04,610 --> 00:38:06,839 Speaker 2: and it's, it's funny if you're out late, you realize 752 00:38:06,850 --> 00:38:08,219 Speaker 2: that's when the restaurants are open. 753 00:38:08,639 --> 00:38:10,969 Speaker 1: Well, Charlie, I was out late and I was by 754 00:38:10,979 --> 00:38:13,239 Speaker 1: the restaurants and not only did I see a lot 755 00:38:13,250 --> 00:38:16,310 Speaker 1: of Chinese tourists, uh some Middle Eastern tourists. The other 756 00:38:16,320 --> 00:38:20,110 Speaker 1: thing that I was completely taken aback and retrospect sounds logical. 757 00:38:20,159 --> 00:38:23,290 Speaker 1: Central Asian tourists, there are direct flight to many parts 758 00:38:23,300 --> 00:38:26,100 Speaker 1: of Central Asia. Uh that I've never really seen anywhere 759 00:38:26,110 --> 00:38:28,138 Speaker 1: else in Southeast Asia. And that linkage was also very 760 00:38:28,149 --> 00:38:28,489 Speaker 1: interesting 761 00:38:28,879 --> 00:38:30,489 Speaker 2: and a lot of Durian sales. 762 00:38:30,649 --> 00:38:31,989 Speaker 1: Yes, the season. 763 00:38:32,330 --> 00:38:36,310 Speaker 1: Uh Charlie, you have uh in these presentations always ended 764 00:38:36,320 --> 00:38:40,790 Speaker 1: with these um seven growth strategy for the countries. Um 765 00:38:40,800 --> 00:38:43,469 Speaker 1: Maybe you can walk us through before we go to 766 00:38:43,479 --> 00:38:44,449 Speaker 1: the next part of the discussion. 767 00:38:44,459 --> 00:38:45,350 Speaker 2: Ok. Ok. 768 00:38:45,600 --> 00:38:49,669 Speaker 2: So when we, they aren't really tail winds or headwinds, 769 00:38:49,679 --> 00:38:52,949 Speaker 2: they're a combination of both. But what we're saying is 770 00:38:52,959 --> 00:38:57,049 Speaker 2: if you, if you think that country strategies or forecasting 771 00:38:57,060 --> 00:39:00,250 Speaker 2: country growth is extrapolating from the past, you're probably going 772 00:39:00,260 --> 00:39:01,139 Speaker 2: to get things wrong 773 00:39:01,550 --> 00:39:04,040 Speaker 2: that there's too many changes that are going on. Some 774 00:39:04,050 --> 00:39:05,850 Speaker 2: in the last three years, some of the last 10, 775 00:39:06,120 --> 00:39:08,350 Speaker 2: but they come together to say the future is going 776 00:39:08,360 --> 00:39:10,560 Speaker 2: to be different in the past. And it's very important 777 00:39:10,570 --> 00:39:12,169 Speaker 2: to articulate those differences. 778 00:39:12,580 --> 00:39:14,899 Speaker 2: So one is something we've already talked about that, the 779 00:39:14,909 --> 00:39:18,659 Speaker 2: sheer competitiveness of China and we do not think that's 780 00:39:18,669 --> 00:39:21,689 Speaker 2: going to change. Yes, people might have tariffs. Yes, you 781 00:39:21,699 --> 00:39:25,070 Speaker 2: may want to diversify away from China. But in general, 782 00:39:25,090 --> 00:39:28,199 Speaker 2: if you're developing a strategy or you're trying to attract investors, 783 00:39:28,209 --> 00:39:30,879 Speaker 2: you need to do so conscious that you need to 784 00:39:30,889 --> 00:39:34,540 Speaker 2: complement what is probably a very competitive player in in China. 785 00:39:34,840 --> 00:39:37,250 Speaker 2: In addition, you have to take into account that you 786 00:39:37,260 --> 00:39:40,279 Speaker 2: may end up with excess capacity in a particular sector. 787 00:39:40,290 --> 00:39:41,620 Speaker 2: Let me take for example, 788 00:39:42,300 --> 00:39:42,719 Speaker 2: um 789 00:39:44,919 --> 00:39:47,500 Speaker 2: I was talking to a government that was saying, look, 790 00:39:47,510 --> 00:39:49,520 Speaker 2: you're you're saying that we should try to attract some 791 00:39:49,530 --> 00:39:52,089 Speaker 2: Chinese investment. Should I try to get them to build 792 00:39:52,100 --> 00:39:54,620 Speaker 2: a very large solar plant in my country? 793 00:39:55,449 --> 00:39:58,659 Speaker 2: And I said it's tempting but I'd probably say no 794 00:39:59,179 --> 00:40:01,949 Speaker 2: because right now based on what I read in the 795 00:40:01,959 --> 00:40:04,250 Speaker 2: economist last week and kind of what I know working 796 00:40:04,260 --> 00:40:05,429 Speaker 2: a little bit in the sector, 797 00:40:06,659 --> 00:40:11,409 Speaker 2: China has enough capacity to meet the world's current consumption 798 00:40:11,419 --> 00:40:15,530 Speaker 2: by 2.5 times. So capacity ization is about 40% in 799 00:40:15,540 --> 00:40:19,300 Speaker 2: the solar panel sector. So if you put a plant in, 800 00:40:19,929 --> 00:40:22,739 Speaker 2: it's gonna lose money because any industry that has that 801 00:40:22,750 --> 00:40:25,550 Speaker 2: level of credit, at least for period. So what you 802 00:40:25,560 --> 00:40:28,510 Speaker 2: would rather do is say I'd like you to build 803 00:40:28,520 --> 00:40:32,589 Speaker 2: in this way, maybe an auto plant where you can 804 00:40:32,600 --> 00:40:35,439 Speaker 2: provide a large domestic market and do exports that go 805 00:40:35,449 --> 00:40:39,330 Speaker 2: around barriers and I will buy your panels. Because if 806 00:40:39,340 --> 00:40:41,590 Speaker 2: there's anything that right now, China needs somebody to buy 807 00:40:41,600 --> 00:40:44,060 Speaker 2: their panels. And I also want you to provide low 808 00:40:44,070 --> 00:40:47,850 Speaker 2: cost financing to install those panels. And I want you 809 00:40:47,860 --> 00:40:48,989 Speaker 2: to help me with the grid 810 00:40:49,379 --> 00:40:52,040 Speaker 2: that will use the electricity from those panels. So I 811 00:40:52,050 --> 00:40:56,719 Speaker 2: think you need to be pretty thoughtful about not just saying, oh, 812 00:40:56,739 --> 00:40:59,439 Speaker 2: we don't want you to import anything into our country. 813 00:40:59,449 --> 00:41:01,810 Speaker 2: We want to force you to build a plant when 814 00:41:01,820 --> 00:41:04,320 Speaker 2: their need is to get rid of their excess production. 815 00:41:04,649 --> 00:41:07,510 Speaker 2: And there may be opportunities to work together to, to 816 00:41:07,520 --> 00:41:10,089 Speaker 2: solve both needs you, you buy their excess production, but 817 00:41:10,100 --> 00:41:15,020 Speaker 2: you get very cheap, well financed green energy, for example. 818 00:41:15,050 --> 00:41:17,169 Speaker 2: And that could be, that could be true for ports, 819 00:41:17,179 --> 00:41:18,790 Speaker 2: it could be true for the grid. It could be 820 00:41:18,800 --> 00:41:20,549 Speaker 2: true for other investments you want to make. 821 00:41:21,439 --> 00:41:24,560 Speaker 2: The second is that China is going to be a, 822 00:41:24,570 --> 00:41:26,899 Speaker 2: a bigger and bigger player in Southeast Asia. It's the 823 00:41:26,909 --> 00:41:30,020 Speaker 2: largest trading partner. And we think over time it will 824 00:41:30,030 --> 00:41:32,689 Speaker 2: probably become the largest investor in the region. Simply they 825 00:41:32,699 --> 00:41:35,780 Speaker 2: have surplus of funds. Uh It's logical to invest in 826 00:41:35,790 --> 00:41:39,110 Speaker 2: your trading partners and they have political and economic interests 827 00:41:39,120 --> 00:41:42,658 Speaker 2: in Southeast Asia we have seen, for example, us, investment 828 00:41:42,669 --> 00:41:45,479 Speaker 2: has gradually been declining as a share of total investment 829 00:41:45,489 --> 00:41:47,600 Speaker 2: in the region for the last 1020 years, you pick 830 00:41:47,610 --> 00:41:48,219 Speaker 2: the time frame. 831 00:41:48,600 --> 00:41:53,339 Speaker 2: And so given that that kind of likely outcome, we 832 00:41:53,350 --> 00:41:56,219 Speaker 2: do think it's important for you to, to 833 00:41:57,060 --> 00:42:03,479 Speaker 2: enjoy peaceful productive relations with both major powers. Let's face it, 834 00:42:03,489 --> 00:42:06,100 Speaker 2: China and the US ending together about half the global economy. 835 00:42:06,280 --> 00:42:08,120 Speaker 2: And so you don't want to lose half of that. 836 00:42:08,600 --> 00:42:11,310 Speaker 2: The third is the rivalry between the US and China. 837 00:42:11,580 --> 00:42:14,500 Speaker 2: And this is kind of in the goldilocks scenario which 838 00:42:14,510 --> 00:42:18,050 Speaker 2: we're currently in not too hot, not too cold. Southeast 839 00:42:18,060 --> 00:42:19,520 Speaker 2: Asia benefits from the rivalry. 840 00:42:20,500 --> 00:42:24,760 Speaker 2: Both will seek to gain favor with Southeast Asia. Both 841 00:42:24,770 --> 00:42:27,520 Speaker 2: will be willing to negotiate with Southeast Asia. And we 842 00:42:27,530 --> 00:42:29,569 Speaker 2: don't believe in general that you should pick one over 843 00:42:29,580 --> 00:42:32,139 Speaker 2: the other. You should seek friendly and, and, and strong 844 00:42:32,149 --> 00:42:33,159 Speaker 2: relations with both. 845 00:42:33,840 --> 00:42:36,100 Speaker 2: I think in terms of FD, I, we talked about 846 00:42:36,110 --> 00:42:39,250 Speaker 2: this a bit but what are people making decisions on 847 00:42:39,260 --> 00:42:41,850 Speaker 2: the FD? I? And what's changing? It was never so 848 00:42:41,860 --> 00:42:44,600 Speaker 2: much about cheap land, cheap labor, cheap taxes, it was 849 00:42:44,610 --> 00:42:47,679 Speaker 2: for certain businesses. But those move very quickly to depend 850 00:42:47,689 --> 00:42:49,590 Speaker 2: on what the latest offer is, whether it's a shoe 851 00:42:49,600 --> 00:42:53,489 Speaker 2: factory or certain kind of textiles or very low end manufacturing. 852 00:42:53,989 --> 00:42:57,500 Speaker 2: Um Well, the desirable manufacturing that comes with a big 853 00:42:57,510 --> 00:43:00,449 Speaker 2: price tag, a lot of capital commitment and maybe long 854 00:43:00,459 --> 00:43:01,419 Speaker 2: term returns 855 00:43:01,729 --> 00:43:07,739 Speaker 2: needs things like reliable green utilities, a supply of highly 856 00:43:07,750 --> 00:43:12,509 Speaker 2: educated laborers, laborers, labor laws that allow them to bring 857 00:43:12,520 --> 00:43:16,250 Speaker 2: in expatriate talent at all levels. It might be a 858 00:43:16,260 --> 00:43:20,830 Speaker 2: 25 year old programmer. It might be somebody from Germany 859 00:43:20,840 --> 00:43:24,350 Speaker 2: who has been through a special process training that they need. 860 00:43:24,739 --> 00:43:27,330 Speaker 2: You don't want to get too involved in second guessing 861 00:43:27,340 --> 00:43:30,149 Speaker 2: who they need or why they need to move people 862 00:43:30,159 --> 00:43:32,429 Speaker 2: in and out so that they're at different stages in 863 00:43:32,439 --> 00:43:36,250 Speaker 2: the development of their enterprise in order to grow. And 864 00:43:36,260 --> 00:43:39,049 Speaker 2: we find, in fact, my discussions last week in one 865 00:43:39,060 --> 00:43:41,479 Speaker 2: of the Southeast Asian countries was focused mainly on this 866 00:43:41,489 --> 00:43:44,090 Speaker 2: issue that there were just too many hurdles to moving 867 00:43:44,100 --> 00:43:47,149 Speaker 2: talent into the country for people to put their best 868 00:43:47,300 --> 00:43:52,040 Speaker 2: processes and factories in that country. Um Another is that 869 00:43:52,929 --> 00:43:55,100 Speaker 2: there's a lot of Western press on how much tariffs 870 00:43:55,110 --> 00:43:58,149 Speaker 2: are going up and it's true for us and maybe Europe. 871 00:43:58,429 --> 00:44:00,850 Speaker 2: But from what we see in Asia, most of the 872 00:44:00,860 --> 00:44:04,070 Speaker 2: intra region, tariffs are declining because of our ce P. 873 00:44:04,500 --> 00:44:07,810 Speaker 2: Um India hasn't joined yet, but presumably, you know, India 874 00:44:07,820 --> 00:44:10,439 Speaker 2: will also open itself up more for trade. Now, one 875 00:44:10,449 --> 00:44:12,839 Speaker 2: has to be careful, it's not all about tariffs. And 876 00:44:12,850 --> 00:44:16,199 Speaker 2: we also hear stories about non tariff barriers going up 877 00:44:16,209 --> 00:44:20,120 Speaker 2: as the, the tariff bearers kind of come down. But nonetheless, 878 00:44:20,129 --> 00:44:25,149 Speaker 2: we don't necessarily think that globalization is dead. We certainly 879 00:44:25,159 --> 00:44:30,479 Speaker 2: think regionalization is very much alive. Um, on the green transition, 880 00:44:31,080 --> 00:44:33,439 Speaker 2: there was a tendency a few years ago 881 00:44:33,959 --> 00:44:35,500 Speaker 2: to kind of say, look, 882 00:44:36,270 --> 00:44:38,549 Speaker 2: the West has all the money, the West created all 883 00:44:38,560 --> 00:44:41,169 Speaker 2: the problem if they don't give us the money to 884 00:44:41,179 --> 00:44:44,330 Speaker 2: s to solve this. Well, screw them. 885 00:44:45,590 --> 00:44:47,010 Speaker 2: I think that's misguided. 886 00:44:47,939 --> 00:44:50,600 Speaker 2: I think the first two are actually true, but it 887 00:44:50,610 --> 00:44:53,580 Speaker 2: doesn't lead you to the third point. If green energy 888 00:44:53,590 --> 00:44:55,229 Speaker 2: becomes very cheap 889 00:44:55,850 --> 00:44:57,929 Speaker 2: and very reliable, 890 00:44:58,889 --> 00:45:01,750 Speaker 2: then you want to do it for three reasons. One, 891 00:45:01,760 --> 00:45:04,449 Speaker 2: you should do it just for the environment. You wanna 892 00:45:04,459 --> 00:45:06,850 Speaker 2: do it because it's more secure. The next time there's 893 00:45:06,860 --> 00:45:09,360 Speaker 2: an oil crisis, at least half of your energy is 894 00:45:09,370 --> 00:45:13,070 Speaker 2: coming from locally generated green sources. And then the third 895 00:45:13,080 --> 00:45:17,600 Speaker 2: is um so economics, security. And then the third is 896 00:45:17,610 --> 00:45:20,830 Speaker 2: its balance of payments. I was in uh one country 897 00:45:20,840 --> 00:45:21,229 Speaker 2: and 898 00:45:21,989 --> 00:45:24,439 Speaker 2: I estimated they'd have to spend 30 to 40 billion 899 00:45:24,449 --> 00:45:26,810 Speaker 2: a year on green transition over the next 10 years. 900 00:45:26,820 --> 00:45:28,689 Speaker 2: It was a very rough calculation. So I'm not gonna 901 00:45:28,699 --> 00:45:31,439 Speaker 2: name the country because I don't wanna be, be a 902 00:45:31,500 --> 00:45:33,780 Speaker 2: second guest on it. And they're like, where are we 903 00:45:33,790 --> 00:45:36,550 Speaker 2: gonna find that kind of money? There's no way that's just, 904 00:45:36,560 --> 00:45:39,299 Speaker 2: you know, smoking dope kind of thing. And I said, well, 905 00:45:39,310 --> 00:45:42,090 Speaker 2: you spend 60 billion a year on imports of oil 906 00:45:42,100 --> 00:45:42,649 Speaker 2: and gas. 907 00:45:43,419 --> 00:45:45,219 Speaker 2: I said you find the money for that and it 908 00:45:45,229 --> 00:45:48,439 Speaker 2: just flows out. It just goes mainly to the Middle East. 909 00:45:48,989 --> 00:45:51,509 Speaker 2: And so surely you can rebalance that if, if you 910 00:45:51,520 --> 00:45:53,839 Speaker 2: only spent 30 billion in the Middle East and 30 911 00:45:53,850 --> 00:45:56,120 Speaker 2: billion on local capital projects 912 00:45:56,350 --> 00:45:58,840 Speaker 2: where your local work, even if you were bringing in 913 00:45:58,850 --> 00:46:01,479 Speaker 2: the solar panels in the winter, but they were installed locally, 914 00:46:01,489 --> 00:46:04,239 Speaker 2: they were maintained locally. And from the point it was 915 00:46:04,250 --> 00:46:08,290 Speaker 2: put in, basically, the uptake was practically free. Isn't that 916 00:46:08,300 --> 00:46:11,379 Speaker 2: a better outcome? And, and that's a, that's a simplistic 917 00:46:11,389 --> 00:46:13,770 Speaker 2: way of looking at it. You know, green energy is, 918 00:46:13,780 --> 00:46:16,449 Speaker 2: it's is more variable, you need some battery backup, there's 919 00:46:16,459 --> 00:46:19,250 Speaker 2: all kinds of other considerations. But by and large, the 920 00:46:19,260 --> 00:46:20,609 Speaker 2: cost curves are such 921 00:46:20,899 --> 00:46:23,709 Speaker 2: that over time, it will be cheaper, it will be 922 00:46:23,719 --> 00:46:27,189 Speaker 2: more reliable and it will be better for your national security. 923 00:46:27,449 --> 00:46:30,060 Speaker 2: And so what, what we're recommending is go after the 924 00:46:30,070 --> 00:46:33,959 Speaker 2: easiest 20% 1st. It just makes total sense and then 925 00:46:33,969 --> 00:46:36,090 Speaker 2: go up to the next 20. Don't worry about the 926 00:46:36,100 --> 00:46:39,270 Speaker 2: last 20 now, just keep going at the easiest parts 927 00:46:39,280 --> 00:46:42,199 Speaker 2: first and then the final one, which is uh a 928 00:46:42,209 --> 00:46:44,040 Speaker 2: tricky one is innovation. 929 00:46:45,489 --> 00:46:47,709 Speaker 2: We were in a world 30 years ago where a 930 00:46:47,719 --> 00:46:49,629 Speaker 2: lot of the innovation was coming out of the US, 931 00:46:49,639 --> 00:46:52,340 Speaker 2: but it was still quite dispersed. Japan was a leader. 932 00:46:52,350 --> 00:46:54,409 Speaker 2: Germany was a leader, good things. Were, you know, a 933 00:46:54,479 --> 00:46:59,550 Speaker 2: lot of telecoms capability came out of Scandinavia. And China, 934 00:46:59,560 --> 00:47:02,550 Speaker 2: everybody said wasn't an innovator. They were just copying everybody 935 00:47:03,510 --> 00:47:06,080 Speaker 2: fast forward to now. And the world has changed. The 936 00:47:06,090 --> 00:47:11,080 Speaker 2: two great innovation ecosystems are the US and China and 937 00:47:11,090 --> 00:47:14,909 Speaker 2: they actually dominate most leading edge technologies. There's a paper 938 00:47:14,919 --> 00:47:18,408 Speaker 2: by the Australian Strate Strategic Policy Institute that I cited 939 00:47:18,419 --> 00:47:21,000 Speaker 2: in a paper I wrote that says that of the 940 00:47:21,010 --> 00:47:23,959 Speaker 2: 44 most important technologies, the US and China are the 941 00:47:23,969 --> 00:47:26,850 Speaker 2: co-leaders in 41 of them. So and only three is 942 00:47:26,860 --> 00:47:28,959 Speaker 2: one of them, not one of the co leaders and 943 00:47:29,139 --> 00:47:31,580 Speaker 2: and they were always second, I think two were India, 944 00:47:31,590 --> 00:47:33,090 Speaker 2: one was Korea or something like that. 945 00:47:33,469 --> 00:47:36,590 Speaker 2: And, and I looked through the technologies and I, you know, 946 00:47:36,600 --> 00:47:38,340 Speaker 2: I'm not the world's expert in this, but I said 947 00:47:38,350 --> 00:47:40,919 Speaker 2: these make sense, these are the ones you want to 948 00:47:40,929 --> 00:47:44,729 Speaker 2: lead in. And China figured this out 2030 years ago 949 00:47:44,739 --> 00:47:48,350 Speaker 2: and went on a path and spent billions of dollars 950 00:47:48,639 --> 00:47:51,879 Speaker 2: to close the gaps. So now you have a situation 951 00:47:51,889 --> 00:47:56,090 Speaker 2: where you have two that are vying for leadership, neither 952 00:47:56,100 --> 00:47:58,560 Speaker 2: wants to be dependent on the other for either of 953 00:47:58,570 --> 00:47:59,570 Speaker 2: the technologies. 954 00:47:59,870 --> 00:48:02,129 Speaker 2: And the result is we think going to be an 955 00:48:02,139 --> 00:48:05,780 Speaker 2: acceleration in the pace of technology innovation, which is a 956 00:48:05,790 --> 00:48:08,310 Speaker 2: good thing for the world, the world will benefit. But 957 00:48:08,320 --> 00:48:10,340 Speaker 2: on the other hand, it makes it much harder for 958 00:48:10,350 --> 00:48:14,489 Speaker 2: other countries to keep up because even in Germany, Japan, 959 00:48:14,790 --> 00:48:17,540 Speaker 2: the best researchers will often now go to either the 960 00:48:17,550 --> 00:48:20,679 Speaker 2: US or China. Because to, to get the Nobel Prize, 961 00:48:20,689 --> 00:48:22,259 Speaker 2: you need to be in the market where the most 962 00:48:22,270 --> 00:48:25,810 Speaker 2: money is available, the smartest colleagues are available, it's easiest 963 00:48:25,820 --> 00:48:28,560 Speaker 2: to be with the university to get published, et cetera. 964 00:48:28,750 --> 00:48:31,560 Speaker 2: And those happen to be the ecosystems in China and 965 00:48:31,570 --> 00:48:34,159 Speaker 2: the US. So I won't pick a winner. Depends on 966 00:48:34,169 --> 00:48:38,139 Speaker 2: the technology, which one and sometimes leadership like take space. 967 00:48:38,550 --> 00:48:40,800 Speaker 2: China actually emerged as the leader for a short period 968 00:48:40,810 --> 00:48:43,189 Speaker 2: of time. The US was launching most of its satellites 969 00:48:43,199 --> 00:48:45,529 Speaker 2: on both Russian and Chinese rockets, believe it or not 970 00:48:45,699 --> 00:48:49,529 Speaker 2: spacex came along through a different innovation model and has 971 00:48:49,540 --> 00:48:52,229 Speaker 2: now surpassed everybody in the world. It's it's more reliable 972 00:48:52,239 --> 00:48:54,389 Speaker 2: and lower cost than everybody else in the world through 973 00:48:54,399 --> 00:48:57,199 Speaker 2: a different innovation model that the US has versus China 974 00:48:57,340 --> 00:48:59,560 Speaker 2: and nobody has been able to close the gap. And 975 00:48:59,570 --> 00:49:02,219 Speaker 2: so you can see that leadership can shift, but it 976 00:49:02,229 --> 00:49:05,360 Speaker 2: will often be between these two ecosystems as opposed to outside. 977 00:49:05,669 --> 00:49:08,449 Speaker 2: Where does that leave Southeast Asia? Make sure you're tied 978 00:49:08,459 --> 00:49:11,010 Speaker 2: into both ecosystems, make sure your best and brightest are 979 00:49:11,020 --> 00:49:13,810 Speaker 2: getting an opportunity to study and work in both of 980 00:49:13,820 --> 00:49:17,330 Speaker 2: those markets. Make sure that your leading companies are tied 981 00:49:17,340 --> 00:49:19,850 Speaker 2: in to the best research being done in both markets. 982 00:49:19,860 --> 00:49:22,549 Speaker 2: If you tie yourself to only one ecosystem, then you 983 00:49:22,560 --> 00:49:23,850 Speaker 2: may not be working with the leader, 984 00:49:24,739 --> 00:49:29,429 Speaker 1: right. So this challenges around innovation um becomes one of 985 00:49:29,439 --> 00:49:32,520 Speaker 1: the foundational considerations for the forward looking part of the 986 00:49:32,530 --> 00:49:36,500 Speaker 1: report Charlie. Because when we took on board some of 987 00:49:36,510 --> 00:49:40,159 Speaker 1: your points that can do straight line extrapolation of recent turn, 988 00:49:40,919 --> 00:49:45,850 Speaker 1: can't rely on massive pickup on total factor productivity, even 989 00:49:45,860 --> 00:49:47,830 Speaker 1: if you believe that technology will play an important role. 990 00:49:47,840 --> 00:49:51,540 Speaker 1: So the biggest TFP growth is probably coming elsewhere, then 991 00:49:51,550 --> 00:49:54,989 Speaker 1: what kind of growth forecast can we build? 992 00:49:55,260 --> 00:49:59,389 Speaker 1: So I think we began by thinking first in scenarios, 993 00:49:59,489 --> 00:50:02,429 Speaker 1: we present this in the report that there are three scenarios, 994 00:50:02,439 --> 00:50:06,020 Speaker 1: there is a central expected growth scenario which probably odds 995 00:50:06,030 --> 00:50:09,139 Speaker 1: on favorite, but that doesn't necessarily mean it's like an 80% growth. 996 00:50:09,199 --> 00:50:11,569 Speaker 2: Although I will say like I showed this to one 997 00:50:11,580 --> 00:50:12,879 Speaker 2: of our mutual friends and 998 00:50:13,320 --> 00:50:15,129 Speaker 2: he went through and graded and he's like, I'm on 999 00:50:15,139 --> 00:50:18,000 Speaker 2: the left and all but one and it was like, whoa, 1000 00:50:18,010 --> 00:50:20,169 Speaker 2: you know, this is a AAA person who works for 1001 00:50:20,179 --> 00:50:22,589 Speaker 2: a major multinational and he thought we were being too 1002 00:50:22,600 --> 00:50:25,459 Speaker 2: optimistic and I've, I've shown it to others and we're like, no, 1003 00:50:25,469 --> 00:50:28,040 Speaker 2: I'm on the right side. You guys are being too pessimistic. 1004 00:50:28,050 --> 00:50:31,070 Speaker 2: So I think the idea is this is where we are, 1005 00:50:31,229 --> 00:50:33,919 Speaker 2: but it's not, you know, we, we wanna lay that 1006 00:50:33,929 --> 00:50:36,110 Speaker 2: out so anybody else could look and say, well, if 1007 00:50:36,120 --> 00:50:39,060 Speaker 2: I'm further to the right, I I would assume a higher, 1008 00:50:39,070 --> 00:50:40,500 Speaker 2: I I would have to believe in that 1009 00:50:40,580 --> 00:50:42,729 Speaker 2: we would lead to a higher rate of growth. Right. Again, 1010 00:50:42,739 --> 00:50:46,189 Speaker 1: encouraging our listeners and viewers to check out the report. 1011 00:50:46,199 --> 00:50:48,239 Speaker 1: But what we're going to talk about now is the 1012 00:50:48,250 --> 00:50:51,979 Speaker 1: Southeast Asia Macro scenario for the next 10 years. And 1013 00:50:51,989 --> 00:50:54,159 Speaker 1: to Charlie's point that we have a left hand side, 1014 00:50:54,169 --> 00:50:57,179 Speaker 1: middle and a right hand side scenario. So let's talk 1015 00:50:57,189 --> 00:50:59,939 Speaker 1: first of all, the low growth scenario where I don't 1016 00:50:59,949 --> 00:51:03,159 Speaker 1: think we're being that outlandish in thinking that if things 1017 00:51:03,169 --> 00:51:07,760 Speaker 1: don't go right, if management of growth risks are not adequate, 1018 00:51:07,989 --> 00:51:11,149 Speaker 1: that we might see, for example, China growing by 2 3% 1019 00:51:11,379 --> 00:51:15,500 Speaker 1: we might see substantial additional fragmentation between China and the US. 1020 00:51:15,729 --> 00:51:20,229 Speaker 1: Um We might see a financial stability issues around feds 1021 00:51:20,239 --> 00:51:23,800 Speaker 1: management of monetary policy or PB O CS management of 1022 00:51:23,810 --> 00:51:25,050 Speaker 1: the property sector in China, 1023 00:51:26,629 --> 00:51:30,709 Speaker 1: disappointing developments on the green transition and perhaps even some 1024 00:51:30,719 --> 00:51:35,719 Speaker 1: geopolitical exacerbation over Taiwan. So that's Charlie is the low 1025 00:51:35,770 --> 00:51:38,260 Speaker 1: growth scenario. My question to you is how much probability 1026 00:51:38,270 --> 00:51:39,520 Speaker 1: would you assign to that scenario? 1027 00:51:41,070 --> 00:51:41,810 Speaker 2: First, 1028 00:51:42,870 --> 00:51:44,290 Speaker 2: when you're a consultant, 1029 00:51:45,260 --> 00:51:47,520 Speaker 2: you always know you're gonna end up in the middle 1030 00:51:48,270 --> 00:51:50,928 Speaker 2: but you want right the left, 1031 00:51:51,679 --> 00:51:54,009 Speaker 2: so that you say actually, I believe any one of 1032 00:51:54,020 --> 00:51:54,820 Speaker 2: these could happen. 1033 00:51:56,360 --> 00:51:56,979 Speaker 2: Um 1034 00:51:58,459 --> 00:52:03,399 Speaker 2: I would have different probabilities for each of those. Um So, and, and, 1035 00:52:03,409 --> 00:52:08,560 Speaker 2: and frankly, my assessments change over time. My concern uh 1036 00:52:08,750 --> 00:52:12,350 Speaker 2: over say Taiwan was higher a year ago than it 1037 00:52:12,360 --> 00:52:14,239 Speaker 2: is now and I won't go through the reasons why, 1038 00:52:14,250 --> 00:52:17,760 Speaker 2: but it's just, there does appear to be some settling 1039 00:52:17,770 --> 00:52:20,919 Speaker 2: of of the process. There's more dialogue between the US 1040 00:52:20,929 --> 00:52:23,750 Speaker 2: and China over the issues, et cetera. But on the 1041 00:52:23,760 --> 00:52:27,219 Speaker 2: other hand, the slowdown in China hasn't gotten better. 1042 00:52:27,520 --> 00:52:29,330 Speaker 2: And the recent third plenum, 1043 00:52:30,169 --> 00:52:33,509 Speaker 2: uh uh at least from my, my feeling didn't address 1044 00:52:33,520 --> 00:52:37,069 Speaker 2: the core issue of domestic demand and addressing the property 1045 00:52:37,080 --> 00:52:40,090 Speaker 2: crisis in the way that would, would start to accelerate 1046 00:52:40,100 --> 00:52:43,149 Speaker 2: growth in the near term. So I would put those 1047 00:52:43,159 --> 00:52:45,830 Speaker 2: as kind of the 20 to 25% scenario on the 1048 00:52:45,840 --> 00:52:49,459 Speaker 2: left and then kind of 50 in the middle and 1049 00:52:49,469 --> 00:52:51,149 Speaker 2: then 20 to 25 on the high 1050 00:52:51,159 --> 00:52:51,510 Speaker 2: side. 1051 00:52:52,389 --> 00:52:53,030 Speaker 1: So 1052 00:52:53,860 --> 00:52:56,560 Speaker 1: things could go wrong. But we have a full scenario 1053 00:52:56,570 --> 00:52:59,100 Speaker 1: where things could be way better than our central scenario 1054 00:52:59,209 --> 00:53:03,340 Speaker 1: where we can assume China getting its act together. And 1055 00:53:03,350 --> 00:53:06,899 Speaker 1: the last few years of doldrums in the capital and 1056 00:53:06,909 --> 00:53:09,729 Speaker 1: real economy, capital markets in the real economy will be 1057 00:53:09,739 --> 00:53:12,350 Speaker 1: behind this and they'll get things going. I think there 1058 00:53:12,360 --> 00:53:15,879 Speaker 1: are some tentative markers for that already. And Charlie while 1059 00:53:15,889 --> 00:53:17,479 Speaker 1: the third plenum did not have 1060 00:53:17,800 --> 00:53:21,810 Speaker 1: too many new things. Post third plenum, some of the 1061 00:53:21,820 --> 00:53:24,189 Speaker 1: measures that are being announced on the consumption site, I'm 1062 00:53:24,429 --> 00:53:28,179 Speaker 1: more optimistic. And then the issue of, you know, coming 1063 00:53:28,189 --> 00:53:31,080 Speaker 1: back from the brink on tariff war, both with respect 1064 00:53:31,090 --> 00:53:33,770 Speaker 1: to the US and Europe sitting here in August of 1065 00:53:33,780 --> 00:53:39,270 Speaker 1: 2024 with 5050 odds of Trump coming back to power. 1066 00:53:39,280 --> 00:53:42,199 Speaker 1: It may seem too optimistic, but we have seen many 1067 00:53:42,209 --> 00:53:45,229 Speaker 1: different scenarios play out on this area and, and it's 1068 00:53:45,239 --> 00:53:46,939 Speaker 1: a 5050 election so it can go either way. 1069 00:53:47,280 --> 00:53:50,939 Speaker 1: Um And then the issue of, you know, global macro management, 1070 00:53:50,949 --> 00:53:53,739 Speaker 1: whether its spillover from China's property market to the rest 1071 00:53:53,750 --> 00:53:57,350 Speaker 1: of the world or the exit from tight monetary policy 1072 00:53:57,360 --> 00:54:01,000 Speaker 1: for the FED. We right now may think that they're 1073 00:54:01,010 --> 00:54:03,270 Speaker 1: not getting it right. But it doesn't take too many 1074 00:54:03,280 --> 00:54:05,750 Speaker 1: levers and too many things to come in place for 1075 00:54:05,760 --> 00:54:09,810 Speaker 1: that to align and the issue of technology and green 1076 00:54:09,820 --> 00:54:10,620 Speaker 1: investment 1077 00:54:10,870 --> 00:54:15,070 Speaker 1: uh and the new levels of productivity being unlocked, I 1078 00:54:15,080 --> 00:54:16,340 Speaker 1: think very much. Uh 1079 00:54:16,929 --> 00:54:20,610 Speaker 2: and one other point when we wrote this time where we, 1080 00:54:20,620 --> 00:54:23,129 Speaker 2: we were taking a 10 year view, right? So often 1081 00:54:23,139 --> 00:54:25,879 Speaker 2: these forecasts are only six months or a quarter or 1082 00:54:25,889 --> 00:54:28,570 Speaker 2: a year out. And so we're not for, you know, 1083 00:54:28,580 --> 00:54:30,929 Speaker 2: we're not forecasting the next year or two. This is 1084 00:54:30,939 --> 00:54:33,189 Speaker 2: kind of what could happen over the next 10 years, 1085 00:54:33,199 --> 00:54:36,510 Speaker 2: which is 2034 a long way off. And, and that 1086 00:54:36,520 --> 00:54:38,969 Speaker 2: was the kind of the, the, the most important vein. 1087 00:54:39,399 --> 00:54:41,198 Speaker 1: So let's talk about what could happen over the next 1088 00:54:41,209 --> 00:54:41,860 Speaker 1: 10 years. 1089 00:54:41,870 --> 00:54:42,659 Speaker 2: And here 1090 00:54:43,120 --> 00:54:45,760 Speaker 2: I get to ask you the questions. Um You know, 1091 00:54:45,770 --> 00:54:48,090 Speaker 2: one of the reasons that we asked D BS to 1092 00:54:48,100 --> 00:54:51,739 Speaker 2: help us was the rigor of your forecasting methodology. So 1093 00:54:52,179 --> 00:54:53,959 Speaker 2: why don't you tell us a little bit about how 1094 00:54:53,969 --> 00:54:56,360 Speaker 2: we did the forecast before we get into the numbers? 1095 00:54:56,370 --> 00:54:58,870 Speaker 1: Right. Charlie, I, I never thought that I would spend 1096 00:54:58,879 --> 00:55:02,020 Speaker 1: substantial amount of time in front of 100 decision makers 1097 00:55:02,030 --> 00:55:04,580 Speaker 1: like we did last week and talk about total factor 1098 00:55:04,590 --> 00:55:08,360 Speaker 1: productivity and growth models. But, uh, I didn't see anybody 1099 00:55:08,370 --> 00:55:09,959 Speaker 1: fall asleep. I think people were engaged. 1100 00:55:10,219 --> 00:55:12,919 Speaker 1: So let's share that. Uh So again, big shout out 1101 00:55:12,929 --> 00:55:16,219 Speaker 1: to hunting Chua who really ran the model. Uh Typical 1102 00:55:16,229 --> 00:55:20,639 Speaker 1: growth forecasting uh framework would look at a country's projection 1103 00:55:20,649 --> 00:55:24,310 Speaker 1: of the labor force would make some assumptions about capital 1104 00:55:24,320 --> 00:55:27,279 Speaker 1: formation and the productivity around that capital. Uh What we 1105 00:55:27,290 --> 00:55:30,320 Speaker 1: did was we decided to make the framework richer 1106 00:55:30,750 --> 00:55:32,989 Speaker 1: by adding what we think is one of the most 1107 00:55:33,000 --> 00:55:36,489 Speaker 1: important sources of growth going forward, which is the quality 1108 00:55:36,500 --> 00:55:40,290 Speaker 1: of human capital and its contribution to productivity. So we 1109 00:55:40,300 --> 00:55:43,939 Speaker 1: brought in capital, labor and human capital and we made 1110 00:55:43,949 --> 00:55:46,560 Speaker 1: some reasonable assumptions about what was the residual and the 1111 00:55:46,570 --> 00:55:50,129 Speaker 1: growth regression or the growth model, which is total factor productivity. 1112 00:55:50,370 --> 00:55:54,120 Speaker 1: Um To your point recognizing the hyper competitiveness of the 1113 00:55:54,129 --> 00:55:58,669 Speaker 1: US and China, we decided to be a bit modest 1114 00:55:58,679 --> 00:56:01,709 Speaker 1: in our assumptions of growth factor productivity. So there are 1115 00:56:01,719 --> 00:56:05,800 Speaker 1: charts in the report that compare productivity in the good 1116 00:56:05,810 --> 00:56:08,379 Speaker 1: years in recent years which have not been that great 1117 00:56:08,389 --> 00:56:11,229 Speaker 1: and forward looking years. We're not talking about a mean reversion. 1118 00:56:11,320 --> 00:56:13,879 Speaker 1: We are cognizant of the various realities out there that's 1119 00:56:13,889 --> 00:56:17,010 Speaker 1: already been discussed. But we still get a pretty decent 1120 00:56:17,020 --> 00:56:17,790 Speaker 1: set of numbers. 1121 00:56:18,540 --> 00:56:23,229 Speaker 1: We get about 6.5% around the 6.6% growth for Vietnam. 1122 00:56:23,389 --> 00:56:27,620 Speaker 1: Based on our assumptions again of demographic dynamic and productivity 1123 00:56:27,629 --> 00:56:32,040 Speaker 1: and labor and capital contribution. Second highest is Philippines huge 1124 00:56:32,050 --> 00:56:36,030 Speaker 1: demographic tailwind but also some uh path dependency coming from 1125 00:56:36,040 --> 00:56:39,669 Speaker 1: the recent success in growth up performance, especially between 2010 1126 00:56:39,679 --> 00:56:40,529 Speaker 1: and 2019. 1127 00:56:41,030 --> 00:56:46,649 Speaker 1: Uh Indonesia and Malaysia are commodity producing economies. Typically, their 1128 00:56:46,659 --> 00:56:50,280 Speaker 1: performance has to sort of zigzag with commodity performance. We 1129 00:56:50,290 --> 00:56:52,540 Speaker 1: like to think especially since we have discussed a lot 1130 00:56:52,550 --> 00:56:54,530 Speaker 1: of time, I spent a lot of time in this discussion, 1131 00:56:54,540 --> 00:56:58,009 Speaker 1: talk about Malaysia that there are reasons to be optimistic 1132 00:56:58,020 --> 00:57:02,540 Speaker 1: about Malaysia's non commodity future. And that consideration goes into 1133 00:57:02,550 --> 00:57:05,529 Speaker 1: the 4.5% average growth forecast that we have for Malaysia. 1134 00:57:06,879 --> 00:57:08,449 Speaker 1: I'm going to talk about Thailand, Singapore and then we'll 1135 00:57:08,459 --> 00:57:10,340 Speaker 1: come back to Indonesia because I want to ask you 1136 00:57:10,350 --> 00:57:13,139 Speaker 1: a question on Indonesia. So in Thailand, we are not 1137 00:57:13,149 --> 00:57:17,219 Speaker 1: particularly optimistic. Although there have been the Detroit of Southeast Asia, 1138 00:57:17,469 --> 00:57:20,219 Speaker 1: they are embracing the supply chain. But 1139 00:57:21,080 --> 00:57:25,080 Speaker 1: unlike most other developing countries, they unfortunately are going through 1140 00:57:25,090 --> 00:57:29,179 Speaker 1: a very adverse demographic dynamic going forward. And the immigration 1141 00:57:29,189 --> 00:57:31,689 Speaker 1: safety valve they had in the past does not seem 1142 00:57:31,699 --> 00:57:34,500 Speaker 1: to be working that well. Uh and that drag sort 1143 00:57:34,510 --> 00:57:37,060 Speaker 1: of bring them to a sub 3% growth outlook over 1144 00:57:37,070 --> 00:57:37,820 Speaker 1: the next decade. 1145 00:57:38,669 --> 00:57:41,649 Speaker 1: Singapore, which raises some eyebrows when we share that. We're 1146 00:57:41,659 --> 00:57:44,439 Speaker 1: expecting it to grow at 2.5%. The question being, why 1147 00:57:44,449 --> 00:57:46,780 Speaker 1: so poor? And our answer is actually it's not poor 1148 00:57:46,790 --> 00:57:49,270 Speaker 1: at all. Uh 2.5% for one of the richest per 1149 00:57:49,280 --> 00:57:52,469 Speaker 1: capita economies in the world is very good, especially when 1150 00:57:52,479 --> 00:57:54,449 Speaker 1: we take into account the very strong demographic area 1151 00:57:54,750 --> 00:57:56,530 Speaker 2: with low population growth. 1152 00:57:56,540 --> 00:57:57,239 Speaker 1: Exactly. 1153 00:57:57,489 --> 00:58:00,239 Speaker 1: So now let's talk a little bit about Indonesia in 1154 00:58:00,250 --> 00:58:03,229 Speaker 1: our product launch or report launch. We had Guida, former 1155 00:58:03,239 --> 00:58:07,540 Speaker 1: Trade Minister of Indonesia there. He felt our 5.7% forecast 1156 00:58:07,550 --> 00:58:09,979 Speaker 1: for the next decade was rather pessimistic. 1157 00:58:11,620 --> 00:58:16,040 Speaker 2: Yes, I think Indonesia, it's the most important economy in 1158 00:58:16,050 --> 00:58:18,800 Speaker 2: Southeast Asia in the largest. Um 1159 00:58:20,659 --> 00:58:23,840 Speaker 2: There's, there's all kinds of anecdotes about how rich the 1160 00:58:23,850 --> 00:58:27,120 Speaker 2: soil is, for example, Indonesia and, and just how, how, 1161 00:58:27,129 --> 00:58:29,669 Speaker 2: how fertile country it is. It, it also seems to 1162 00:58:29,679 --> 00:58:34,020 Speaker 2: have incredible mineral growth, uh mineral availability that has been 1163 00:58:34,030 --> 00:58:38,080 Speaker 2: mined and has been exported coal, copper, you name it. 1164 00:58:38,600 --> 00:58:43,570 Speaker 2: Um And so to some degree, Indonesia was always very 1165 00:58:43,580 --> 00:58:46,719 Speaker 2: successful without having to try too hard. 1166 00:58:47,590 --> 00:58:51,080 Speaker 2: Um One of the other changes in Indonesia that's taken 1167 00:58:51,090 --> 00:58:53,320 Speaker 2: place since I've been working here is they went from a, 1168 00:58:53,600 --> 00:58:58,649 Speaker 2: you know, six terms of Suharto to a pretty vibrant 1169 00:58:58,659 --> 00:59:02,409 Speaker 2: democracy and a lot of people wonder is that good 1170 00:59:02,419 --> 00:59:04,699 Speaker 2: for growth or not so good for growth. And it's 1171 00:59:04,709 --> 00:59:08,290 Speaker 2: certainly in, in my view, been very good for growth. 1172 00:59:08,719 --> 00:59:13,040 Speaker 2: Indonesia has been one of the most entrepreneurial econ economies 1173 00:59:13,050 --> 00:59:14,649 Speaker 2: in Southeast Asia. And that 1174 00:59:15,129 --> 00:59:17,840 Speaker 2: I, I didn't, I, I expected all the Southeast Asian 1175 00:59:17,850 --> 00:59:22,330 Speaker 2: countries to have an entrepreneurial success but that it's concentrated 1176 00:59:22,340 --> 00:59:24,030 Speaker 2: in Indonesia came as a bit of a surprise to 1177 00:59:24,040 --> 00:59:26,060 Speaker 2: me and I can't really explain why, 1178 00:59:26,350 --> 00:59:30,209 Speaker 2: but it's given them AAA kind of another leg of 1179 00:59:30,219 --> 00:59:33,810 Speaker 2: the stool for growth that we think has really helped 1180 00:59:33,820 --> 00:59:36,949 Speaker 2: them in the last 10 years. Um Things like shopee 1181 00:59:36,979 --> 00:59:39,649 Speaker 2: and grab and, you know, just, you name it, whether 1182 00:59:39,659 --> 00:59:42,780 Speaker 2: it's in Edtech or in health tech, Indonesia has some 1183 00:59:42,790 --> 00:59:46,159 Speaker 2: of the most pro promising start ups in Southeast Asia. 1184 00:59:46,989 --> 00:59:50,989 Speaker 2: So why would we have any concerns? I think number one, the, 1185 00:59:51,000 --> 00:59:55,689 Speaker 2: the infrastructure continues to lag what's needed even though Jacoby 1186 00:59:55,699 --> 00:59:58,699 Speaker 2: really took this on and some high profile projects were 1187 00:59:58,709 --> 01:00:01,560 Speaker 2: done and more roads were completed than have been completed. And, 1188 01:00:01,709 --> 01:00:03,919 Speaker 2: you know, like more in the last decade than several 1189 01:00:03,929 --> 01:00:07,389 Speaker 2: decades before. That's great. They just need a lot more. 1190 01:00:07,419 --> 01:00:11,060 Speaker 2: It still doesn't have good infrastructure compared to a Vietnam 1191 01:00:11,070 --> 01:00:13,129 Speaker 2: or Singapore or Thailand and Malaysia. 1192 01:00:13,709 --> 01:00:17,229 Speaker 2: The second is the education levels in Indonesia continue to 1193 01:00:17,239 --> 01:00:21,530 Speaker 2: lag and that's a problem is that's a multigeneration problem. 1194 01:00:21,540 --> 01:00:23,969 Speaker 2: It's very, or even if a government were absolutely committed 1195 01:00:23,979 --> 01:00:26,399 Speaker 2: to fixing it, it would take 30 or 40 years 1196 01:00:26,409 --> 01:00:28,790 Speaker 2: to bring them up to the levels of say of Vietnam. 1197 01:00:28,979 --> 01:00:32,050 Speaker 2: Um simply because of the challenges of building out the 1198 01:00:32,060 --> 01:00:35,770 Speaker 2: schools and finding the teachers and, and, and, and figuring 1199 01:00:35,780 --> 01:00:39,080 Speaker 2: out a way to, to efficiently spend the money. And 1200 01:00:39,090 --> 01:00:42,090 Speaker 2: so those will always be drags on the Indonesian economy. 1201 01:00:42,409 --> 01:00:45,310 Speaker 2: Um The last is the governments have tended to be 1202 01:00:45,320 --> 01:00:49,790 Speaker 2: slightly protectionist and they don't use those terms. Um But 1203 01:00:49,959 --> 01:00:52,209 Speaker 2: when you look at, for example, the export controls that 1204 01:00:52,219 --> 01:00:55,060 Speaker 2: were put on palm oil or the restrictions that were 1205 01:00:55,070 --> 01:00:58,129 Speaker 2: put on nickel production that you had to downstream while 1206 01:00:58,139 --> 01:01:03,370 Speaker 2: ostensibly successful and certainly attracted more FD I. As a result. 1207 01:01:03,379 --> 01:01:05,550 Speaker 2: In the case of nickel, you had to think about 1208 01:01:05,560 --> 01:01:08,750 Speaker 2: every other industry and how they would respond to those 1209 01:01:08,760 --> 01:01:09,399 Speaker 2: kind of control. 1210 01:01:10,120 --> 01:01:12,620 Speaker 2: And it, it would, it would certainly, if you have 1211 01:01:12,629 --> 01:01:15,310 Speaker 2: alternatives make you think twice about, well, I could put 1212 01:01:15,320 --> 01:01:17,330 Speaker 2: it in a plant but let's say I put in 1213 01:01:17,340 --> 01:01:19,929 Speaker 2: a toy factory, what if I'm forced to also produce 1214 01:01:19,969 --> 01:01:22,899 Speaker 2: the plastics locally or buy plastics locally versus from the 1215 01:01:22,909 --> 01:01:25,989 Speaker 2: lowest cost global player? You'd think twice about being in 1216 01:01:26,000 --> 01:01:29,770 Speaker 2: an environment where those rules might change very suddenly and 1217 01:01:29,780 --> 01:01:31,870 Speaker 2: impact the economics of your business. 1218 01:01:32,560 --> 01:01:35,439 Speaker 1: Charlie. When we wrapped up the report, we put these 1219 01:01:35,449 --> 01:01:39,209 Speaker 1: five pieces of jigsaw. Uh And, and we said that, 1220 01:01:39,219 --> 01:01:41,050 Speaker 1: you know, there are multiple solutions to the jigsaw and 1221 01:01:41,060 --> 01:01:43,580 Speaker 1: you don't need all five pieces to make it work. 1222 01:01:43,750 --> 01:01:46,500 Speaker 1: But what we had was one invest in emerging growth 1223 01:01:46,510 --> 01:01:51,790 Speaker 1: sectors to foster tech enabled disruptors. Third, strengthen capital markets. Fourth, 1224 01:01:51,800 --> 01:01:56,659 Speaker 1: embrace multilateral initiatives and five accelerate green transition. 1225 01:01:57,000 --> 01:02:00,800 Speaker 1: So parting thoughts, what strategy should businesses as well as 1226 01:02:00,810 --> 01:02:04,669 Speaker 1: governments pursue? Given the thoughts that we have provided these. 1227 01:02:04,959 --> 01:02:07,649 Speaker 2: So a big part of that was to say 1228 01:02:08,340 --> 01:02:10,439 Speaker 2: it, it came out of the discussions I had in 1229 01:02:10,449 --> 01:02:11,959 Speaker 2: Thailand the last two years 1230 01:02:12,949 --> 01:02:15,239 Speaker 2: where I said based on current trajectory, this is gonna 1231 01:02:15,250 --> 01:02:16,010 Speaker 2: be your growth rate, 1232 01:02:17,110 --> 01:02:18,610 Speaker 2: but that's not what I want and that's not what 1233 01:02:18,620 --> 01:02:22,010 Speaker 2: you want. And, and the question on everybody's mind is 1234 01:02:22,020 --> 01:02:23,209 Speaker 2: how can we grow faster? 1235 01:02:24,350 --> 01:02:29,280 Speaker 2: Um What we've said is export oriented manufacturing, which has 1236 01:02:29,290 --> 01:02:29,679 Speaker 2: been 1237 01:02:30,350 --> 01:02:35,320 Speaker 2: the label for the most successful development strategies. The last 1238 01:02:35,330 --> 01:02:38,929 Speaker 2: 30 years is still an important leg of the stool. 1239 01:02:39,810 --> 01:02:43,330 Speaker 2: Um It works, it forces you to have to be 1240 01:02:43,340 --> 01:02:46,270 Speaker 2: able to manage more complex enterprises. It ties you into 1241 01:02:46,280 --> 01:02:49,300 Speaker 2: global supply chains, it forces you to have talent that 1242 01:02:49,310 --> 01:02:53,189 Speaker 2: can work as an equal or part of a global organization. 1243 01:02:53,959 --> 01:02:58,260 Speaker 2: Ee especially when it's foreign investment, it, it raises the 1244 01:02:58,270 --> 01:03:00,899 Speaker 2: gain for at least a portion of your economy. And 1245 01:03:00,909 --> 01:03:02,340 Speaker 2: then there are spillover benefits, 1246 01:03:03,020 --> 01:03:04,760 Speaker 2: but it's only one wet leg of the stool. And 1247 01:03:04,770 --> 01:03:06,939 Speaker 2: if you rely on that solely given the amount of 1248 01:03:06,949 --> 01:03:10,020 Speaker 2: competition in the world right now, and China's leadership in 1249 01:03:10,030 --> 01:03:13,229 Speaker 2: so many manufacturing sectors, we don't think you'll hit the 1250 01:03:13,239 --> 01:03:16,330 Speaker 2: growth rates that you aspire to. So, in addition to that, 1251 01:03:16,340 --> 01:03:18,250 Speaker 2: we think there are other legs of the stool. One 1252 01:03:18,260 --> 01:03:22,679 Speaker 2: is to really ensure that your entrepreneurial sector prospers. Now, 1253 01:03:22,689 --> 01:03:24,620 Speaker 2: it's so much more fun for a politician to go 1254 01:03:24,629 --> 01:03:27,000 Speaker 2: to a big ribbon cutting of a billion dollar plant. 1255 01:03:27,669 --> 01:03:31,100 Speaker 2: The equival nowadays is probably the gong of a new 1256 01:03:31,110 --> 01:03:34,510 Speaker 2: unicorn on NASDAQ that came out of Indonesia or Thailand 1257 01:03:34,520 --> 01:03:36,639 Speaker 2: or Vietnam. And there's a league table that we have 1258 01:03:36,649 --> 01:03:39,139 Speaker 2: in the report of how many unicorns each country has 1259 01:03:39,149 --> 01:03:42,629 Speaker 2: managed to foster. And you can see clearly that, that 1260 01:03:42,639 --> 01:03:44,580 Speaker 2: the the winners right now are Indonesians, 1261 01:03:44,699 --> 01:03:46,979 Speaker 2: Singapore and other countries are looking and say, well, what 1262 01:03:46,989 --> 01:03:50,520 Speaker 2: can we do to foster more entrepreneurs? And it's a 1263 01:03:50,530 --> 01:03:53,939 Speaker 2: whole host of things from ability to move talent in 1264 01:03:53,949 --> 01:03:58,379 Speaker 2: your laws on, on venture capital and foreign ownership of assets, 1265 01:03:58,389 --> 01:04:02,870 Speaker 2: your um your willingness to protect them from too strong. 1266 01:04:02,879 --> 01:04:05,310 Speaker 2: Lo not, I won't say too strong local competition, but 1267 01:04:05,320 --> 01:04:09,020 Speaker 2: I would say competition becomes so aggressive that it keeps 1268 01:04:09,030 --> 01:04:09,959 Speaker 2: them out of the market. 1269 01:04:10,399 --> 01:04:15,320 Speaker 2: Um And also in ensuring that there's a solid relationships 1270 01:04:15,330 --> 01:04:19,020 Speaker 2: between your VC community and your university community that your 1271 01:04:19,030 --> 01:04:21,979 Speaker 2: universities have an ability to invest in start ups that 1272 01:04:21,989 --> 01:04:24,530 Speaker 2: the students there see going to a start up as 1273 01:04:24,540 --> 01:04:27,239 Speaker 2: a viable uh employment opportunity. 1274 01:04:27,399 --> 01:04:30,000 Speaker 2: It just being directed towards the government or state owned 1275 01:04:30,010 --> 01:04:32,979 Speaker 2: enterprises or large enterprises in the country. So there's a 1276 01:04:32,989 --> 01:04:35,300 Speaker 2: whole host of things you can do to make the 1277 01:04:35,310 --> 01:04:38,520 Speaker 2: entrepreneurial sector take off. And we've seen countries that do 1278 01:04:38,530 --> 01:04:41,760 Speaker 2: this well, get benefits from it. The green we've already 1279 01:04:41,770 --> 01:04:46,419 Speaker 2: talked through. We just see, look, it probably could double 1280 01:04:46,429 --> 01:04:49,020 Speaker 2: the level of FD I in a country. It just 1281 01:04:49,030 --> 01:04:52,419 Speaker 2: becomes an equal. The infrastructure spending on FD I would 1282 01:04:52,429 --> 01:04:56,729 Speaker 2: be equivalent to the multinational investment in, in manufacturing l exports. 1283 01:04:57,060 --> 01:05:00,159 Speaker 2: I think the the issue of new sectors, the main 1284 01:05:00,169 --> 01:05:02,840 Speaker 2: thing we pointed out to people is if you can't 1285 01:05:02,850 --> 01:05:06,939 Speaker 2: point to an existing capability you have that you're building on, 1286 01:05:07,139 --> 01:05:09,080 Speaker 2: you will probably not be able to pull it off. 1287 01:05:09,429 --> 01:05:11,379 Speaker 2: There's a lot of people who want to be heroes. 1288 01:05:11,530 --> 01:05:13,879 Speaker 2: This is like Indonesia saying, why can't we do an 1289 01:05:13,889 --> 01:05:18,000 Speaker 2: airline sector? Brazil did it and I'm impressed by what 1290 01:05:18,010 --> 01:05:20,840 Speaker 2: Brazil did. But when we see the Chinese have spent, 1291 01:05:20,850 --> 01:05:22,399 Speaker 2: I I saw a piece of data, I think the 1292 01:05:22,409 --> 01:05:24,399 Speaker 2: number was $80 billion 1293 01:05:24,639 --> 01:05:28,080 Speaker 2: so far developing the Comac aircraft. Now it probably makes 1294 01:05:28,090 --> 01:05:29,780 Speaker 2: sense for China to try to do that. They want 1295 01:05:29,790 --> 01:05:31,719 Speaker 2: to be a leader in every technology. They don't want 1296 01:05:31,729 --> 01:05:34,719 Speaker 2: to be dependent on us, technology, they're probably defense spinoffs 1297 01:05:34,729 --> 01:05:36,969 Speaker 2: that they want from being in that sector. But there 1298 01:05:36,979 --> 01:05:39,620 Speaker 2: aren't many countries that can spend that kind of money 1299 01:05:39,699 --> 01:05:42,699 Speaker 2: and so know what you're up against and realize when, when, 1300 01:05:42,709 --> 01:05:45,110 Speaker 2: when the competition is going to be too heavy. So 1301 01:05:45,120 --> 01:05:46,969 Speaker 2: the case of Malaysia doubling down 1302 01:05:47,090 --> 01:05:52,040 Speaker 2: on on semiconductors or Thailand seeking to win in electric 1303 01:05:52,050 --> 01:05:56,659 Speaker 2: vehicles or Indonesia leveraging their nickel to to go into batteries. These, 1304 01:05:56,669 --> 01:05:58,850 Speaker 2: these all make sense to us that the health tech 1305 01:05:58,860 --> 01:06:01,830 Speaker 2: sector has so much further to run in Thailand and 1306 01:06:01,840 --> 01:06:03,870 Speaker 2: Philippines should be getting a piece of that. They also 1307 01:06:03,879 --> 01:06:06,050 Speaker 2: have a lot of doctors and nurses and they could 1308 01:06:06,060 --> 01:06:09,590 Speaker 2: easily be a rival to Thailand in MedTech and health tech. 1309 01:06:09,739 --> 01:06:13,929 Speaker 2: So build on, on an existing asset and that all 1310 01:06:13,939 --> 01:06:16,030 Speaker 2: the countries in Southeast Asia have those assets. 1311 01:06:16,370 --> 01:06:19,169 Speaker 2: And then uh I'm getting the last one. It was 1312 01:06:19,179 --> 01:06:20,500 Speaker 2: the uh multilateral 1313 01:06:20,510 --> 01:06:21,439 Speaker 1: initiative, multilateral 1314 01:06:21,449 --> 01:06:24,909 Speaker 2: initiatives. We, this is a tricky area. We, what we've 1315 01:06:24,919 --> 01:06:30,459 Speaker 2: seen is that some countries postpone difficult decisions 1316 01:06:30,729 --> 01:06:32,870 Speaker 2: and say, well, we'll wait for ASEAN to kind of 1317 01:06:32,879 --> 01:06:35,860 Speaker 2: resolve this. So we won't build our grid. We'll wait 1318 01:06:35,870 --> 01:06:38,199 Speaker 2: till there's kind of an ASEAN grid or we won't 1319 01:06:38,239 --> 01:06:41,750 Speaker 2: deal with this tricky. Legislation's too politically unpopular, but it's 1320 01:06:41,760 --> 01:06:45,439 Speaker 2: forced on us by, by ASEAN. We'll do it. That's 1321 01:06:45,449 --> 01:06:49,310 Speaker 2: waiting too long. Most country, most of the growth rate 1322 01:06:49,320 --> 01:06:52,469 Speaker 2: increases in countries are within the control of the domestic 1323 01:06:52,479 --> 01:06:55,629 Speaker 2: markets and don't require so called regional integration. 1324 01:06:55,860 --> 01:06:59,459 Speaker 2: However, if the region does lower non tar bearers in 1325 01:06:59,469 --> 01:07:01,919 Speaker 2: particular and tar bearers which are already coming down because 1326 01:07:01,929 --> 01:07:05,070 Speaker 2: of our CE P. If they coordinate on an electric grid, 1327 01:07:05,080 --> 01:07:09,000 Speaker 2: if they coordinate on certain internet elector, property protections or 1328 01:07:09,010 --> 01:07:13,419 Speaker 2: how data is protected around the region. That's a good thing. 1329 01:07:13,570 --> 01:07:16,110 Speaker 2: But we see that is just icing on the or 1330 01:07:16,120 --> 01:07:19,840 Speaker 2: I I icing on the cake, not the cake itself. 1331 01:07:19,850 --> 01:07:22,969 Speaker 2: And we want most governments to recognize that your destiny 1332 01:07:22,979 --> 01:07:23,800 Speaker 2: is in your hit. 1333 01:07:24,719 --> 01:07:26,909 Speaker 1: Uh Charlie final thought from my side is that we 1334 01:07:26,919 --> 01:07:30,979 Speaker 1: also underscored the importance of a vibrant private and public 1335 01:07:30,989 --> 01:07:33,820 Speaker 1: capital market. Yes, there's a lot of savings in the region. 1336 01:07:33,830 --> 01:07:35,939 Speaker 1: There's a lot of FD I coming in, but we 1337 01:07:35,949 --> 01:07:39,540 Speaker 1: need more liquidity. We need more hungry capitalists out there 1338 01:07:39,550 --> 01:07:42,110 Speaker 1: in the region looking for deals within the country or 1339 01:07:42,120 --> 01:07:44,060 Speaker 1: cross border. And that would be in my view, an 1340 01:07:44,070 --> 01:07:45,419 Speaker 1: essential part of the group story. 1341 01:07:45,449 --> 01:07:45,739 Speaker 2: And 1342 01:07:45,750 --> 01:07:49,090 Speaker 2: I, I see maybe I'm naive but I see so 1343 01:07:49,100 --> 01:07:52,300 Speaker 2: many people who are too pessimistic on this simply based 1344 01:07:52,310 --> 01:07:54,459 Speaker 2: on past trends. But as you pointed out, 1345 01:07:54,750 --> 01:07:57,889 Speaker 2: the amount of liquidity being created in the Middle East 1346 01:07:58,320 --> 01:08:00,649 Speaker 2: and the desire of China to, to have a more 1347 01:08:00,659 --> 01:08:05,379 Speaker 2: effective BR I and the desire of all the G7 1348 01:08:05,389 --> 01:08:09,709 Speaker 2: country co countries to continue to have influence. And a 1349 01:08:09,719 --> 01:08:12,949 Speaker 2: say in Southeast Asia tells me that there are three 1350 01:08:12,959 --> 01:08:17,040 Speaker 2: large pools in addition to domestically generated pools that are 1351 01:08:17,049 --> 01:08:18,568 Speaker 2: going to be available for investment 1352 01:08:18,890 --> 01:08:22,520 Speaker 2: and, and, and the government simply have to find a 1353 01:08:22,529 --> 01:08:25,310 Speaker 2: way to attract more of that to the capital markets 1354 01:08:25,319 --> 01:08:27,819 Speaker 2: in this, in this region. If you build it, they 1355 01:08:27,830 --> 01:08:28,189 Speaker 2: will come 1356 01:08:29,680 --> 01:08:32,609 Speaker 1: Charlie. Uh It's been a great uh eight month collaboration. 1357 01:08:32,620 --> 01:08:34,779 Speaker 1: I look forward to working with you again. Yes, 1358 01:08:35,319 --> 01:08:36,310 Speaker 2: continuously. 1359 01:08:36,839 --> 01:08:40,318 Speaker 1: Fantastic to have you. Thank you Charlie and thanks to 1360 01:08:40,330 --> 01:08:43,990 Speaker 1: our listeners as well. Copy Time was produced by Ken Delbridge, 1361 01:08:44,000 --> 01:08:47,629 Speaker 1: Violet Lee and Daisy Sharma provided additional assistance. It is 1362 01:08:47,640 --> 01:08:51,528 Speaker 1: for information only and does not constitute any investment advice. 1363 01:08:51,540 --> 01:08:54,790 Speaker 1: All 131 episodes of the podcast are available on youtube 1364 01:08:55,009 --> 01:08:58,910 Speaker 1: and on major platforms like Apple and Spotify. As for 1365 01:08:58,919 --> 01:09:01,259 Speaker 1: our research publications and webinars, you can find them all 1366 01:09:01,270 --> 01:09:04,269 Speaker 1: by Googling D BS research Library. Have a great day.