WEBVTT - DBS Kopi Time E131 - SE Asia 2024-34 with Charles Ormiston

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<v Speaker 1>Welcome to Kobe Time, a podcast series on markets and

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<v Speaker 1>Economies from Devious Group research. I'm Tambe, chief economist. Welcoming

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<v Speaker 1>you to our 131st episode

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<v Speaker 1>at CBI time. Repeat guests are rare and repeat guests

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<v Speaker 1>within a year. It's never happened, but today we will

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<v Speaker 1>make an exception. Charles Oron was our guest last November.

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<v Speaker 1>On episode 112, we talked about China and Southeast Asia

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<v Speaker 1>in that episode. And after that, we talked and we

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<v Speaker 1>decided to do a collaboration. So today's podcast is about

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<v Speaker 1>the outcome of that collaboration,

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<v Speaker 1>Charles Orson founded, ran and grew BA in Southeast Asia

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<v Speaker 1>from 1993 to 2007. He's presently the chair of the

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<v Speaker 1>S Sana Council, a Singapore based Think tank backed by

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<v Speaker 1>Monks Hill Ventures. It is focused on growth potential of

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<v Speaker 1>Southeast Asia. Charlie. Welcome back to Copy Time. Thank you, Turner.

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<v Speaker 1>It's great to have you Charlie. So you and I

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<v Speaker 1>had a couple of conversations late last year. And then

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<v Speaker 1>at the beginning of this year, we got some people

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<v Speaker 1>together and we started doing some work. What did we do, Charlie?

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<v Speaker 2>Well, we had, I guess the journey began two years

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<v Speaker 2>ago when we did the Southeast State, the first edition

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<v Speaker 2>of the report and we looked out 10 years

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<v Speaker 2>to forecast growth and to do that, we had to

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<v Speaker 2>look historically at what had gone on in the region.

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<v Speaker 2>Uh I think we did a good job, you know,

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<v Speaker 2>for a first effort, let's say I give myself a

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<v Speaker 2>b uh but you could see a couple of gaps.

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<v Speaker 2>I think one was, none of us had a really

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<v Speaker 2>strong economics background.

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<v Speaker 2>Uh Number two, the way a consulting firm looks at

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<v Speaker 2>capital markets is different than the way a bank looks

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<v Speaker 2>at capital markets. I think number three, I kind of

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<v Speaker 2>miss deep collaboration.

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<v Speaker 2>Best work I did at Bain was always with somebody else.

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<v Speaker 2>Uh Even the the large accounts that I worked on,

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<v Speaker 2>I always co led them, which wasn't the Norman Bin,

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<v Speaker 2>but it was the way I preferred to work. So

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<v Speaker 2>I approached you to see if you'd be interested in collaborating.

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<v Speaker 2>And uh I was lucky to say you said yes

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<v Speaker 2>and sure enough, I think it's fit like a glove.

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<v Speaker 2>Um I think where your your expertise in economics with

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<v Speaker 2>the IMF with D BS perfectly complements what, what my

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<v Speaker 2>background in business, some economics

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<v Speaker 2>and also thinking through uh market entry, which is probably

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<v Speaker 2>one of the most relevant lenses for, for looking at

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<v Speaker 2>country strategy,

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<v Speaker 1>right? So just for the viewers and listeners edification, the

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<v Speaker 1>way it worked was um Charlie brought in Anana Council

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<v Speaker 1>and his contacts and resources from Bain.

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<v Speaker 1>And Bain was kind enough to assign episodically full time

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<v Speaker 1>consultants to work on the project. We had support from

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<v Speaker 1>Glas Baig whos at San Council and then Ma T

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<v Speaker 1>Yen Hunt Chu and Radhika Rao, three economists from D

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<v Speaker 1>BS site came together. And Charlie, the idea was initially

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<v Speaker 1>that you with your experience and with support from Bain

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<v Speaker 1>would draw a picture of what brings Southeast Asia where

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<v Speaker 1>it is today. Is it

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<v Speaker 2>when you look back

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<v Speaker 2>the golden years for Southeast Asia were really before 1997

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<v Speaker 2>those are the years where economies were growing. 78, even

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<v Speaker 2>10 plus percent a year. We've forgotten that um maybe

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<v Speaker 2>China had a few years like that, but it's been

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<v Speaker 2>30 years since Southeast Asia has had that, that kind

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<v Speaker 2>of growth.

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<v Speaker 2>And we asked ourselves, you know, why is that, why,

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<v Speaker 2>why has Southeast Asia not slowed the level of Latin

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<v Speaker 2>America or the Middle East or, or Africa? But nonetheless,

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<v Speaker 2>is really not grown the way that China or India

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<v Speaker 2>or other developing markets have and certainly given its potential,

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<v Speaker 2>it feels like it was falling short of potential. What are, what,

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<v Speaker 2>what we came up with at the time was that

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<v Speaker 2>Southeast Asia had focused a bit more on stability than

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<v Speaker 2>on growth

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<v Speaker 2>and largely as a result of the 97 crisis and

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<v Speaker 2>that had carried through all the way to the state

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<v Speaker 2>when we did this report two years ago, it was

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<v Speaker 2>just coming out of COVID, we were just coming out

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<v Speaker 2>of COVID

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<v Speaker 2>and it was hard to escape that. It was hard

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<v Speaker 2>to look out. You, you call it recency bias, I think.

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<v Speaker 2>But it was hard to look out 10 years when

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<v Speaker 2>you've just been through the worst crisis in the world in,

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<v Speaker 2>in years. And it affected the CO co the region

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<v Speaker 2>in an unusual way and it affected different countries at

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<v Speaker 2>different levels depending on, you know, the mix of tourism

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<v Speaker 2>and export and how dependent they were on China versus us,

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<v Speaker 2>et cetera.

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<v Speaker 2>Um The good news is two years later, we could

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<v Speaker 2>see that the green shoots that were evident two years

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<v Speaker 2>ago have prospered

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<v Speaker 2>and in fact, a number of the transitions in government

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<v Speaker 2>that have taken place have led us to believe that

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<v Speaker 2>most Southeast Asian governments are going to be more pro

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<v Speaker 2>growth in the next 4 to 5 years. We really

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<v Speaker 2>can't see beyond that politically than they have been for

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<v Speaker 2>the last 20 or 30. We see that particularly in

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<v Speaker 2>the Philippines under Marcos Malaysia, under Anwar. Uh I think

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<v Speaker 2>in Indonesia, they started earlier, Prabowo was considered very pro

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<v Speaker 2>growth and sorry. Um Jacoby

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<v Speaker 2>and Prabowo is committed to following his footsteps and then

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<v Speaker 2>Singapore has always been pro growth and Lawrence Wong may

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<v Speaker 2>try some new things, but it's exciting to see where

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<v Speaker 2>he plans to head. Um Vietnam seems to have just

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<v Speaker 2>secured a more stable outcome after two years of some,

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<v Speaker 2>you know, a lot of changes in the, both the

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<v Speaker 2>Prime Minister and the President. And um and there's a

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<v Speaker 2>lot of uh a lot of the insiders we talked

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<v Speaker 2>to who are quite optimistic that Vietnam is now ready

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<v Speaker 2>to kind of have pursue stable growth for the next

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<v Speaker 2>5 to 10 years. So it's a different time than

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<v Speaker 2>two years ago. And so even though the approach was similar,

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<v Speaker 2>our optimism has increased in that two year period.

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<v Speaker 2>And so for the first time, in a long time,

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<v Speaker 2>we are willing to say, we believe Southeast Asia will

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<v Speaker 2>grow faster than China for the next 10 years. And

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<v Speaker 2>in addition, in absolute terms, will attract more foreign direct

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<v Speaker 2>investment than China. And that was a hypothesis a year

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<v Speaker 2>or two ago. But we decided we weren't ready to,

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<v Speaker 2>to lay it in uh to put it in on print.

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<v Speaker 2>And now we are

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<v Speaker 1>so Charlie uh just going back to the process over

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<v Speaker 1>the last six months on San Council Ba

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<v Speaker 1>D BS got together, we did quite a bit of

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<v Speaker 1>data work. You sort of look back at some of

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<v Speaker 1>the analytics from your earlier report, you sort of refresh them,

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<v Speaker 1>you have been on a listening tour around the world

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<v Speaker 1>and you brought in some of those perspectives from those

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<v Speaker 1>who had read your earlier report and then we went

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<v Speaker 1>ahead and wrote the report down. We now have a website.

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<v Speaker 1>It will be in the show notes, the link and

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<v Speaker 1>the visualization and all the work in there.

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<v Speaker 1>The title of a report is navigating high winds. You

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<v Speaker 1>have some views on high winds, not just from geopolitics,

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<v Speaker 1>but just very specifically vis a vis China. So let's

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<v Speaker 1>start with that discussion,

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<v Speaker 2>right? So high winds, unfortunately, they are not all tail winds,

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<v Speaker 2>but fortunately, they're not all head winds as well.

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<v Speaker 2>Yeah,

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<v Speaker 2>there are a lot of analysts including us who are

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<v Speaker 2>optimistic about the prospects for the next few years because

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<v Speaker 2>of what many analysts refer to as China plus one.

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<v Speaker 2>China plus one is the idea that being dependent on

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<v Speaker 2>China for all of your sourcing is a mistake.

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<v Speaker 2>Now, it could be a mistake because you have all

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<v Speaker 2>your eggs in one basket. Uh It could be the

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<v Speaker 2>the wonderful place to source from. But uh in, in

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<v Speaker 2>times like COVID, when you could had trouble getting exports

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<v Speaker 2>out or you, your management couldn't fly into the market.

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<v Speaker 2>You you realize that having your eggs in different baskets

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<v Speaker 2>made more sense as a as a manufacturer. A second

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<v Speaker 2>could be political.

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<v Speaker 2>Um You could be either under guidance from your respective

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<v Speaker 2>government or just have your own concerns and decide you

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<v Speaker 2>want at least some of your production outside of China.

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<v Speaker 2>And so some people are diversifying for that reason. The

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<v Speaker 2>third could be, your costs are escalating in China. Uh

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<v Speaker 2>China is, has started to decline in terms of its

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<v Speaker 2>working age population. Um There's a great competition for the

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<v Speaker 2>best workers in China. And so people have seen uh

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<v Speaker 2>wage inflation in China, that's uh ahead of inflation in China.

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<v Speaker 2>And that has caused some concerns particularly at the very

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<v Speaker 2>low end, semi skilled or unskilled labor value, a low

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<v Speaker 2>value added and something that naturally falls now outside of China.

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<v Speaker 2>Um I think the last could be tariffs which sometimes

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<v Speaker 2>is related to national security but not always you, it'd

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<v Speaker 2>be hard for me to argue that solar panels or

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<v Speaker 2>wind turbines are a national security issue is more a

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<v Speaker 2>desire to protect local industries, same with electric vehicles or batteries.

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<v Speaker 2>And as a result, not just us firms, but Chinese

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<v Speaker 2>firms are being forced to establish bases offshore uh in

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<v Speaker 2>order to not evade tariffs, but to comply with law

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<v Speaker 2>and use a different export base in order to, to

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<v Speaker 2>uh receive lower tariff uh paid lower tariff levels. So it's,

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<v Speaker 2>it's all very rational in a, in a world where

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<v Speaker 2>uh some markets are becoming more protectionist.

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<v Speaker 2>It doesn't matter what your reason is. The outcome is,

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<v Speaker 2>you're going to move some of your manufacturing outside of China.

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<v Speaker 2>Now, that's a nice tailwind.

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<v Speaker 2>Southeast Asia has always been friendly to M and C investment.

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<v Speaker 2>Um One thing people forget is that in the eighties

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<v Speaker 2>and nineties while Korea and Japan were on a tier

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<v Speaker 2>in terms of growth. And so so was Taiwan, at

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<v Speaker 2>that point, they weren't that receptive to foreign investment. It

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<v Speaker 2>was very hard to invest in the markets. A lot

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<v Speaker 2>of hurdles, hard to participate in the domestic market.

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<v Speaker 2>And suddenly starting with Singapore, Southeast Asia threw up its

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<v Speaker 2>openness market and said we want you to come here

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<v Speaker 2>e especially if you're there to export, there was all

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<v Speaker 2>kinds of incentives, you could have 100% ownership. There was

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<v Speaker 2>uh they built infrastructure for you. And so some of

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<v Speaker 2>the most interesting investments in the world landed here in

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<v Speaker 2>Southeast Asia. It didn't take much, it took cheap land,

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<v Speaker 2>cheap taxes, cheap labor, but mainly a willingness to allow

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<v Speaker 2>M and CS to invest here.

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<v Speaker 2>Um It was open for business over the next 30 years,

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<v Speaker 2>it got a lot harder. Suddenly others started to copy

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<v Speaker 2>this approach of trying to attract M and C investment

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<v Speaker 2>as supposed to resist it. And the most successful dose

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<v Speaker 2>was China

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<v Speaker 2>and China went from very difficult to do business in

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<v Speaker 2>when I was working in China in the nineties. Um

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<v Speaker 2>it was very difficult to get 100% ownership of an entity.

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<v Speaker 2>It was hard to get access to the local market.

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<v Speaker 2>You were often you found it difficult to operate for

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<v Speaker 2>various reasons. Um The road transport was not good. Rail

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<v Speaker 2>transport was very difficult to access and very slow. So you, you,

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<v Speaker 2>you went to China because you saw the long term prospect,

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<v Speaker 2>but it wasn't cheaper

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<v Speaker 2>and, and then gradually it all changed. And now we're

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<v Speaker 2>in a situation where the competitiveness of China is just

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<v Speaker 2>staggering to people who are not deeply involved in manufacturing,

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<v Speaker 2>the scale of the facilities you put in. There are

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<v Speaker 2>usually the largest you have in the world, the scale

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<v Speaker 2>of the ecosystem supplying you, whether it's a chemical provider

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<v Speaker 2>or certain kinds of components or accessories. A lot of

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<v Speaker 2>those are produced in China and it's cheapest to get

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<v Speaker 2>them in China. The the facilities to help you export

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<v Speaker 2>are some of the best in the world. Now, you

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<v Speaker 2>can access almost any port in the world directly from China.

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<v Speaker 2>And so the list goes on,

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<v Speaker 2>but it's also generally very easy to work with government

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<v Speaker 2>in China. If you're setting up some kind of manufacturing

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<v Speaker 2>facility and you're not just working with the national government.

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<v Speaker 2>In fact, rarely do you interact with the national government.

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<v Speaker 2>It's usually you're choosing between different kind of city ecosystems

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<v Speaker 2>that will back you and support you. But you have

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<v Speaker 2>to be careful who you pick because just as you

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<v Speaker 2>pick one to support you, others may then be annoyed

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<v Speaker 2>that you chose one of their rivals. There's tremendous rivalry

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<v Speaker 2>between the different cities in China to attract investment and

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<v Speaker 2>to see the companies that invest locally prosper. So China

0:11:44.690 --> 0:11:49.090
<v Speaker 2>has become a big competitor, competitor So I was talking,

0:11:49.099 --> 0:11:51.250
<v Speaker 2>I was in one of the Southeast Asian countries late

0:11:51.260 --> 0:11:52.900
<v Speaker 2>last week talking to a

0:11:53.390 --> 0:11:54.890
<v Speaker 2>some a minister there.

0:11:55.669 --> 0:11:56.609
<v Speaker 2>And he said, look

0:11:57.429 --> 0:11:59.359
<v Speaker 2>30 years ago, we were almost the only game in

0:11:59.369 --> 0:12:02.250
<v Speaker 2>town Vietnam didn't exist. China didn't exist. We really just

0:12:02.260 --> 0:12:07.609
<v Speaker 2>competed against Singapore some degree, Philippines, Malaysia and Indonesia. And

0:12:07.619 --> 0:12:10.099
<v Speaker 2>now we compete with at least 10 countries. We, we

0:12:10.109 --> 0:12:12.960
<v Speaker 2>compete with Mexico, we compete with India. We compete with

0:12:12.969 --> 0:12:15.869
<v Speaker 2>different provinces in China. We compete with Eastern Europe. So

0:12:15.880 --> 0:12:19.010
<v Speaker 2>nothing falls into our lap. We have to win everything.

0:12:19.280 --> 0:12:22.909
<v Speaker 2>So while the there are opportunities that are coming out

0:12:22.919 --> 0:12:26.989
<v Speaker 2>of China, they are heavily contested and nothing will fall

0:12:27.000 --> 0:12:28.260
<v Speaker 2>into a country's lap.

0:12:28.900 --> 0:12:32.119
<v Speaker 1>I think your line that is very evocative of that

0:12:32.130 --> 0:12:35.750
<v Speaker 1>issue is that the era of just drawing investment through

0:12:35.760 --> 0:12:38.679
<v Speaker 1>cheap land, labor doesn't work anymore. You got to do

0:12:38.690 --> 0:12:43.320
<v Speaker 1>more than that. A there is this hyper competitiveness within China.

0:12:43.380 --> 0:12:45.859
<v Speaker 1>So just because labor cost is rising in China does

0:12:45.869 --> 0:12:48.200
<v Speaker 1>not guarantee that the capital would flow out. And if

0:12:48.210 --> 0:12:51.000
<v Speaker 1>even if it does, you better offer some of those

0:12:51.010 --> 0:12:53.010
<v Speaker 1>competitive aspect, otherwise not going to come. Yes.

0:12:53.119 --> 0:12:55.900
<v Speaker 2>Yes. And the one probably the biggest

0:12:56.900 --> 0:13:00.119
<v Speaker 2>tail wind in Southeast Asia is the attitude of government

0:13:00.130 --> 0:13:01.320
<v Speaker 2>to the MNC S.

0:13:02.109 --> 0:13:04.700
<v Speaker 2>But I would say probably the biggest headwind to Southeast

0:13:04.710 --> 0:13:08.750
<v Speaker 2>Asia is the general education level of the population. And

0:13:08.760 --> 0:13:11.260
<v Speaker 2>there are objective ways to assess that the piece of

0:13:11.270 --> 0:13:14.630
<v Speaker 2>scores which take place in eighth grade. There are indices

0:13:14.640 --> 0:13:18.500
<v Speaker 2>of human capital, competitiveness, et cetera. But it's also experience

0:13:18.510 --> 0:13:21.500
<v Speaker 2>of people on the ground. Those that are educated are

0:13:21.510 --> 0:13:23.510
<v Speaker 2>some of the best. It's not a, it's not a

0:13:23.520 --> 0:13:25.460
<v Speaker 2>raw capability, there's nothing there.

0:13:25.710 --> 0:13:28.770
<v Speaker 2>But the reality is the amount spent on education, the

0:13:28.780 --> 0:13:34.289
<v Speaker 2>availability to the full mass population is limited everywhere but

0:13:34.299 --> 0:13:35.250
<v Speaker 2>Singapore and Vietnam.

0:13:35.940 --> 0:13:40.020
<v Speaker 2>And so one reason we have seen Vietnam outperform the

0:13:40.030 --> 0:13:44.339
<v Speaker 2>other Southeast Asian countries we believe is they have everything else, right?

0:13:44.349 --> 0:13:49.479
<v Speaker 2>But they have a far more educated general population than Philippines, Indonesia,

0:13:49.489 --> 0:13:50.359
<v Speaker 2>Thailand and Malaysia.

0:13:51.159 --> 0:13:54.429
<v Speaker 2>And also their English speaking skills tend to be above

0:13:54.440 --> 0:13:57.390
<v Speaker 2>those countries as well for the mass population. And we

0:13:57.400 --> 0:13:59.478
<v Speaker 2>think that's made it easier for a lot of MC

0:13:59.489 --> 0:14:01.640
<v Speaker 2>to operate there. And therefore they've, they've had a better

0:14:01.650 --> 0:14:04.590
<v Speaker 2>experience and they've been willing to, to invest again.

0:14:05.830 --> 0:14:11.169
<v Speaker 1>Um Charlie, a skeptic would look at Southeast Asia's track record,

0:14:11.179 --> 0:14:14.520
<v Speaker 1>say after the Asian financial crisis and will say, well,

0:14:15.299 --> 0:14:19.440
<v Speaker 1>they recover from the crisis, they had some growth performance,

0:14:19.450 --> 0:14:23.320
<v Speaker 1>but it doesn't seem like they really embraced manufacturing. So

0:14:23.330 --> 0:14:27.359
<v Speaker 1>talk us through the level of industrialization in South Asia

0:14:27.369 --> 0:14:29.039
<v Speaker 1>and where we are right now.

0:14:29.859 --> 0:14:30.150
<v Speaker 2>If uh

0:14:30.820 --> 0:14:33.229
<v Speaker 2>part of what I'll share is the anecdotal and part

0:14:33.239 --> 0:14:35.780
<v Speaker 2>will be, you know, data. Um

0:14:36.380 --> 0:14:39.239
<v Speaker 2>When I was here in the eighties,

0:14:39.890 --> 0:14:42.890
<v Speaker 2>uh I started work in Singapore in 1986. I was

0:14:42.900 --> 0:14:44.989
<v Speaker 2>doing a lot of work in the oil and gas sector.

0:14:45.700 --> 0:14:50.000
<v Speaker 2>And Singapore already had a leadership position as a what

0:14:50.010 --> 0:14:53.000
<v Speaker 2>we call screen producer, which meant very little of what

0:14:53.010 --> 0:14:55.719
<v Speaker 2>they produced in the local refineries for the local market.

0:14:55.979 --> 0:14:57.909
<v Speaker 2>And depending on what needs, there were, there was suddenly

0:14:57.919 --> 0:15:01.340
<v Speaker 2>a diesel shortage in Thailand or there was a surplus

0:15:01.349 --> 0:15:05.070
<v Speaker 2>of light crude oil from Indonesia back in the days

0:15:05.080 --> 0:15:08.359
<v Speaker 2>when they exported heavily. Um They, the, the, the the

0:15:08.369 --> 0:15:12.320
<v Speaker 2>facility here was so flexible that they could quickly tweak

0:15:12.580 --> 0:15:15.080
<v Speaker 2>the settings on the refinery and produce what was needed

0:15:15.090 --> 0:15:17.599
<v Speaker 2>with the crude that was cheapest and it was, it

0:15:17.609 --> 0:15:20.599
<v Speaker 2>was an arbitrage opportunity. It meant the refineries here were very,

0:15:20.609 --> 0:15:25.669
<v Speaker 2>very profitable. So Indonesia, Malaysia, Thailand all saw this and decided,

0:15:25.780 --> 0:15:29.179
<v Speaker 2>why are we letting Singapore win this? After all, we

0:15:29.190 --> 0:15:32.700
<v Speaker 2>have cheaper land most in those days, Malaysia and Indonesia

0:15:32.710 --> 0:15:35.989
<v Speaker 2>were both major producers of oil. At that point, Thailand

0:15:36.000 --> 0:15:38.859
<v Speaker 2>actually hadn't found significant gas reserves and maybe they found,

0:15:38.869 --> 0:15:41.750
<v Speaker 2>but they weren't being brought to the surface. And so

0:15:42.030 --> 0:15:44.200
<v Speaker 2>they wanted to build large

0:15:44.969 --> 0:15:48.700
<v Speaker 2>refining facilities and neither really succeeded. They, they succeeded in

0:15:48.710 --> 0:15:51.780
<v Speaker 2>building refineries and with some attached chemicals that serve the

0:15:51.789 --> 0:15:54.559
<v Speaker 2>local market, but they weren't able to be a producer

0:15:54.570 --> 0:15:55.309
<v Speaker 2>for the region.

0:15:56.400 --> 0:15:59.580
<v Speaker 2>What also occurred at the time is Taiwan was doubling

0:15:59.590 --> 0:16:02.570
<v Speaker 2>down on their chemicals capability. Korea was as well and

0:16:02.580 --> 0:16:04.869
<v Speaker 2>so was the Middle East. So it was a competitive market.

0:16:04.880 --> 0:16:08.359
<v Speaker 2>It didn't create the kind of margins that maybe you could,

0:16:08.369 --> 0:16:12.080
<v Speaker 2>if you weren't operating a refinery perfectly, you could really

0:16:12.090 --> 0:16:12.780
<v Speaker 2>make money on.

0:16:13.539 --> 0:16:15.390
<v Speaker 2>And that was when I first learned that there was

0:16:15.400 --> 0:16:17.640
<v Speaker 2>a lot more to the where you put a a

0:16:17.650 --> 0:16:20.640
<v Speaker 2>manufacturing facility than low cost labor, low cost land.

0:16:21.830 --> 0:16:25.000
<v Speaker 2>Over the subsequent 20 years, we could see some really

0:16:25.010 --> 0:16:27.849
<v Speaker 2>smart efforts to build manufacturing, but we also saw some

0:16:27.859 --> 0:16:31.059
<v Speaker 2>real failed ones. So for example, Indonesia spent and I

0:16:31.070 --> 0:16:34.020
<v Speaker 2>believe it's correct to say billions of dollars trying to

0:16:34.030 --> 0:16:36.739
<v Speaker 2>develop an aerospace industry under Habibi.

0:16:37.109 --> 0:16:40.119
<v Speaker 2>And I don't believe they may have produced about eight planes,

0:16:40.130 --> 0:16:42.700
<v Speaker 2>but it, it squandered quite a bit of money that

0:16:42.710 --> 0:16:44.890
<v Speaker 2>could have gone into some sectors that would have been

0:16:44.900 --> 0:16:48.440
<v Speaker 2>more appropriate. I don't think Malaysia got a significant payback

0:16:48.450 --> 0:16:51.820
<v Speaker 2>from the proton project, which was again a significant a

0:16:51.830 --> 0:16:53.919
<v Speaker 2>a way of approaching it. So we want our own

0:16:53.929 --> 0:16:56.840
<v Speaker 2>auto industry. We don't want to rely on MN CS.

0:16:57.090 --> 0:17:00.750
<v Speaker 2>Whereas Thailand approached the market by saying, let's attract Japanese

0:17:00.760 --> 0:17:03.630
<v Speaker 2>and C investment in automotive. So they took the best

0:17:03.640 --> 0:17:06.349
<v Speaker 2>players and allowed them to use Thailand as a base

0:17:06.359 --> 0:17:09.020
<v Speaker 2>and gave them more control. And the winner after all

0:17:09.030 --> 0:17:12.939
<v Speaker 2>that was Thailand. Thailand became the leader in producing combustion

0:17:12.949 --> 0:17:14.310
<v Speaker 2>engine vehicles.

0:17:14.718 --> 0:17:18.058
<v Speaker 2>So as you look through different sectors, you can actually

0:17:18.068 --> 0:17:20.859
<v Speaker 2>see that not every step was a misstep, but not

0:17:20.869 --> 0:17:24.418
<v Speaker 2>every step was a solid step towards attracting a sector,

0:17:24.428 --> 0:17:27.098
<v Speaker 2>attracting a promising company, getting them to set it up

0:17:27.109 --> 0:17:30.338
<v Speaker 2>as a base and then continue to invest behind that

0:17:30.348 --> 0:17:30.818
<v Speaker 2>base

0:17:32.260 --> 0:17:34.790
<v Speaker 2>cast forward. And uh

0:17:35.449 --> 0:17:37.869
<v Speaker 2>the big competitors started to become China

0:17:38.829 --> 0:17:44.429
<v Speaker 2>and China started to attract far more investment than Southeast Asia.

0:17:44.439 --> 0:17:47.410
<v Speaker 2>And I I just had this gut feeling that uh

0:17:47.420 --> 0:17:50.589
<v Speaker 2>in the words of Ross Perot who was a famous

0:17:50.599 --> 0:17:53.449
<v Speaker 2>uh independent candidate for president,

0:17:53.760 --> 0:17:56.909
<v Speaker 2>uh he probably was the reason Bill Clinton beat uh

0:17:56.920 --> 0:18:00.510
<v Speaker 2>George Bush senior for his second term because he drew

0:18:00.520 --> 0:18:03.109
<v Speaker 2>away enough votes. But he said the North American free

0:18:03.119 --> 0:18:06.479
<v Speaker 2>Trade agreement will create this massive sucking sound of jobs

0:18:06.489 --> 0:18:09.379
<v Speaker 2>to the South. And, and I, I'm kind of

0:18:10.089 --> 0:18:13.430
<v Speaker 2>perjured that or whatever the right term is. And I

0:18:13.439 --> 0:18:15.280
<v Speaker 2>think we've seen a bit of a sucking sound to

0:18:15.290 --> 0:18:18.449
<v Speaker 2>the north. And so we looked at data on manufacturing

0:18:18.459 --> 0:18:22.300
<v Speaker 2>value added in uh Southeast Asia and we also looked

0:18:22.310 --> 0:18:24.140
<v Speaker 2>at a couple of academic papers, one by a guy

0:18:24.150 --> 0:18:27.739
<v Speaker 2>named Dan Roderick, who's a, who's a phd at, at Harvard.

0:18:27.900 --> 0:18:30.188
<v Speaker 2>And they all led us to the same conclusion that

0:18:30.349 --> 0:18:33.010
<v Speaker 2>the developing world, it it is not just the developed

0:18:33.020 --> 0:18:34.859
<v Speaker 2>world that has lost jobs

0:18:35.160 --> 0:18:39.300
<v Speaker 2>and manufacturing to China, it's also the developing world. And

0:18:39.310 --> 0:18:42.659
<v Speaker 2>his paper was title the premature indus deindustrialization of the

0:18:42.670 --> 0:18:45.369
<v Speaker 2>developing world. And when we looked at the data, we

0:18:45.380 --> 0:18:48.139
<v Speaker 2>saw a similar pattern. But now what's interesting if you

0:18:48.150 --> 0:18:50.140
<v Speaker 2>go into the details of the data which I encourage

0:18:50.150 --> 0:18:53.510
<v Speaker 2>you to do. It's on the website is that Malaysia

0:18:53.520 --> 0:18:59.459
<v Speaker 2>and Singapore and I believe Thailand have started to improve things.

0:18:59.949 --> 0:19:05.869
<v Speaker 2>But Indonesia and the Philippines continued their decline for this entire, since,

0:19:05.880 --> 0:19:09.219
<v Speaker 2>since the early two thousands. So Southeast Asia peaked in

0:19:09.229 --> 0:19:11.939
<v Speaker 2>terms of manufacturing value added in the two thousands, with

0:19:11.949 --> 0:19:15.089
<v Speaker 2>one exception, Vietnam, but three have started to turn the

0:19:15.099 --> 0:19:17.448
<v Speaker 2>corner in the last 10 years. And so it, what

0:19:17.459 --> 0:19:22.390
<v Speaker 2>it told us is good policy and particularly follow through

0:19:22.420 --> 0:19:25.520
<v Speaker 2>on your commitments with Mn CS that have have invested

0:19:25.530 --> 0:19:28.290
<v Speaker 2>in your country will often result in

0:19:28.589 --> 0:19:33.449
<v Speaker 2>continued presence in manufacturing. However, if you don't fall through

0:19:33.459 --> 0:19:35.839
<v Speaker 2>your commitments, if you play games with some of the rules,

0:19:35.849 --> 0:19:38.510
<v Speaker 2>if you make it harder to import parts or chemicals,

0:19:38.520 --> 0:19:41.550
<v Speaker 2>if you force downs streaming into new sectors that they

0:19:41.560 --> 0:19:44.909
<v Speaker 2>hadn't intended to go into, if you cut off exports

0:19:44.920 --> 0:19:47.569
<v Speaker 2>for a period of time, because it will keep prices

0:19:47.579 --> 0:19:50.629
<v Speaker 2>low in the domestic market. All those send signals to

0:19:50.640 --> 0:19:53.939
<v Speaker 2>people that this is not a desirable place to invest

0:19:53.949 --> 0:19:55.400
<v Speaker 2>and that might, you might get away with it if

0:19:55.410 --> 0:19:56.729
<v Speaker 2>there are only three or four options.

0:19:57.020 --> 0:19:59.400
<v Speaker 2>But as, as, as I learned in Thailand last week,

0:19:59.410 --> 0:20:02.760
<v Speaker 2>there are a lot of options for any investor considering investment.

0:20:02.910 --> 0:20:06.399
<v Speaker 2>And so we see continuity and policy following through on

0:20:06.410 --> 0:20:11.239
<v Speaker 2>your commitments, trust is probably the key driver of raising

0:20:11.250 --> 0:20:14.119
<v Speaker 2>both FD I and manufacturing. Value added.

0:20:14.949 --> 0:20:18.640
<v Speaker 1>So Charlie, uh in doing the presentation, we have done

0:20:18.650 --> 0:20:22.060
<v Speaker 1>several presentations already with this report. Um And I've seen

0:20:22.069 --> 0:20:25.150
<v Speaker 1>that people sort set upright when you show the chart

0:20:25.160 --> 0:20:27.969
<v Speaker 1>on the premature destri. So I highly recommend

0:20:28.329 --> 0:20:30.669
<v Speaker 1>uh listeners to the podcast to look up the website.

0:20:30.829 --> 0:20:32.579
<v Speaker 1>But the second area where I see a lot of

0:20:32.589 --> 0:20:34.349
<v Speaker 1>people pay a lot of attention. I think it's gotten

0:20:34.359 --> 0:20:37.989
<v Speaker 1>some newspaper headline also is the fact that majority of

0:20:38.000 --> 0:20:40.250
<v Speaker 1>the FD I that's come into the region over the

0:20:40.260 --> 0:20:42.369
<v Speaker 1>last 5, 1015 years has been the same

0:20:42.479 --> 0:20:42.689
<v Speaker 1>thing.

0:20:42.739 --> 0:20:44.978
<v Speaker 2>Yeah, I, I continue to be surprised by the number.

0:20:44.989 --> 0:20:47.630
<v Speaker 2>In fact, one night I bolted awake in a cold

0:20:47.640 --> 0:20:49.849
<v Speaker 2>sweat thinking what if we got that number wrong because

0:20:49.859 --> 0:20:53.069
<v Speaker 2>it's so glaring. But the data was, or is that

0:20:53.079 --> 0:20:57.109
<v Speaker 2>from 2013 to 2018, Southeast Asia

0:20:58.310 --> 0:21:02.050
<v Speaker 2>uh of Southeast Asia's FD I Singapore attracted 56%.

0:21:02.880 --> 0:21:04.979
<v Speaker 2>And then in the next five years, it went up

0:21:04.989 --> 0:21:05.979
<v Speaker 2>to 62.

0:21:07.689 --> 0:21:10.969
<v Speaker 2>Now this is a net FD I number. Um And,

0:21:10.979 --> 0:21:14.040
<v Speaker 2>but still Singapore is a major investor in other countries. So,

0:21:14.050 --> 0:21:17.140
<v Speaker 2>you know, the net number doesn't necessarily just favor Singapore.

0:21:17.819 --> 0:21:21.319
<v Speaker 2>Um And uh one of one of our council members

0:21:21.329 --> 0:21:24.438
<v Speaker 2>from uh Indonesia, Geeta Weir Jwan. I didn't put it

0:21:24.449 --> 0:21:26.719
<v Speaker 2>well at an investor conference I was at in, in,

0:21:26.729 --> 0:21:29.438
<v Speaker 2>in Malaysia. He said, look, it all comes down to

0:21:29.449 --> 0:21:31.040
<v Speaker 2>trust and

0:21:31.949 --> 0:21:35.688
<v Speaker 2>we think we can attract these companies with a deal.

0:21:36.430 --> 0:21:38.699
<v Speaker 2>But what the first thing they do is they talk

0:21:38.709 --> 0:21:40.989
<v Speaker 2>to their friends and they said, what has been your

0:21:41.000 --> 0:21:44.819
<v Speaker 2>experience in this country? And if they've ever had a

0:21:44.829 --> 0:21:47.680
<v Speaker 2>difficult experience, whether it was customs or immigration or getting

0:21:47.689 --> 0:21:50.399
<v Speaker 2>work permits or getting chemicals in an appropriate time or

0:21:50.410 --> 0:21:55.448
<v Speaker 2>spare parts or somebody asking for, for, um, for some

0:21:55.459 --> 0:21:58.839
<v Speaker 2>share of the revenue share of the business itself. These

0:21:58.849 --> 0:22:01.849
<v Speaker 2>things happen in developing world, then they aren't going to

0:22:01.859 --> 0:22:02.810
<v Speaker 2>share a good story.

0:22:03.170 --> 0:22:06.589
<v Speaker 2>And, and ultimately Singapore has people's trust. There's a great

0:22:06.599 --> 0:22:10.439
<v Speaker 2>article in today's straits Times by the pfizer Ceo and

0:22:10.449 --> 0:22:13.750
<v Speaker 2>he talked about why they keep investing billions of dollars

0:22:13.760 --> 0:22:16.520
<v Speaker 2>into Singapore and he didn't use the word trust. But

0:22:16.530 --> 0:22:19.209
<v Speaker 2>every if you distilled his words down, it came down

0:22:19.219 --> 0:22:21.790
<v Speaker 2>to that, that we have had a strong working relationship

0:22:21.800 --> 0:22:25.169
<v Speaker 2>with the Singapore government for years and we believe in

0:22:25.180 --> 0:22:27.630
<v Speaker 2>what they, that, that they'll do what they say they'll do.

0:22:27.849 --> 0:22:30.969
<v Speaker 2>So I, I uh now do I think Singapore can

0:22:30.979 --> 0:22:32.109
<v Speaker 2>keep this up? No.

0:22:32.979 --> 0:22:36.079
<v Speaker 2>Um I this is a very small place and if

0:22:36.319 --> 0:22:40.319
<v Speaker 2>Southeast Asia really gets its act together, then you start

0:22:40.329 --> 0:22:43.449
<v Speaker 2>to be optimistic that more while Singapore will probably still

0:22:43.459 --> 0:22:46.879
<v Speaker 2>grow ft I, the greater growth will take place in

0:22:46.890 --> 0:22:48.238
<v Speaker 2>other parts of Southeast Asia

0:22:48.560 --> 0:22:52.438
<v Speaker 2>and we can see it occurring already. Uh For example,

0:22:52.449 --> 0:22:54.729
<v Speaker 2>if there really is a uh an sez as a

0:22:54.739 --> 0:22:58.780
<v Speaker 2>special economic zone between Singapore and Johor, we would expect

0:22:58.790 --> 0:23:02.189
<v Speaker 2>some of Singapore's investment and foreign investors to divert investment

0:23:02.199 --> 0:23:04.959
<v Speaker 2>that would have gone to Singapore to Johor. But this

0:23:04.969 --> 0:23:08.489
<v Speaker 2>will benefit both Singapore and Johor. Uh We know Thailand

0:23:08.500 --> 0:23:10.979
<v Speaker 2>is very eager to attract more of the investments that

0:23:10.989 --> 0:23:13.380
<v Speaker 2>they see going to Malaysia, Vietnam and Indonesia.

0:23:13.680 --> 0:23:16.619
<v Speaker 2>And we know Vietnam is keen to reverse a recent

0:23:16.630 --> 0:23:20.540
<v Speaker 2>slide in kind of the league tables. And uh they're

0:23:20.550 --> 0:23:22.920
<v Speaker 2>very disappointed that they lost a couple of investments. One

0:23:22.930 --> 0:23:26.780
<v Speaker 2>was with Intel um to uh I believe it was Poland.

0:23:27.079 --> 0:23:29.979
<v Speaker 2>And so this is a, this is a region that

0:23:29.989 --> 0:23:33.119
<v Speaker 2>is committed to attracting a greater share in FD I

0:23:33.130 --> 0:23:36.000
<v Speaker 2>and realize the next 5 to 10 years might be

0:23:36.010 --> 0:23:38.899
<v Speaker 2>a unique period to secure Greenfield investments.

0:23:39.560 --> 0:23:42.819
<v Speaker 1>But Charlie, when we talk about having

0:23:44.170 --> 0:23:46.530
<v Speaker 1>an environment of trust and rule of law and governance

0:23:46.540 --> 0:23:50.650
<v Speaker 1>that is conducive to investment, we're still talking about investment

0:23:50.660 --> 0:23:53.910
<v Speaker 1>that will go into the export oriented sector of the economy.

0:23:54.400 --> 0:23:57.989
<v Speaker 1>And does that open up the areas of vulnerability as well?

0:23:58.339 --> 0:23:59.609
<v Speaker 2>You're absolutely right.

0:24:01.920 --> 0:24:04.228
<v Speaker 2>I don't think the the West is as discerning as

0:24:04.239 --> 0:24:06.459
<v Speaker 2>this but pretty much everywhere. In Asia,

0:24:07.449 --> 0:24:10.869
<v Speaker 2>the rules are different if you were planning to be exporting,

0:24:11.079 --> 0:24:14.900
<v Speaker 2>uh you're in a special economic zone, um you're treated

0:24:14.910 --> 0:24:17.160
<v Speaker 2>differently and you just have to comply with whatever you

0:24:17.170 --> 0:24:20.310
<v Speaker 2>might even allow, be allowed to export only 90% or

0:24:20.319 --> 0:24:24.479
<v Speaker 2>only 80% whether it's automotive or it could be solar panels,

0:24:24.489 --> 0:24:27.389
<v Speaker 2>it could be to get the special tax breaks, etcetera. Now,

0:24:27.400 --> 0:24:30.670
<v Speaker 2>part of that is a reasonable political consideration

0:24:31.069 --> 0:24:34.228
<v Speaker 2>that in order to get to, to persuade the public

0:24:34.239 --> 0:24:35.959
<v Speaker 2>that we should give this kind of tax break is

0:24:35.969 --> 0:24:38.449
<v Speaker 2>to say, well, look, they're creating jobs that otherwise wouldn't

0:24:38.459 --> 0:24:41.930
<v Speaker 2>exist here and they're not really competing with a local company,

0:24:41.939 --> 0:24:44.589
<v Speaker 2>they're doing something that no local company can do. So

0:24:44.599 --> 0:24:48.419
<v Speaker 2>I understand the political rationale for it. The challenge is

0:24:48.430 --> 0:24:48.869
<v Speaker 2>that

0:24:49.569 --> 0:24:54.050
<v Speaker 2>most of these economies would benefit from more competition in

0:24:54.060 --> 0:24:58.089
<v Speaker 2>their domestic market. And if you as we go to

0:24:58.099 --> 0:25:02.430
<v Speaker 2>other sources of growth beyond export led manufacturing, things like

0:25:02.439 --> 0:25:07.930
<v Speaker 2>the green transition, entrepreneurial activity, uh growing new sectors, particularly

0:25:07.939 --> 0:25:11.439
<v Speaker 2>in the services side, almost all of them benefit significantly

0:25:11.449 --> 0:25:14.859
<v Speaker 2>from local competition. It tends to attract more investment which

0:25:14.869 --> 0:25:17.270
<v Speaker 2>is a surprise to people. It tends to attract uh

0:25:17.280 --> 0:25:18.869
<v Speaker 2>result in more innovation,

0:25:18.949 --> 0:25:23.709
<v Speaker 2>more, more and better outcomes for consumers. Competition is good.

0:25:23.920 --> 0:25:26.630
<v Speaker 2>There's always a tendency to want to protect local players

0:25:26.640 --> 0:25:30.969
<v Speaker 2>and to be worried about MNC protection IMNC is taking

0:25:30.979 --> 0:25:33.780
<v Speaker 2>over the market. We do find that yeah, there are

0:25:33.790 --> 0:25:37.688
<v Speaker 2>certain businesses where you could look and say their global

0:25:38.020 --> 0:25:41.609
<v Speaker 2>scale gives them an unfair advantage against a local player.

0:25:41.619 --> 0:25:43.689
<v Speaker 2>And we have to, we have to adjust the rules

0:25:43.699 --> 0:25:44.729
<v Speaker 2>to some degree

0:25:44.979 --> 0:25:49.119
<v Speaker 2>so that there is strong competition, but it's still fair competition,

0:25:49.130 --> 0:25:51.839
<v Speaker 2>it would, it would be like uh weight class or

0:25:51.849 --> 0:25:54.889
<v Speaker 2>certain kind of handicapping. But if you exclude them from

0:25:54.900 --> 0:25:58.400
<v Speaker 2>the market entirely, then what you'll end up with less competition,

0:25:58.699 --> 0:26:02.060
<v Speaker 2>it has to be done. Sector by sector, financial services

0:26:02.069 --> 0:26:05.438
<v Speaker 2>is typically done separately because of the unique characteristics of, of,

0:26:05.449 --> 0:26:08.000
<v Speaker 2>of financial crises. Versus if, if you know, if you

0:26:08.010 --> 0:26:10.599
<v Speaker 2>had a shortage of croissants, it wouldn't bring down the

0:26:10.609 --> 0:26:12.530
<v Speaker 2>economy in the same way it would if, if you

0:26:12.540 --> 0:26:15.958
<v Speaker 2>had a bank run. So II I understand particularly why

0:26:15.969 --> 0:26:19.599
<v Speaker 2>financial services might be regulated differently. But in general, we

0:26:19.619 --> 0:26:22.560
<v Speaker 2>f one of our main recommendations in addition to addressing

0:26:22.839 --> 0:26:26.920
<v Speaker 2>the short shortcomings in education is to have more competition

0:26:26.930 --> 0:26:29.040
<v Speaker 2>in local markets in order to attract investment and get

0:26:29.050 --> 0:26:29.780
<v Speaker 2>better outcomes.

0:26:30.420 --> 0:26:33.540
<v Speaker 1>So that that outcome brings me to the point that

0:26:33.949 --> 0:26:38.180
<v Speaker 1>we in this report have identified seven traditional drivers of

0:26:38.189 --> 0:26:42.139
<v Speaker 1>growth uh from ease of doing business to competition policies

0:26:42.150 --> 0:26:45.920
<v Speaker 1>to institutions, to your point of workforce quality and then

0:26:45.930 --> 0:26:51.670
<v Speaker 1>infrastructure stability and the investment environment overall. Um does one

0:26:51.680 --> 0:26:54.959
<v Speaker 1>country just stand out that it's better in all these

0:26:54.969 --> 0:26:56.439
<v Speaker 1>traditional broad drivers?

0:26:56.959 --> 0:26:59.329
<v Speaker 2>I mean, Singapore has traditionally stood out and it, and

0:26:59.339 --> 0:27:01.218
<v Speaker 2>it's been a leader, let's be clear, not just in

0:27:01.229 --> 0:27:03.979
<v Speaker 2>Southeast Asia, but in the world in terms of attracting

0:27:03.989 --> 0:27:06.619
<v Speaker 2>MNC investment. And if you look at the outcomes,

0:27:07.329 --> 0:27:10.839
<v Speaker 2>you'd say it worked, you know, and, and in fact, if, if,

0:27:10.849 --> 0:27:13.829
<v Speaker 2>if I were Korea or Japan and I could wind

0:27:13.839 --> 0:27:16.849
<v Speaker 2>back the clock. I would have been more receptive to

0:27:16.859 --> 0:27:20.790
<v Speaker 2>foreign investment because I think their economies ended up slowing

0:27:21.199 --> 0:27:25.500
<v Speaker 2>mainly because they, the there was over consolidation among these

0:27:25.510 --> 0:27:28.189
<v Speaker 2>big exporting firms. The Tribals, in the case of,

0:27:28.640 --> 0:27:31.569
<v Speaker 2>of uh Korea, the trading firms in case in Japan,

0:27:31.579 --> 0:27:35.739
<v Speaker 2>they ended up dominating both local services and export oriented

0:27:35.750 --> 0:27:38.689
<v Speaker 2>manufacturing and somewhat stifling the economies and neither has really

0:27:38.699 --> 0:27:42.359
<v Speaker 2>grown as fast as one would think they should given

0:27:42.369 --> 0:27:44.760
<v Speaker 2>the quality of their workforce and all the other factors

0:27:44.770 --> 0:27:47.900
<v Speaker 2>that they they have as a country. Um

0:27:49.199 --> 0:27:52.959
<v Speaker 2>Vietnam also stands out now uh what two years ago

0:27:52.969 --> 0:27:54.859
<v Speaker 2>when we saw the growth rates for Vietnam, I have

0:27:54.869 --> 0:27:57.569
<v Speaker 2>to admit I was, I was caught by surprise. Uh

0:27:57.579 --> 0:27:59.819
<v Speaker 2>the work I had done in Vietnam in the nineties,

0:27:59.829 --> 0:28:01.550
<v Speaker 2>I had found it one of the more challenging countries

0:28:01.560 --> 0:28:04.760
<v Speaker 2>to work in. Um There was a uh

0:28:05.510 --> 0:28:11.849
<v Speaker 2>a very challenging power sharing between the, the central government,

0:28:12.099 --> 0:28:14.689
<v Speaker 2>the provincial governments and the military.

0:28:15.390 --> 0:28:20.389
<v Speaker 2>And we were doing quite complex deals in Vietnam, buying

0:28:20.400 --> 0:28:24.660
<v Speaker 2>up uh assets uh in, in a manufacturing sector in

0:28:24.670 --> 0:28:27.069
<v Speaker 2>order to serve the domestic market, which is always the

0:28:27.079 --> 0:28:30.780
<v Speaker 2>trickiest place to play. And in each one, each of

0:28:30.790 --> 0:28:35.670
<v Speaker 2>those three entities had objectives that they wanted served. And

0:28:35.680 --> 0:28:38.349
<v Speaker 2>if either thought the other was getting more than them,

0:28:38.410 --> 0:28:40.780
<v Speaker 2>the deal was off and, and, and, and it was

0:28:40.790 --> 0:28:42.930
<v Speaker 2>just hard to, to get things done.

0:28:43.300 --> 0:28:46.880
<v Speaker 2>And so, you know, my career took different paths and

0:28:46.890 --> 0:28:49.119
<v Speaker 2>when I came back to work in Vietnam, I was,

0:28:49.130 --> 0:28:53.209
<v Speaker 2>oh my gosh, this is now just on fire. And

0:28:53.219 --> 0:28:54.920
<v Speaker 2>I went in, uh, I went to a couple of

0:28:54.930 --> 0:28:56.400
<v Speaker 2>industrial parks and

0:28:57.270 --> 0:29:00.300
<v Speaker 2>one guy who's particularly nice to me. I still owe

0:29:00.310 --> 0:29:02.829
<v Speaker 2>him a golf game because he, he just opened up

0:29:02.839 --> 0:29:04.849
<v Speaker 2>his plant to me and let me ask any question

0:29:04.859 --> 0:29:07.270
<v Speaker 2>I want. And one of the questions I asked is OK,

0:29:07.280 --> 0:29:09.180
<v Speaker 2>you have two other plants, one in Mexico and one

0:29:09.189 --> 0:29:12.040
<v Speaker 2>in Arizona. Is it true? The Vietnamese workers are more

0:29:12.050 --> 0:29:14.959
<v Speaker 2>productive than those in Mexico and the US. And he said, oh,

0:29:15.290 --> 0:29:16.089
<v Speaker 2>you bet

0:29:16.869 --> 0:29:18.630
<v Speaker 2>he goes, let me give you an anecdote if I

0:29:18.640 --> 0:29:21.770
<v Speaker 2>were to go to the US and demand that the

0:29:21.780 --> 0:29:25.489
<v Speaker 2>workers spend the weekend working and I'd pay them overtime,

0:29:25.609 --> 0:29:26.569
<v Speaker 2>half of them would quit.

0:29:27.550 --> 0:29:31.530
<v Speaker 2>If I went to Mexico and demanded that they work overtime,

0:29:31.540 --> 0:29:33.369
<v Speaker 2>they'd all say yes, but only half would show up

0:29:33.920 --> 0:29:37.430
<v Speaker 2>in Vietnam. If I didn't give them overtime, half would quit.

0:29:38.130 --> 0:29:40.130
<v Speaker 2>He said they want to work 60 hours a week.

0:29:40.410 --> 0:29:42.680
<v Speaker 2>And if I don't give them 60 hours, they'll start

0:29:42.689 --> 0:29:44.550
<v Speaker 2>looking for another job because they have a certain amount

0:29:44.560 --> 0:29:47.130
<v Speaker 2>of money. They, they wanna take home every day. But

0:29:47.140 --> 0:29:50.560
<v Speaker 2>he said, just aside from, from that attitude, he just

0:29:50.569 --> 0:29:52.180
<v Speaker 2>said the quality of the work and I you know,

0:29:52.189 --> 0:29:54.380
<v Speaker 2>he let me observe them working for a couple of hours.

0:29:54.390 --> 0:29:56.160
<v Speaker 2>We went to different workstations and

0:29:56.400 --> 0:29:59.579
<v Speaker 2>I could see the, it wasn't a, a super complex product,

0:29:59.589 --> 0:30:02.540
<v Speaker 2>but it was a very uh uh delicate one. They

0:30:02.550 --> 0:30:05.619
<v Speaker 2>were producing surgical gowns for, for surgeries in the US.

0:30:05.630 --> 0:30:07.479
<v Speaker 2>And they had to be done, as you might imagine

0:30:07.489 --> 0:30:10.219
<v Speaker 2>in a way that was uh resulted in a sterile document.

0:30:10.430 --> 0:30:15.140
<v Speaker 2>That was absolutely perfectly done because you couldn't have leakage. And,

0:30:15.439 --> 0:30:17.420
<v Speaker 2>and they were, you know, he just said the quality, they,

0:30:17.430 --> 0:30:21.040
<v Speaker 2>they almost stopped inspecting because they just never found issues in,

0:30:21.050 --> 0:30:23.380
<v Speaker 2>in this particular facility. So

0:30:24.089 --> 0:30:26.410
<v Speaker 2>that's just an anecdote. But when you, when you talk

0:30:26.420 --> 0:30:29.050
<v Speaker 2>to others in Vietnam, what you heard time and time

0:30:29.060 --> 0:30:30.069
<v Speaker 2>again was

0:30:30.729 --> 0:30:33.510
<v Speaker 2>we were given a deal and not only did the

0:30:33.520 --> 0:30:36.170
<v Speaker 2>government fulfill that deal, but they kept coming back just

0:30:36.180 --> 0:30:38.069
<v Speaker 2>to say, how could we get you to invest more?

0:30:38.750 --> 0:30:41.699
<v Speaker 2>Whereas in some countries, if I asked the same question,

0:30:41.709 --> 0:30:45.160
<v Speaker 2>they'd say after we got established, we didn't, the people

0:30:45.170 --> 0:30:47.300
<v Speaker 2>that we worked with left and then we no longer

0:30:47.310 --> 0:30:50.800
<v Speaker 2>knew who to call. And, and gradually some of the

0:30:50.810 --> 0:30:53.229
<v Speaker 2>parts of the deal started to fall away. Like I was,

0:30:53.239 --> 0:30:56.540
<v Speaker 2>I was in one situation recently where somebody's power bill

0:30:56.550 --> 0:30:59.079
<v Speaker 2>had gone up three times in the last few years.

0:30:59.560 --> 0:31:01.489
<v Speaker 2>And it's because it's something that the government says is

0:31:01.500 --> 0:31:04.530
<v Speaker 2>outside their control, the, the, the power, the costs are

0:31:04.540 --> 0:31:07.060
<v Speaker 2>being set by the private sector and they could not

0:31:07.069 --> 0:31:09.979
<v Speaker 2>control it, but they were no longer competitive with other,

0:31:09.989 --> 0:31:13.839
<v Speaker 2>other markets in Southeast Asia. And so when time came

0:31:13.849 --> 0:31:15.420
<v Speaker 2>to set up a new facility, they put it in

0:31:15.430 --> 0:31:19.400
<v Speaker 2>Malaysia and, and the government was quite upset that they said, look, I,

0:31:19.410 --> 0:31:21.349
<v Speaker 2>I mean, you, you allowed the power to go up

0:31:21.359 --> 0:31:24.579
<v Speaker 2>on us. So governments are going to have to recognize

0:31:24.589 --> 0:31:24.900
<v Speaker 2>that

0:31:25.160 --> 0:31:29.209
<v Speaker 2>if they don't have competitive provision of utilities and eventually

0:31:29.219 --> 0:31:32.550
<v Speaker 2>that's going to be green utilities, then they won't be

0:31:32.560 --> 0:31:35.020
<v Speaker 2>able to win business even if they give them low

0:31:35.030 --> 0:31:37.859
<v Speaker 2>taxes and cheap land and, and you know, uh relatively

0:31:37.869 --> 0:31:39.550
<v Speaker 2>cheap labor is available in the market,

0:31:39.849 --> 0:31:40.089
<v Speaker 1>right?

0:31:40.250 --> 0:31:42.339
<v Speaker 1>So Charlie in the report, I think we have like

0:31:42.349 --> 0:31:46.540
<v Speaker 1>a 12 by six matrix where we summarize these scores

0:31:46.550 --> 0:31:49.010
<v Speaker 1>revolving around the points they're making that, you know, which

0:31:49.020 --> 0:31:51.380
<v Speaker 1>country offers the best business environment and which country offers

0:31:51.390 --> 0:31:52.300
<v Speaker 1>the most competition.

0:31:52.609 --> 0:31:54.609
<v Speaker 1>And to your point, Singapore and Vietnam are the ones

0:31:54.619 --> 0:31:57.109
<v Speaker 1>that take most of the Laurels. It is interesting nonetheless

0:31:57.119 --> 0:32:00.479
<v Speaker 1>that Malaysia scores the highest in public infrastructure investment as

0:32:00.489 --> 0:32:04.660
<v Speaker 1>a share of GDP going forward as strategic investments become

0:32:04.670 --> 0:32:07.599
<v Speaker 1>more critical about the government's role in some of these

0:32:07.609 --> 0:32:10.650
<v Speaker 1>investments become important. I think that gives Malaysia a degree

0:32:10.660 --> 0:32:12.829
<v Speaker 1>of strength. And then one of the things that we

0:32:12.839 --> 0:32:15.369
<v Speaker 1>brought into this report was trying to get financial stability

0:32:15.380 --> 0:32:18.069
<v Speaker 1>and buffer markers and there, Indonesia,

0:32:18.459 --> 0:32:22.680
<v Speaker 1>I suppose because of the post 97 recovery was tepid

0:32:22.849 --> 0:32:26.530
<v Speaker 1>has kept external debt to a rather minimum. And as

0:32:26.540 --> 0:32:28.750
<v Speaker 1>a result in a world where we might be embracing

0:32:28.760 --> 0:32:32.270
<v Speaker 1>more volatility, Indonesia's external debt burden is the best in

0:32:32.280 --> 0:32:33.040
<v Speaker 1>terms of management.

0:32:33.069 --> 0:32:33.560
<v Speaker 2>Although

0:32:33.569 --> 0:32:36.959
<v Speaker 2>although Prabowo has been on record saying that he intends

0:32:36.969 --> 0:32:40.489
<v Speaker 2>to borrow more to funds from the infrastructure and, and

0:32:40.500 --> 0:32:42.050
<v Speaker 2>that he has a room. Yeah, and that, and he

0:32:42.060 --> 0:32:43.930
<v Speaker 2>is the room to do that. Let me say something

0:32:43.939 --> 0:32:46.160
<v Speaker 2>on Malaysia. I mean, in all these reports, you want

0:32:46.170 --> 0:32:47.290
<v Speaker 2>to be hypothesis led.

0:32:47.890 --> 0:32:52.130
<v Speaker 2>And going in six months ago, our hypothesis was Malaysia

0:32:52.140 --> 0:32:56.520
<v Speaker 2>would continue to have relatively anemic growth. And that is

0:32:56.530 --> 0:32:59.810
<v Speaker 2>one of the hypotheses that we decided we were wrong about.

0:33:00.050 --> 0:33:03.680
<v Speaker 2>We see a lot of indicators that Malaysia is turning

0:33:03.689 --> 0:33:05.699
<v Speaker 2>the corner and I, I'd point to three things. I

0:33:05.709 --> 0:33:09.160
<v Speaker 2>think one is just purely anecdotal that a number of

0:33:09.170 --> 0:33:09.599
<v Speaker 2>the

0:33:10.050 --> 0:33:12.989
<v Speaker 2>business leaders that I either inter interact with directly or

0:33:13.000 --> 0:33:16.369
<v Speaker 2>indirectly through other people that I know are saying that

0:33:16.380 --> 0:33:19.099
<v Speaker 2>if they have a good opportunity that Anwar or his

0:33:19.109 --> 0:33:21.930
<v Speaker 2>team will pull all stops to try to do a

0:33:21.939 --> 0:33:24.589
<v Speaker 2>deal to attract the business in a way that they

0:33:24.599 --> 0:33:28.319
<v Speaker 2>haven't felt for years that they're, they're focused on getting

0:33:28.329 --> 0:33:31.189
<v Speaker 2>more of this investment. I think the second is that

0:33:31.489 --> 0:33:35.060
<v Speaker 2>um the special economic zone with Joor sends a lot

0:33:35.069 --> 0:33:35.949
<v Speaker 2>of signals,

0:33:36.319 --> 0:33:42.060
<v Speaker 2>but it also creates interesting competition between Penang Kl, the

0:33:42.069 --> 0:33:45.849
<v Speaker 2>Kang Valley and Johor and it's a dynamic we've seen

0:33:45.859 --> 0:33:48.859
<v Speaker 2>in Vietnam, we've seen in China as well that when

0:33:48.869 --> 0:33:52.060
<v Speaker 2>different regions of a country start to compete with each other,

0:33:52.359 --> 0:33:56.319
<v Speaker 2>you end up with better outcomes and businesses have options

0:33:56.329 --> 0:33:59.619
<v Speaker 2>and they like that and, and the, and, and people

0:33:59.630 --> 0:34:03.930
<v Speaker 2>can't get away with taking things easy. Um Penang was

0:34:03.939 --> 0:34:05.540
<v Speaker 2>probably in the driver's seat

0:34:05.890 --> 0:34:09.389
<v Speaker 2>recently simply because of some very good decisions that were

0:34:09.399 --> 0:34:12.379
<v Speaker 2>made 20 or 30 years ago to attract a number

0:34:12.389 --> 0:34:16.550
<v Speaker 2>of leading players uh affiliate with the uh the semiconductor sector,

0:34:16.560 --> 0:34:21.060
<v Speaker 2>consumer electronic sector, they produce build servers and things there

0:34:21.070 --> 0:34:23.179
<v Speaker 2>that are now in high demand due to to the

0:34:23.189 --> 0:34:26.520
<v Speaker 2>data centers and also a decision in the mid nineties

0:34:26.530 --> 0:34:28.989
<v Speaker 2>to develop Cyber JIA is what was called there, the

0:34:29.000 --> 0:34:31.550
<v Speaker 2>Multimedia Super Corridor, if you're old enough to remember,

0:34:31.780 --> 0:34:34.520
<v Speaker 2>and they attracted a lot of data centers into uh

0:34:34.659 --> 0:34:38.819
<v Speaker 2>just south of KL. And so suddenly two sectors that

0:34:38.830 --> 0:34:39.919
<v Speaker 2>are super hot

0:34:40.510 --> 0:34:44.250
<v Speaker 2>semiconductors and data centers. Malaysia is in the best position.

0:34:44.510 --> 0:34:47.570
<v Speaker 2>When you see this investment in infrastructure, you realize that

0:34:47.580 --> 0:34:51.689
<v Speaker 2>they have also got the utilities and the road infrastructure

0:34:51.699 --> 0:34:54.760
<v Speaker 2>and port infrastructure to handle these investments. And then the

0:34:54.770 --> 0:34:57.770
<v Speaker 2>third is I think Malaysia has been very smart and

0:34:57.780 --> 0:35:00.780
<v Speaker 2>I would recommend all the countries in Southeast Asia to

0:35:00.790 --> 0:35:05.169
<v Speaker 2>form commercial relationships with both the West and China. Um

0:35:05.949 --> 0:35:09.580
<v Speaker 2>China is the biggest export partner of every Southeast Asian country.

0:35:10.080 --> 0:35:13.049
<v Speaker 2>It will we think over time become the largest investor

0:35:13.060 --> 0:35:16.340
<v Speaker 2>in Southeast Asia. They have the leading low cost position.

0:35:16.350 --> 0:35:19.780
<v Speaker 2>A lot of important manufactured products. They can build infrastructure

0:35:19.790 --> 0:35:22.449
<v Speaker 2>cheaper than others, they can build solar panels and wind

0:35:22.459 --> 0:35:25.860
<v Speaker 2>turbines cheaper than others. And so to ignore that opportunity

0:35:25.870 --> 0:35:28.879
<v Speaker 2>to work with China, to develop your infrastructure and to

0:35:28.889 --> 0:35:31.399
<v Speaker 2>provide it to other investors in the region, I think

0:35:31.409 --> 0:35:32.520
<v Speaker 2>would be foolhardy.

0:35:32.860 --> 0:35:35.449
<v Speaker 2>And so we're we're bullish on Malaysia because we see

0:35:35.459 --> 0:35:39.810
<v Speaker 2>them pursuing three tracks will raise their growth rate beyond their,

0:35:39.820 --> 0:35:40.888
<v Speaker 2>their recent history.

0:35:41.199 --> 0:35:43.649
<v Speaker 1>Surely, I'm just gonna add two quick things. But first,

0:35:43.659 --> 0:35:45.800
<v Speaker 1>I was in Kal for two days over the weekend

0:35:46.129 --> 0:35:50.149
<v Speaker 1>and I haven't seen this kind of energy in Kel ever.

0:35:50.379 --> 0:35:53.370
<v Speaker 1>Uh It to me always struck me as a city

0:35:53.379 --> 0:35:56.239
<v Speaker 1>that was built around commodity monetization

0:35:56.520 --> 0:35:59.678
<v Speaker 1>at some tourism. Now it seems like a really serious

0:35:59.689 --> 0:36:04.070
<v Speaker 1>opportunity minded businessmen from China, from elsewhere in the world,

0:36:04.080 --> 0:36:06.770
<v Speaker 1>coming to Malaysia and looking at the signals that you

0:36:06.780 --> 0:36:08.790
<v Speaker 1>are precisely talking about. So the two things that I

0:36:08.800 --> 0:36:11.620
<v Speaker 1>want to add is one is the green aspect that

0:36:11.629 --> 0:36:15.339
<v Speaker 1>if indeed we need data centers that have clean energy

0:36:15.350 --> 0:36:17.759
<v Speaker 1>as their driving force, Malaysia is in a position to

0:36:17.770 --> 0:36:19.719
<v Speaker 1>deliver that I think that would hold them in very

0:36:19.729 --> 0:36:22.500
<v Speaker 1>good shape, especially with respect to Johor because if there

0:36:22.510 --> 0:36:24.509
<v Speaker 1>are certain FD I coming into Singapore,

0:36:24.850 --> 0:36:27.100
<v Speaker 1>it wants to spill over into the Malaysian side of

0:36:27.110 --> 0:36:29.810
<v Speaker 1>the border. It better be green energy. Otherwise the big

0:36:30.149 --> 0:36:32.549
<v Speaker 1>emacs of the world would not go for it. And

0:36:32.560 --> 0:36:33.860
<v Speaker 1>the second is while

0:36:34.939 --> 0:36:38.090
<v Speaker 1>Malaysia is playing a fairly delicate but fairly successful so

0:36:38.100 --> 0:36:40.709
<v Speaker 1>far game of courting investment, both from the West as

0:36:40.719 --> 0:36:43.250
<v Speaker 1>well as from China. I think there's a third pillar

0:36:43.260 --> 0:36:46.379
<v Speaker 1>which is the Middle East among the South countries, even

0:36:46.389 --> 0:36:49.120
<v Speaker 1>though Indonesia is also a Muslim majority population,

0:36:49.370 --> 0:36:52.500
<v Speaker 1>Malaysia seems to be very good at this. They have

0:36:52.510 --> 0:36:55.540
<v Speaker 1>a thriving supermarket, they have very good relationship with the

0:36:55.550 --> 0:36:58.830
<v Speaker 1>Middle Eastern wealth funds. And I think that as more

0:36:58.840 --> 0:37:02.138
<v Speaker 1>and more projects and we are talking about multibillion dollar

0:37:02.149 --> 0:37:07.219
<v Speaker 1>projects in Johor elsewhere that get into fruition, we'll see

0:37:07.229 --> 0:37:09.259
<v Speaker 1>large part of that being

0:37:09.350 --> 0:37:12.320
<v Speaker 1>under being funded or underwritten by Middle Eastern capital.

0:37:12.340 --> 0:37:13.830
<v Speaker 2>I think you made a good point. I mean, one

0:37:13.840 --> 0:37:18.129
<v Speaker 2>of the advantage of the Western and Chinese investment is

0:37:18.139 --> 0:37:21.620
<v Speaker 2>often tied you into a global supply chain kind of

0:37:21.629 --> 0:37:23.590
<v Speaker 2>a ready made market. A lot of the products that

0:37:23.600 --> 0:37:26.409
<v Speaker 2>are exported from Southeast Asia aren't finished goods, they're intermediate

0:37:26.419 --> 0:37:28.409
<v Speaker 2>that go on to other markets and become part of

0:37:28.419 --> 0:37:31.300
<v Speaker 2>the finished goods. I think Middle East has always wanted

0:37:31.310 --> 0:37:35.000
<v Speaker 2>to invest in in Southeast Asia but finding the right

0:37:35.010 --> 0:37:37.840
<v Speaker 2>vehicle because they they often don't have companies that have

0:37:37.850 --> 0:37:38.850
<v Speaker 2>global supply chains

0:37:39.149 --> 0:37:43.969
<v Speaker 2>but is Southeast Asia builds up infrastructure, particularly the green infrastructure,

0:37:44.159 --> 0:37:46.489
<v Speaker 2>the logical place to source some of that funding will

0:37:46.500 --> 0:37:49.429
<v Speaker 2>be the Middle East. And, and you're right, Malaysia more

0:37:49.439 --> 0:37:51.449
<v Speaker 2>than I think almost any market in the world and

0:37:51.459 --> 0:37:53.699
<v Speaker 2>you see it in the tourism as well. You know,

0:37:53.709 --> 0:37:55.689
<v Speaker 2>when you're in, when you're in Thailand, there are tourists

0:37:55.699 --> 0:37:59.129
<v Speaker 2>from everywhere but you see particularly from China, Korea, Japan.

0:37:59.379 --> 0:38:02.530
<v Speaker 2>But when you're in Malaysia, you see a lot of, uh, of, uh,

0:38:02.540 --> 0:38:04.330
<v Speaker 2>tourists from the Middle East and,

0:38:04.610 --> 0:38:06.839
<v Speaker 2>and it's, it's funny if you're out late, you realize

0:38:06.850 --> 0:38:08.219
<v Speaker 2>that's when the restaurants are open.

0:38:08.639 --> 0:38:10.969
<v Speaker 1>Well, Charlie, I was out late and I was by

0:38:10.979 --> 0:38:13.239
<v Speaker 1>the restaurants and not only did I see a lot

0:38:13.250 --> 0:38:16.310
<v Speaker 1>of Chinese tourists, uh some Middle Eastern tourists. The other

0:38:16.320 --> 0:38:20.110
<v Speaker 1>thing that I was completely taken aback and retrospect sounds logical.

0:38:20.159 --> 0:38:23.290
<v Speaker 1>Central Asian tourists, there are direct flight to many parts

0:38:23.300 --> 0:38:26.100
<v Speaker 1>of Central Asia. Uh that I've never really seen anywhere

0:38:26.110 --> 0:38:28.138
<v Speaker 1>else in Southeast Asia. And that linkage was also very

0:38:28.149 --> 0:38:28.489
<v Speaker 1>interesting

0:38:28.879 --> 0:38:30.489
<v Speaker 2>and a lot of Durian sales.

0:38:30.649 --> 0:38:31.989
<v Speaker 1>Yes, the season.

0:38:32.330 --> 0:38:36.310
<v Speaker 1>Uh Charlie, you have uh in these presentations always ended

0:38:36.320 --> 0:38:40.790
<v Speaker 1>with these um seven growth strategy for the countries. Um

0:38:40.800 --> 0:38:43.469
<v Speaker 1>Maybe you can walk us through before we go to

0:38:43.479 --> 0:38:44.449
<v Speaker 1>the next part of the discussion.

0:38:44.459 --> 0:38:45.350
<v Speaker 2>Ok. Ok.

0:38:45.600 --> 0:38:49.669
<v Speaker 2>So when we, they aren't really tail winds or headwinds,

0:38:49.679 --> 0:38:52.949
<v Speaker 2>they're a combination of both. But what we're saying is

0:38:52.959 --> 0:38:57.049
<v Speaker 2>if you, if you think that country strategies or forecasting

0:38:57.060 --> 0:39:00.250
<v Speaker 2>country growth is extrapolating from the past, you're probably going

0:39:00.260 --> 0:39:01.139
<v Speaker 2>to get things wrong

0:39:01.550 --> 0:39:04.040
<v Speaker 2>that there's too many changes that are going on. Some

0:39:04.050 --> 0:39:05.850
<v Speaker 2>in the last three years, some of the last 10,

0:39:06.120 --> 0:39:08.350
<v Speaker 2>but they come together to say the future is going

0:39:08.360 --> 0:39:10.560
<v Speaker 2>to be different in the past. And it's very important

0:39:10.570 --> 0:39:12.169
<v Speaker 2>to articulate those differences.

0:39:12.580 --> 0:39:14.899
<v Speaker 2>So one is something we've already talked about that, the

0:39:14.909 --> 0:39:18.659
<v Speaker 2>sheer competitiveness of China and we do not think that's

0:39:18.669 --> 0:39:21.689
<v Speaker 2>going to change. Yes, people might have tariffs. Yes, you

0:39:21.699 --> 0:39:25.070
<v Speaker 2>may want to diversify away from China. But in general,

0:39:25.090 --> 0:39:28.199
<v Speaker 2>if you're developing a strategy or you're trying to attract investors,

0:39:28.209 --> 0:39:30.879
<v Speaker 2>you need to do so conscious that you need to

0:39:30.889 --> 0:39:34.540
<v Speaker 2>complement what is probably a very competitive player in in China.

0:39:34.840 --> 0:39:37.250
<v Speaker 2>In addition, you have to take into account that you

0:39:37.260 --> 0:39:40.279
<v Speaker 2>may end up with excess capacity in a particular sector.

0:39:40.290 --> 0:39:41.620
<v Speaker 2>Let me take for example,

0:39:42.300 --> 0:39:42.719
<v Speaker 2>um

0:39:44.919 --> 0:39:47.500
<v Speaker 2>I was talking to a government that was saying, look,

0:39:47.510 --> 0:39:49.520
<v Speaker 2>you're you're saying that we should try to attract some

0:39:49.530 --> 0:39:52.089
<v Speaker 2>Chinese investment. Should I try to get them to build

0:39:52.100 --> 0:39:54.620
<v Speaker 2>a very large solar plant in my country?

0:39:55.449 --> 0:39:58.659
<v Speaker 2>And I said it's tempting but I'd probably say no

0:39:59.179 --> 0:40:01.949
<v Speaker 2>because right now based on what I read in the

0:40:01.959 --> 0:40:04.250
<v Speaker 2>economist last week and kind of what I know working

0:40:04.260 --> 0:40:05.429
<v Speaker 2>a little bit in the sector,

0:40:06.659 --> 0:40:11.409
<v Speaker 2>China has enough capacity to meet the world's current consumption

0:40:11.419 --> 0:40:15.530
<v Speaker 2>by 2.5 times. So capacity ization is about 40% in

0:40:15.540 --> 0:40:19.300
<v Speaker 2>the solar panel sector. So if you put a plant in,

0:40:19.929 --> 0:40:22.739
<v Speaker 2>it's gonna lose money because any industry that has that

0:40:22.750 --> 0:40:25.550
<v Speaker 2>level of credit, at least for period. So what you

0:40:25.560 --> 0:40:28.510
<v Speaker 2>would rather do is say I'd like you to build

0:40:28.520 --> 0:40:32.589
<v Speaker 2>in this way, maybe an auto plant where you can

0:40:32.600 --> 0:40:35.439
<v Speaker 2>provide a large domestic market and do exports that go

0:40:35.449 --> 0:40:39.330
<v Speaker 2>around barriers and I will buy your panels. Because if

0:40:39.340 --> 0:40:41.590
<v Speaker 2>there's anything that right now, China needs somebody to buy

0:40:41.600 --> 0:40:44.060
<v Speaker 2>their panels. And I also want you to provide low

0:40:44.070 --> 0:40:47.850
<v Speaker 2>cost financing to install those panels. And I want you

0:40:47.860 --> 0:40:48.989
<v Speaker 2>to help me with the grid

0:40:49.379 --> 0:40:52.040
<v Speaker 2>that will use the electricity from those panels. So I

0:40:52.050 --> 0:40:56.719
<v Speaker 2>think you need to be pretty thoughtful about not just saying, oh,

0:40:56.739 --> 0:40:59.439
<v Speaker 2>we don't want you to import anything into our country.

0:40:59.449 --> 0:41:01.810
<v Speaker 2>We want to force you to build a plant when

0:41:01.820 --> 0:41:04.320
<v Speaker 2>their need is to get rid of their excess production.

0:41:04.649 --> 0:41:07.510
<v Speaker 2>And there may be opportunities to work together to, to

0:41:07.520 --> 0:41:10.089
<v Speaker 2>solve both needs you, you buy their excess production, but

0:41:10.100 --> 0:41:15.020
<v Speaker 2>you get very cheap, well financed green energy, for example.

0:41:15.050 --> 0:41:17.169
<v Speaker 2>And that could be, that could be true for ports,

0:41:17.179 --> 0:41:18.790
<v Speaker 2>it could be true for the grid. It could be

0:41:18.800 --> 0:41:20.549
<v Speaker 2>true for other investments you want to make.

0:41:21.439 --> 0:41:24.560
<v Speaker 2>The second is that China is going to be a,

0:41:24.570 --> 0:41:26.899
<v Speaker 2>a bigger and bigger player in Southeast Asia. It's the

0:41:26.909 --> 0:41:30.020
<v Speaker 2>largest trading partner. And we think over time it will

0:41:30.030 --> 0:41:32.689
<v Speaker 2>probably become the largest investor in the region. Simply they

0:41:32.699 --> 0:41:35.780
<v Speaker 2>have surplus of funds. Uh It's logical to invest in

0:41:35.790 --> 0:41:39.110
<v Speaker 2>your trading partners and they have political and economic interests

0:41:39.120 --> 0:41:42.658
<v Speaker 2>in Southeast Asia we have seen, for example, us, investment

0:41:42.669 --> 0:41:45.479
<v Speaker 2>has gradually been declining as a share of total investment

0:41:45.489 --> 0:41:47.600
<v Speaker 2>in the region for the last 1020 years, you pick

0:41:47.610 --> 0:41:48.219
<v Speaker 2>the time frame.

0:41:48.600 --> 0:41:53.339
<v Speaker 2>And so given that that kind of likely outcome, we

0:41:53.350 --> 0:41:56.219
<v Speaker 2>do think it's important for you to, to

0:41:57.060 --> 0:42:03.479
<v Speaker 2>enjoy peaceful productive relations with both major powers. Let's face it,

0:42:03.489 --> 0:42:06.100
<v Speaker 2>China and the US ending together about half the global economy.

0:42:06.280 --> 0:42:08.120
<v Speaker 2>And so you don't want to lose half of that.

0:42:08.600 --> 0:42:11.310
<v Speaker 2>The third is the rivalry between the US and China.

0:42:11.580 --> 0:42:14.500
<v Speaker 2>And this is kind of in the goldilocks scenario which

0:42:14.510 --> 0:42:18.050
<v Speaker 2>we're currently in not too hot, not too cold. Southeast

0:42:18.060 --> 0:42:19.520
<v Speaker 2>Asia benefits from the rivalry.

0:42:20.500 --> 0:42:24.760
<v Speaker 2>Both will seek to gain favor with Southeast Asia. Both

0:42:24.770 --> 0:42:27.520
<v Speaker 2>will be willing to negotiate with Southeast Asia. And we

0:42:27.530 --> 0:42:29.569
<v Speaker 2>don't believe in general that you should pick one over

0:42:29.580 --> 0:42:32.139
<v Speaker 2>the other. You should seek friendly and, and, and strong

0:42:32.149 --> 0:42:33.159
<v Speaker 2>relations with both.

0:42:33.840 --> 0:42:36.100
<v Speaker 2>I think in terms of FD, I, we talked about

0:42:36.110 --> 0:42:39.250
<v Speaker 2>this a bit but what are people making decisions on

0:42:39.260 --> 0:42:41.850
<v Speaker 2>the FD? I? And what's changing? It was never so

0:42:41.860 --> 0:42:44.600
<v Speaker 2>much about cheap land, cheap labor, cheap taxes, it was

0:42:44.610 --> 0:42:47.679
<v Speaker 2>for certain businesses. But those move very quickly to depend

0:42:47.689 --> 0:42:49.590
<v Speaker 2>on what the latest offer is, whether it's a shoe

0:42:49.600 --> 0:42:53.489
<v Speaker 2>factory or certain kind of textiles or very low end manufacturing.

0:42:53.989 --> 0:42:57.500
<v Speaker 2>Um Well, the desirable manufacturing that comes with a big

0:42:57.510 --> 0:43:00.449
<v Speaker 2>price tag, a lot of capital commitment and maybe long

0:43:00.459 --> 0:43:01.419
<v Speaker 2>term returns

0:43:01.729 --> 0:43:07.739
<v Speaker 2>needs things like reliable green utilities, a supply of highly

0:43:07.750 --> 0:43:12.509
<v Speaker 2>educated laborers, laborers, labor laws that allow them to bring

0:43:12.520 --> 0:43:16.250
<v Speaker 2>in expatriate talent at all levels. It might be a

0:43:16.260 --> 0:43:20.830
<v Speaker 2>25 year old programmer. It might be somebody from Germany

0:43:20.840 --> 0:43:24.350
<v Speaker 2>who has been through a special process training that they need.

0:43:24.739 --> 0:43:27.330
<v Speaker 2>You don't want to get too involved in second guessing

0:43:27.340 --> 0:43:30.149
<v Speaker 2>who they need or why they need to move people

0:43:30.159 --> 0:43:32.429
<v Speaker 2>in and out so that they're at different stages in

0:43:32.439 --> 0:43:36.250
<v Speaker 2>the development of their enterprise in order to grow. And

0:43:36.260 --> 0:43:39.049
<v Speaker 2>we find, in fact, my discussions last week in one

0:43:39.060 --> 0:43:41.479
<v Speaker 2>of the Southeast Asian countries was focused mainly on this

0:43:41.489 --> 0:43:44.090
<v Speaker 2>issue that there were just too many hurdles to moving

0:43:44.100 --> 0:43:47.149
<v Speaker 2>talent into the country for people to put their best

0:43:47.300 --> 0:43:52.040
<v Speaker 2>processes and factories in that country. Um Another is that

0:43:52.929 --> 0:43:55.100
<v Speaker 2>there's a lot of Western press on how much tariffs

0:43:55.110 --> 0:43:58.149
<v Speaker 2>are going up and it's true for us and maybe Europe.

0:43:58.429 --> 0:44:00.850
<v Speaker 2>But from what we see in Asia, most of the

0:44:00.860 --> 0:44:04.070
<v Speaker 2>intra region, tariffs are declining because of our ce P.

0:44:04.500 --> 0:44:07.810
<v Speaker 2>Um India hasn't joined yet, but presumably, you know, India

0:44:07.820 --> 0:44:10.439
<v Speaker 2>will also open itself up more for trade. Now, one

0:44:10.449 --> 0:44:12.839
<v Speaker 2>has to be careful, it's not all about tariffs. And

0:44:12.850 --> 0:44:16.199
<v Speaker 2>we also hear stories about non tariff barriers going up

0:44:16.209 --> 0:44:20.120
<v Speaker 2>as the, the tariff bearers kind of come down. But nonetheless,

0:44:20.129 --> 0:44:25.149
<v Speaker 2>we don't necessarily think that globalization is dead. We certainly

0:44:25.159 --> 0:44:30.479
<v Speaker 2>think regionalization is very much alive. Um, on the green transition,

0:44:31.080 --> 0:44:33.439
<v Speaker 2>there was a tendency a few years ago

0:44:33.959 --> 0:44:35.500
<v Speaker 2>to kind of say, look,

0:44:36.270 --> 0:44:38.549
<v Speaker 2>the West has all the money, the West created all

0:44:38.560 --> 0:44:41.169
<v Speaker 2>the problem if they don't give us the money to

0:44:41.179 --> 0:44:44.330
<v Speaker 2>s to solve this. Well, screw them.

0:44:45.590 --> 0:44:47.010
<v Speaker 2>I think that's misguided.

0:44:47.939 --> 0:44:50.600
<v Speaker 2>I think the first two are actually true, but it

0:44:50.610 --> 0:44:53.580
<v Speaker 2>doesn't lead you to the third point. If green energy

0:44:53.590 --> 0:44:55.229
<v Speaker 2>becomes very cheap

0:44:55.850 --> 0:44:57.929
<v Speaker 2>and very reliable,

0:44:58.889 --> 0:45:01.750
<v Speaker 2>then you want to do it for three reasons. One,

0:45:01.760 --> 0:45:04.449
<v Speaker 2>you should do it just for the environment. You wanna

0:45:04.459 --> 0:45:06.850
<v Speaker 2>do it because it's more secure. The next time there's

0:45:06.860 --> 0:45:09.360
<v Speaker 2>an oil crisis, at least half of your energy is

0:45:09.370 --> 0:45:13.070
<v Speaker 2>coming from locally generated green sources. And then the third

0:45:13.080 --> 0:45:17.600
<v Speaker 2>is um so economics, security. And then the third is

0:45:17.610 --> 0:45:20.830
<v Speaker 2>its balance of payments. I was in uh one country

0:45:20.840 --> 0:45:21.229
<v Speaker 2>and

0:45:21.989 --> 0:45:24.439
<v Speaker 2>I estimated they'd have to spend 30 to 40 billion

0:45:24.449 --> 0:45:26.810
<v Speaker 2>a year on green transition over the next 10 years.

0:45:26.820 --> 0:45:28.689
<v Speaker 2>It was a very rough calculation. So I'm not gonna

0:45:28.699 --> 0:45:31.439
<v Speaker 2>name the country because I don't wanna be, be a

0:45:31.500 --> 0:45:33.780
<v Speaker 2>second guest on it. And they're like, where are we

0:45:33.790 --> 0:45:36.550
<v Speaker 2>gonna find that kind of money? There's no way that's just,

0:45:36.560 --> 0:45:39.299
<v Speaker 2>you know, smoking dope kind of thing. And I said, well,

0:45:39.310 --> 0:45:42.090
<v Speaker 2>you spend 60 billion a year on imports of oil

0:45:42.100 --> 0:45:42.649
<v Speaker 2>and gas.

0:45:43.419 --> 0:45:45.219
<v Speaker 2>I said you find the money for that and it

0:45:45.229 --> 0:45:48.439
<v Speaker 2>just flows out. It just goes mainly to the Middle East.

0:45:48.989 --> 0:45:51.509
<v Speaker 2>And so surely you can rebalance that if, if you

0:45:51.520 --> 0:45:53.839
<v Speaker 2>only spent 30 billion in the Middle East and 30

0:45:53.850 --> 0:45:56.120
<v Speaker 2>billion on local capital projects

0:45:56.350 --> 0:45:58.840
<v Speaker 2>where your local work, even if you were bringing in

0:45:58.850 --> 0:46:01.479
<v Speaker 2>the solar panels in the winter, but they were installed locally,

0:46:01.489 --> 0:46:04.239
<v Speaker 2>they were maintained locally. And from the point it was

0:46:04.250 --> 0:46:08.290
<v Speaker 2>put in, basically, the uptake was practically free. Isn't that

0:46:08.300 --> 0:46:11.379
<v Speaker 2>a better outcome? And, and that's a, that's a simplistic

0:46:11.389 --> 0:46:13.770
<v Speaker 2>way of looking at it. You know, green energy is,

0:46:13.780 --> 0:46:16.449
<v Speaker 2>it's is more variable, you need some battery backup, there's

0:46:16.459 --> 0:46:19.250
<v Speaker 2>all kinds of other considerations. But by and large, the

0:46:19.260 --> 0:46:20.609
<v Speaker 2>cost curves are such

0:46:20.899 --> 0:46:23.709
<v Speaker 2>that over time, it will be cheaper, it will be

0:46:23.719 --> 0:46:27.189
<v Speaker 2>more reliable and it will be better for your national security.

0:46:27.449 --> 0:46:30.060
<v Speaker 2>And so what, what we're recommending is go after the

0:46:30.070 --> 0:46:33.959
<v Speaker 2>easiest 20% 1st. It just makes total sense and then

0:46:33.969 --> 0:46:36.090
<v Speaker 2>go up to the next 20. Don't worry about the

0:46:36.100 --> 0:46:39.270
<v Speaker 2>last 20 now, just keep going at the easiest parts

0:46:39.280 --> 0:46:42.199
<v Speaker 2>first and then the final one, which is uh a

0:46:42.209 --> 0:46:44.040
<v Speaker 2>tricky one is innovation.

0:46:45.489 --> 0:46:47.709
<v Speaker 2>We were in a world 30 years ago where a

0:46:47.719 --> 0:46:49.629
<v Speaker 2>lot of the innovation was coming out of the US,

0:46:49.639 --> 0:46:52.340
<v Speaker 2>but it was still quite dispersed. Japan was a leader.

0:46:52.350 --> 0:46:54.409
<v Speaker 2>Germany was a leader, good things. Were, you know, a

0:46:54.479 --> 0:46:59.550
<v Speaker 2>lot of telecoms capability came out of Scandinavia. And China,

0:46:59.560 --> 0:47:02.550
<v Speaker 2>everybody said wasn't an innovator. They were just copying everybody

0:47:03.510 --> 0:47:06.080
<v Speaker 2>fast forward to now. And the world has changed. The

0:47:06.090 --> 0:47:11.080
<v Speaker 2>two great innovation ecosystems are the US and China and

0:47:11.090 --> 0:47:14.909
<v Speaker 2>they actually dominate most leading edge technologies. There's a paper

0:47:14.919 --> 0:47:18.408
<v Speaker 2>by the Australian Strate Strategic Policy Institute that I cited

0:47:18.419 --> 0:47:21.000
<v Speaker 2>in a paper I wrote that says that of the

0:47:21.010 --> 0:47:23.959
<v Speaker 2>44 most important technologies, the US and China are the

0:47:23.969 --> 0:47:26.850
<v Speaker 2>co-leaders in 41 of them. So and only three is

0:47:26.860 --> 0:47:28.959
<v Speaker 2>one of them, not one of the co leaders and

0:47:29.139 --> 0:47:31.580
<v Speaker 2>and they were always second, I think two were India,

0:47:31.590 --> 0:47:33.090
<v Speaker 2>one was Korea or something like that.

0:47:33.469 --> 0:47:36.590
<v Speaker 2>And, and I looked through the technologies and I, you know,

0:47:36.600 --> 0:47:38.340
<v Speaker 2>I'm not the world's expert in this, but I said

0:47:38.350 --> 0:47:40.919
<v Speaker 2>these make sense, these are the ones you want to

0:47:40.929 --> 0:47:44.729
<v Speaker 2>lead in. And China figured this out 2030 years ago

0:47:44.739 --> 0:47:48.350
<v Speaker 2>and went on a path and spent billions of dollars

0:47:48.639 --> 0:47:51.879
<v Speaker 2>to close the gaps. So now you have a situation

0:47:51.889 --> 0:47:56.090
<v Speaker 2>where you have two that are vying for leadership, neither

0:47:56.100 --> 0:47:58.560
<v Speaker 2>wants to be dependent on the other for either of

0:47:58.570 --> 0:47:59.570
<v Speaker 2>the technologies.

0:47:59.870 --> 0:48:02.129
<v Speaker 2>And the result is we think going to be an

0:48:02.139 --> 0:48:05.780
<v Speaker 2>acceleration in the pace of technology innovation, which is a

0:48:05.790 --> 0:48:08.310
<v Speaker 2>good thing for the world, the world will benefit. But

0:48:08.320 --> 0:48:10.340
<v Speaker 2>on the other hand, it makes it much harder for

0:48:10.350 --> 0:48:14.489
<v Speaker 2>other countries to keep up because even in Germany, Japan,

0:48:14.790 --> 0:48:17.540
<v Speaker 2>the best researchers will often now go to either the

0:48:17.550 --> 0:48:20.679
<v Speaker 2>US or China. Because to, to get the Nobel Prize,

0:48:20.689 --> 0:48:22.259
<v Speaker 2>you need to be in the market where the most

0:48:22.270 --> 0:48:25.810
<v Speaker 2>money is available, the smartest colleagues are available, it's easiest

0:48:25.820 --> 0:48:28.560
<v Speaker 2>to be with the university to get published, et cetera.

0:48:28.750 --> 0:48:31.560
<v Speaker 2>And those happen to be the ecosystems in China and

0:48:31.570 --> 0:48:34.159
<v Speaker 2>the US. So I won't pick a winner. Depends on

0:48:34.169 --> 0:48:38.139
<v Speaker 2>the technology, which one and sometimes leadership like take space.

0:48:38.550 --> 0:48:40.800
<v Speaker 2>China actually emerged as the leader for a short period

0:48:40.810 --> 0:48:43.189
<v Speaker 2>of time. The US was launching most of its satellites

0:48:43.199 --> 0:48:45.529
<v Speaker 2>on both Russian and Chinese rockets, believe it or not

0:48:45.699 --> 0:48:49.529
<v Speaker 2>spacex came along through a different innovation model and has

0:48:49.540 --> 0:48:52.229
<v Speaker 2>now surpassed everybody in the world. It's it's more reliable

0:48:52.239 --> 0:48:54.389
<v Speaker 2>and lower cost than everybody else in the world through

0:48:54.399 --> 0:48:57.199
<v Speaker 2>a different innovation model that the US has versus China

0:48:57.340 --> 0:48:59.560
<v Speaker 2>and nobody has been able to close the gap. And

0:48:59.570 --> 0:49:02.219
<v Speaker 2>so you can see that leadership can shift, but it

0:49:02.229 --> 0:49:05.360
<v Speaker 2>will often be between these two ecosystems as opposed to outside.

0:49:05.669 --> 0:49:08.449
<v Speaker 2>Where does that leave Southeast Asia? Make sure you're tied

0:49:08.459 --> 0:49:11.010
<v Speaker 2>into both ecosystems, make sure your best and brightest are

0:49:11.020 --> 0:49:13.810
<v Speaker 2>getting an opportunity to study and work in both of

0:49:13.820 --> 0:49:17.330
<v Speaker 2>those markets. Make sure that your leading companies are tied

0:49:17.340 --> 0:49:19.850
<v Speaker 2>in to the best research being done in both markets.

0:49:19.860 --> 0:49:22.549
<v Speaker 2>If you tie yourself to only one ecosystem, then you

0:49:22.560 --> 0:49:23.850
<v Speaker 2>may not be working with the leader,

0:49:24.739 --> 0:49:29.429
<v Speaker 1>right. So this challenges around innovation um becomes one of

0:49:29.439 --> 0:49:32.520
<v Speaker 1>the foundational considerations for the forward looking part of the

0:49:32.530 --> 0:49:36.500
<v Speaker 1>report Charlie. Because when we took on board some of

0:49:36.510 --> 0:49:40.159
<v Speaker 1>your points that can do straight line extrapolation of recent turn,

0:49:40.919 --> 0:49:45.850
<v Speaker 1>can't rely on massive pickup on total factor productivity, even

0:49:45.860 --> 0:49:47.830
<v Speaker 1>if you believe that technology will play an important role.

0:49:47.840 --> 0:49:51.540
<v Speaker 1>So the biggest TFP growth is probably coming elsewhere, then

0:49:51.550 --> 0:49:54.989
<v Speaker 1>what kind of growth forecast can we build?

0:49:55.260 --> 0:49:59.389
<v Speaker 1>So I think we began by thinking first in scenarios,

0:49:59.489 --> 0:50:02.429
<v Speaker 1>we present this in the report that there are three scenarios,

0:50:02.439 --> 0:50:06.020
<v Speaker 1>there is a central expected growth scenario which probably odds

0:50:06.030 --> 0:50:09.139
<v Speaker 1>on favorite, but that doesn't necessarily mean it's like an 80% growth.

0:50:09.199 --> 0:50:11.569
<v Speaker 2>Although I will say like I showed this to one

0:50:11.580 --> 0:50:12.879
<v Speaker 2>of our mutual friends and

0:50:13.320 --> 0:50:15.129
<v Speaker 2>he went through and graded and he's like, I'm on

0:50:15.139 --> 0:50:18.000
<v Speaker 2>the left and all but one and it was like, whoa,

0:50:18.010 --> 0:50:20.169
<v Speaker 2>you know, this is a AAA person who works for

0:50:20.179 --> 0:50:22.589
<v Speaker 2>a major multinational and he thought we were being too

0:50:22.600 --> 0:50:25.459
<v Speaker 2>optimistic and I've, I've shown it to others and we're like, no,

0:50:25.469 --> 0:50:28.040
<v Speaker 2>I'm on the right side. You guys are being too pessimistic.

0:50:28.050 --> 0:50:31.070
<v Speaker 2>So I think the idea is this is where we are,

0:50:31.229 --> 0:50:33.919
<v Speaker 2>but it's not, you know, we, we wanna lay that

0:50:33.929 --> 0:50:36.110
<v Speaker 2>out so anybody else could look and say, well, if

0:50:36.120 --> 0:50:39.060
<v Speaker 2>I'm further to the right, I I would assume a higher,

0:50:39.070 --> 0:50:40.500
<v Speaker 2>I I would have to believe in that

0:50:40.580 --> 0:50:42.729
<v Speaker 2>we would lead to a higher rate of growth. Right. Again,

0:50:42.739 --> 0:50:46.189
<v Speaker 1>encouraging our listeners and viewers to check out the report.

0:50:46.199 --> 0:50:48.239
<v Speaker 1>But what we're going to talk about now is the

0:50:48.250 --> 0:50:51.979
<v Speaker 1>Southeast Asia Macro scenario for the next 10 years. And

0:50:51.989 --> 0:50:54.159
<v Speaker 1>to Charlie's point that we have a left hand side,

0:50:54.169 --> 0:50:57.179
<v Speaker 1>middle and a right hand side scenario. So let's talk

0:50:57.189 --> 0:50:59.939
<v Speaker 1>first of all, the low growth scenario where I don't

0:50:59.949 --> 0:51:03.159
<v Speaker 1>think we're being that outlandish in thinking that if things

0:51:03.169 --> 0:51:07.760
<v Speaker 1>don't go right, if management of growth risks are not adequate,

0:51:07.989 --> 0:51:11.149
<v Speaker 1>that we might see, for example, China growing by 2 3%

0:51:11.379 --> 0:51:15.500
<v Speaker 1>we might see substantial additional fragmentation between China and the US.

0:51:15.729 --> 0:51:20.229
<v Speaker 1>Um We might see a financial stability issues around feds

0:51:20.239 --> 0:51:23.800
<v Speaker 1>management of monetary policy or PB O CS management of

0:51:23.810 --> 0:51:25.050
<v Speaker 1>the property sector in China,

0:51:26.629 --> 0:51:30.709
<v Speaker 1>disappointing developments on the green transition and perhaps even some

0:51:30.719 --> 0:51:35.719
<v Speaker 1>geopolitical exacerbation over Taiwan. So that's Charlie is the low

0:51:35.770 --> 0:51:38.260
<v Speaker 1>growth scenario. My question to you is how much probability

0:51:38.270 --> 0:51:39.520
<v Speaker 1>would you assign to that scenario?

0:51:41.070 --> 0:51:41.810
<v Speaker 2>First,

0:51:42.870 --> 0:51:44.290
<v Speaker 2>when you're a consultant,

0:51:45.260 --> 0:51:47.520
<v Speaker 2>you always know you're gonna end up in the middle

0:51:48.270 --> 0:51:50.928
<v Speaker 2>but you want right the left,

0:51:51.679 --> 0:51:54.009
<v Speaker 2>so that you say actually, I believe any one of

0:51:54.020 --> 0:51:54.820
<v Speaker 2>these could happen.

0:51:56.360 --> 0:51:56.979
<v Speaker 2>Um

0:51:58.459 --> 0:52:03.399
<v Speaker 2>I would have different probabilities for each of those. Um So, and, and,

0:52:03.409 --> 0:52:08.560
<v Speaker 2>and frankly, my assessments change over time. My concern uh

0:52:08.750 --> 0:52:12.350
<v Speaker 2>over say Taiwan was higher a year ago than it

0:52:12.360 --> 0:52:14.239
<v Speaker 2>is now and I won't go through the reasons why,

0:52:14.250 --> 0:52:17.760
<v Speaker 2>but it's just, there does appear to be some settling

0:52:17.770 --> 0:52:20.919
<v Speaker 2>of of the process. There's more dialogue between the US

0:52:20.929 --> 0:52:23.750
<v Speaker 2>and China over the issues, et cetera. But on the

0:52:23.760 --> 0:52:27.219
<v Speaker 2>other hand, the slowdown in China hasn't gotten better.

0:52:27.520 --> 0:52:29.330
<v Speaker 2>And the recent third plenum,

0:52:30.169 --> 0:52:33.509
<v Speaker 2>uh uh at least from my, my feeling didn't address

0:52:33.520 --> 0:52:37.069
<v Speaker 2>the core issue of domestic demand and addressing the property

0:52:37.080 --> 0:52:40.090
<v Speaker 2>crisis in the way that would, would start to accelerate

0:52:40.100 --> 0:52:43.149
<v Speaker 2>growth in the near term. So I would put those

0:52:43.159 --> 0:52:45.830
<v Speaker 2>as kind of the 20 to 25% scenario on the

0:52:45.840 --> 0:52:49.459
<v Speaker 2>left and then kind of 50 in the middle and

0:52:49.469 --> 0:52:51.149
<v Speaker 2>then 20 to 25 on the high

0:52:51.159 --> 0:52:51.510
<v Speaker 2>side.

0:52:52.389 --> 0:52:53.030
<v Speaker 1>So

0:52:53.860 --> 0:52:56.560
<v Speaker 1>things could go wrong. But we have a full scenario

0:52:56.570 --> 0:52:59.100
<v Speaker 1>where things could be way better than our central scenario

0:52:59.209 --> 0:53:03.340
<v Speaker 1>where we can assume China getting its act together. And

0:53:03.350 --> 0:53:06.899
<v Speaker 1>the last few years of doldrums in the capital and

0:53:06.909 --> 0:53:09.729
<v Speaker 1>real economy, capital markets in the real economy will be

0:53:09.739 --> 0:53:12.350
<v Speaker 1>behind this and they'll get things going. I think there

0:53:12.360 --> 0:53:15.879
<v Speaker 1>are some tentative markers for that already. And Charlie while

0:53:15.889 --> 0:53:17.479
<v Speaker 1>the third plenum did not have

0:53:17.800 --> 0:53:21.810
<v Speaker 1>too many new things. Post third plenum, some of the

0:53:21.820 --> 0:53:24.189
<v Speaker 1>measures that are being announced on the consumption site, I'm

0:53:24.429 --> 0:53:28.179
<v Speaker 1>more optimistic. And then the issue of, you know, coming

0:53:28.189 --> 0:53:31.080
<v Speaker 1>back from the brink on tariff war, both with respect

0:53:31.090 --> 0:53:33.770
<v Speaker 1>to the US and Europe sitting here in August of

0:53:33.780 --> 0:53:39.270
<v Speaker 1>2024 with 5050 odds of Trump coming back to power.

0:53:39.280 --> 0:53:42.199
<v Speaker 1>It may seem too optimistic, but we have seen many

0:53:42.209 --> 0:53:45.229
<v Speaker 1>different scenarios play out on this area and, and it's

0:53:45.239 --> 0:53:46.939
<v Speaker 1>a 5050 election so it can go either way.

0:53:47.280 --> 0:53:50.939
<v Speaker 1>Um And then the issue of, you know, global macro management,

0:53:50.949 --> 0:53:53.739
<v Speaker 1>whether its spillover from China's property market to the rest

0:53:53.750 --> 0:53:57.350
<v Speaker 1>of the world or the exit from tight monetary policy

0:53:57.360 --> 0:54:01.000
<v Speaker 1>for the FED. We right now may think that they're

0:54:01.010 --> 0:54:03.270
<v Speaker 1>not getting it right. But it doesn't take too many

0:54:03.280 --> 0:54:05.750
<v Speaker 1>levers and too many things to come in place for

0:54:05.760 --> 0:54:09.810
<v Speaker 1>that to align and the issue of technology and green

0:54:09.820 --> 0:54:10.620
<v Speaker 1>investment

0:54:10.870 --> 0:54:15.070
<v Speaker 1>uh and the new levels of productivity being unlocked, I

0:54:15.080 --> 0:54:16.340
<v Speaker 1>think very much. Uh

0:54:16.929 --> 0:54:20.610
<v Speaker 2>and one other point when we wrote this time where we,

0:54:20.620 --> 0:54:23.129
<v Speaker 2>we were taking a 10 year view, right? So often

0:54:23.139 --> 0:54:25.879
<v Speaker 2>these forecasts are only six months or a quarter or

0:54:25.889 --> 0:54:28.570
<v Speaker 2>a year out. And so we're not for, you know,

0:54:28.580 --> 0:54:30.929
<v Speaker 2>we're not forecasting the next year or two. This is

0:54:30.939 --> 0:54:33.189
<v Speaker 2>kind of what could happen over the next 10 years,

0:54:33.199 --> 0:54:36.510
<v Speaker 2>which is 2034 a long way off. And, and that

0:54:36.520 --> 0:54:38.969
<v Speaker 2>was the kind of the, the, the most important vein.

0:54:39.399 --> 0:54:41.198
<v Speaker 1>So let's talk about what could happen over the next

0:54:41.209 --> 0:54:41.860
<v Speaker 1>10 years.

0:54:41.870 --> 0:54:42.659
<v Speaker 2>And here

0:54:43.120 --> 0:54:45.760
<v Speaker 2>I get to ask you the questions. Um You know,

0:54:45.770 --> 0:54:48.090
<v Speaker 2>one of the reasons that we asked D BS to

0:54:48.100 --> 0:54:51.739
<v Speaker 2>help us was the rigor of your forecasting methodology. So

0:54:52.179 --> 0:54:53.959
<v Speaker 2>why don't you tell us a little bit about how

0:54:53.969 --> 0:54:56.360
<v Speaker 2>we did the forecast before we get into the numbers?

0:54:56.370 --> 0:54:58.870
<v Speaker 1>Right. Charlie, I, I never thought that I would spend

0:54:58.879 --> 0:55:02.020
<v Speaker 1>substantial amount of time in front of 100 decision makers

0:55:02.030 --> 0:55:04.580
<v Speaker 1>like we did last week and talk about total factor

0:55:04.590 --> 0:55:08.360
<v Speaker 1>productivity and growth models. But, uh, I didn't see anybody

0:55:08.370 --> 0:55:09.959
<v Speaker 1>fall asleep. I think people were engaged.

0:55:10.219 --> 0:55:12.919
<v Speaker 1>So let's share that. Uh So again, big shout out

0:55:12.929 --> 0:55:16.219
<v Speaker 1>to hunting Chua who really ran the model. Uh Typical

0:55:16.229 --> 0:55:20.639
<v Speaker 1>growth forecasting uh framework would look at a country's projection

0:55:20.649 --> 0:55:24.310
<v Speaker 1>of the labor force would make some assumptions about capital

0:55:24.320 --> 0:55:27.279
<v Speaker 1>formation and the productivity around that capital. Uh What we

0:55:27.290 --> 0:55:30.320
<v Speaker 1>did was we decided to make the framework richer

0:55:30.750 --> 0:55:32.989
<v Speaker 1>by adding what we think is one of the most

0:55:33.000 --> 0:55:36.489
<v Speaker 1>important sources of growth going forward, which is the quality

0:55:36.500 --> 0:55:40.290
<v Speaker 1>of human capital and its contribution to productivity. So we

0:55:40.300 --> 0:55:43.939
<v Speaker 1>brought in capital, labor and human capital and we made

0:55:43.949 --> 0:55:46.560
<v Speaker 1>some reasonable assumptions about what was the residual and the

0:55:46.570 --> 0:55:50.129
<v Speaker 1>growth regression or the growth model, which is total factor productivity.

0:55:50.370 --> 0:55:54.120
<v Speaker 1>Um To your point recognizing the hyper competitiveness of the

0:55:54.129 --> 0:55:58.669
<v Speaker 1>US and China, we decided to be a bit modest

0:55:58.679 --> 0:56:01.709
<v Speaker 1>in our assumptions of growth factor productivity. So there are

0:56:01.719 --> 0:56:05.800
<v Speaker 1>charts in the report that compare productivity in the good

0:56:05.810 --> 0:56:08.379
<v Speaker 1>years in recent years which have not been that great

0:56:08.389 --> 0:56:11.229
<v Speaker 1>and forward looking years. We're not talking about a mean reversion.

0:56:11.320 --> 0:56:13.879
<v Speaker 1>We are cognizant of the various realities out there that's

0:56:13.889 --> 0:56:17.010
<v Speaker 1>already been discussed. But we still get a pretty decent

0:56:17.020 --> 0:56:17.790
<v Speaker 1>set of numbers.

0:56:18.540 --> 0:56:23.229
<v Speaker 1>We get about 6.5% around the 6.6% growth for Vietnam.

0:56:23.389 --> 0:56:27.620
<v Speaker 1>Based on our assumptions again of demographic dynamic and productivity

0:56:27.629 --> 0:56:32.040
<v Speaker 1>and labor and capital contribution. Second highest is Philippines huge

0:56:32.050 --> 0:56:36.030
<v Speaker 1>demographic tailwind but also some uh path dependency coming from

0:56:36.040 --> 0:56:39.669
<v Speaker 1>the recent success in growth up performance, especially between 2010

0:56:39.679 --> 0:56:40.529
<v Speaker 1>and 2019.

0:56:41.030 --> 0:56:46.649
<v Speaker 1>Uh Indonesia and Malaysia are commodity producing economies. Typically, their

0:56:46.659 --> 0:56:50.280
<v Speaker 1>performance has to sort of zigzag with commodity performance. We

0:56:50.290 --> 0:56:52.540
<v Speaker 1>like to think especially since we have discussed a lot

0:56:52.550 --> 0:56:54.530
<v Speaker 1>of time, I spent a lot of time in this discussion,

0:56:54.540 --> 0:56:58.009
<v Speaker 1>talk about Malaysia that there are reasons to be optimistic

0:56:58.020 --> 0:57:02.540
<v Speaker 1>about Malaysia's non commodity future. And that consideration goes into

0:57:02.550 --> 0:57:05.529
<v Speaker 1>the 4.5% average growth forecast that we have for Malaysia.

0:57:06.879 --> 0:57:08.449
<v Speaker 1>I'm going to talk about Thailand, Singapore and then we'll

0:57:08.459 --> 0:57:10.340
<v Speaker 1>come back to Indonesia because I want to ask you

0:57:10.350 --> 0:57:13.139
<v Speaker 1>a question on Indonesia. So in Thailand, we are not

0:57:13.149 --> 0:57:17.219
<v Speaker 1>particularly optimistic. Although there have been the Detroit of Southeast Asia,

0:57:17.469 --> 0:57:20.219
<v Speaker 1>they are embracing the supply chain. But

0:57:21.080 --> 0:57:25.080
<v Speaker 1>unlike most other developing countries, they unfortunately are going through

0:57:25.090 --> 0:57:29.179
<v Speaker 1>a very adverse demographic dynamic going forward. And the immigration

0:57:29.189 --> 0:57:31.689
<v Speaker 1>safety valve they had in the past does not seem

0:57:31.699 --> 0:57:34.500
<v Speaker 1>to be working that well. Uh and that drag sort

0:57:34.510 --> 0:57:37.060
<v Speaker 1>of bring them to a sub 3% growth outlook over

0:57:37.070 --> 0:57:37.820
<v Speaker 1>the next decade.

0:57:38.669 --> 0:57:41.649
<v Speaker 1>Singapore, which raises some eyebrows when we share that. We're

0:57:41.659 --> 0:57:44.439
<v Speaker 1>expecting it to grow at 2.5%. The question being, why

0:57:44.449 --> 0:57:46.780
<v Speaker 1>so poor? And our answer is actually it's not poor

0:57:46.790 --> 0:57:49.270
<v Speaker 1>at all. Uh 2.5% for one of the richest per

0:57:49.280 --> 0:57:52.469
<v Speaker 1>capita economies in the world is very good, especially when

0:57:52.479 --> 0:57:54.449
<v Speaker 1>we take into account the very strong demographic area

0:57:54.750 --> 0:57:56.530
<v Speaker 2>with low population growth.

0:57:56.540 --> 0:57:57.239
<v Speaker 1>Exactly.

0:57:57.489 --> 0:58:00.239
<v Speaker 1>So now let's talk a little bit about Indonesia in

0:58:00.250 --> 0:58:03.229
<v Speaker 1>our product launch or report launch. We had Guida, former

0:58:03.239 --> 0:58:07.540
<v Speaker 1>Trade Minister of Indonesia there. He felt our 5.7% forecast

0:58:07.550 --> 0:58:09.979
<v Speaker 1>for the next decade was rather pessimistic.

0:58:11.620 --> 0:58:16.040
<v Speaker 2>Yes, I think Indonesia, it's the most important economy in

0:58:16.050 --> 0:58:18.800
<v Speaker 2>Southeast Asia in the largest. Um

0:58:20.659 --> 0:58:23.840
<v Speaker 2>There's, there's all kinds of anecdotes about how rich the

0:58:23.850 --> 0:58:27.120
<v Speaker 2>soil is, for example, Indonesia and, and just how, how,

0:58:27.129 --> 0:58:29.669
<v Speaker 2>how fertile country it is. It, it also seems to

0:58:29.679 --> 0:58:34.020
<v Speaker 2>have incredible mineral growth, uh mineral availability that has been

0:58:34.030 --> 0:58:38.080
<v Speaker 2>mined and has been exported coal, copper, you name it.

0:58:38.600 --> 0:58:43.570
<v Speaker 2>Um And so to some degree, Indonesia was always very

0:58:43.580 --> 0:58:46.719
<v Speaker 2>successful without having to try too hard.

0:58:47.590 --> 0:58:51.080
<v Speaker 2>Um One of the other changes in Indonesia that's taken

0:58:51.090 --> 0:58:53.320
<v Speaker 2>place since I've been working here is they went from a,

0:58:53.600 --> 0:58:58.649
<v Speaker 2>you know, six terms of Suharto to a pretty vibrant

0:58:58.659 --> 0:59:02.409
<v Speaker 2>democracy and a lot of people wonder is that good

0:59:02.419 --> 0:59:04.699
<v Speaker 2>for growth or not so good for growth. And it's

0:59:04.709 --> 0:59:08.290
<v Speaker 2>certainly in, in my view, been very good for growth.

0:59:08.719 --> 0:59:13.040
<v Speaker 2>Indonesia has been one of the most entrepreneurial econ economies

0:59:13.050 --> 0:59:14.649
<v Speaker 2>in Southeast Asia. And that

0:59:15.129 --> 0:59:17.840
<v Speaker 2>I, I didn't, I, I expected all the Southeast Asian

0:59:17.850 --> 0:59:22.330
<v Speaker 2>countries to have an entrepreneurial success but that it's concentrated

0:59:22.340 --> 0:59:24.030
<v Speaker 2>in Indonesia came as a bit of a surprise to

0:59:24.040 --> 0:59:26.060
<v Speaker 2>me and I can't really explain why,

0:59:26.350 --> 0:59:30.209
<v Speaker 2>but it's given them AAA kind of another leg of

0:59:30.219 --> 0:59:33.810
<v Speaker 2>the stool for growth that we think has really helped

0:59:33.820 --> 0:59:36.949
<v Speaker 2>them in the last 10 years. Um Things like shopee

0:59:36.979 --> 0:59:39.649
<v Speaker 2>and grab and, you know, just, you name it, whether

0:59:39.659 --> 0:59:42.780
<v Speaker 2>it's in Edtech or in health tech, Indonesia has some

0:59:42.790 --> 0:59:46.159
<v Speaker 2>of the most pro promising start ups in Southeast Asia.

0:59:46.989 --> 0:59:50.989
<v Speaker 2>So why would we have any concerns? I think number one, the,

0:59:51.000 --> 0:59:55.689
<v Speaker 2>the infrastructure continues to lag what's needed even though Jacoby

0:59:55.699 --> 0:59:58.699
<v Speaker 2>really took this on and some high profile projects were

0:59:58.709 --> 1:00:01.560
<v Speaker 2>done and more roads were completed than have been completed. And,

1:00:01.709 --> 1:00:03.919
<v Speaker 2>you know, like more in the last decade than several

1:00:03.929 --> 1:00:07.389
<v Speaker 2>decades before. That's great. They just need a lot more.

1:00:07.419 --> 1:00:11.060
<v Speaker 2>It still doesn't have good infrastructure compared to a Vietnam

1:00:11.070 --> 1:00:13.129
<v Speaker 2>or Singapore or Thailand and Malaysia.

1:00:13.709 --> 1:00:17.229
<v Speaker 2>The second is the education levels in Indonesia continue to

1:00:17.239 --> 1:00:21.530
<v Speaker 2>lag and that's a problem is that's a multigeneration problem.

1:00:21.540 --> 1:00:23.969
<v Speaker 2>It's very, or even if a government were absolutely committed

1:00:23.979 --> 1:00:26.399
<v Speaker 2>to fixing it, it would take 30 or 40 years

1:00:26.409 --> 1:00:28.790
<v Speaker 2>to bring them up to the levels of say of Vietnam.

1:00:28.979 --> 1:00:32.050
<v Speaker 2>Um simply because of the challenges of building out the

1:00:32.060 --> 1:00:35.770
<v Speaker 2>schools and finding the teachers and, and, and, and figuring

1:00:35.780 --> 1:00:39.080
<v Speaker 2>out a way to, to efficiently spend the money. And

1:00:39.090 --> 1:00:42.090
<v Speaker 2>so those will always be drags on the Indonesian economy.

1:00:42.409 --> 1:00:45.310
<v Speaker 2>Um The last is the governments have tended to be

1:00:45.320 --> 1:00:49.790
<v Speaker 2>slightly protectionist and they don't use those terms. Um But

1:00:49.959 --> 1:00:52.209
<v Speaker 2>when you look at, for example, the export controls that

1:00:52.219 --> 1:00:55.060
<v Speaker 2>were put on palm oil or the restrictions that were

1:00:55.070 --> 1:00:58.129
<v Speaker 2>put on nickel production that you had to downstream while

1:00:58.139 --> 1:01:03.370
<v Speaker 2>ostensibly successful and certainly attracted more FD I. As a result.

1:01:03.379 --> 1:01:05.550
<v Speaker 2>In the case of nickel, you had to think about

1:01:05.560 --> 1:01:08.750
<v Speaker 2>every other industry and how they would respond to those

1:01:08.760 --> 1:01:09.399
<v Speaker 2>kind of control.

1:01:10.120 --> 1:01:12.620
<v Speaker 2>And it, it would, it would certainly, if you have

1:01:12.629 --> 1:01:15.310
<v Speaker 2>alternatives make you think twice about, well, I could put

1:01:15.320 --> 1:01:17.330
<v Speaker 2>it in a plant but let's say I put in

1:01:17.340 --> 1:01:19.929
<v Speaker 2>a toy factory, what if I'm forced to also produce

1:01:19.969 --> 1:01:22.899
<v Speaker 2>the plastics locally or buy plastics locally versus from the

1:01:22.909 --> 1:01:25.989
<v Speaker 2>lowest cost global player? You'd think twice about being in

1:01:26.000 --> 1:01:29.770
<v Speaker 2>an environment where those rules might change very suddenly and

1:01:29.780 --> 1:01:31.870
<v Speaker 2>impact the economics of your business.

1:01:32.560 --> 1:01:35.439
<v Speaker 1>Charlie. When we wrapped up the report, we put these

1:01:35.449 --> 1:01:39.209
<v Speaker 1>five pieces of jigsaw. Uh And, and we said that,

1:01:39.219 --> 1:01:41.050
<v Speaker 1>you know, there are multiple solutions to the jigsaw and

1:01:41.060 --> 1:01:43.580
<v Speaker 1>you don't need all five pieces to make it work.

1:01:43.750 --> 1:01:46.500
<v Speaker 1>But what we had was one invest in emerging growth

1:01:46.510 --> 1:01:51.790
<v Speaker 1>sectors to foster tech enabled disruptors. Third, strengthen capital markets. Fourth,

1:01:51.800 --> 1:01:56.659
<v Speaker 1>embrace multilateral initiatives and five accelerate green transition.

1:01:57.000 --> 1:02:00.800
<v Speaker 1>So parting thoughts, what strategy should businesses as well as

1:02:00.810 --> 1:02:04.669
<v Speaker 1>governments pursue? Given the thoughts that we have provided these.

1:02:04.959 --> 1:02:07.649
<v Speaker 2>So a big part of that was to say

1:02:08.340 --> 1:02:10.439
<v Speaker 2>it, it came out of the discussions I had in

1:02:10.449 --> 1:02:11.959
<v Speaker 2>Thailand the last two years

1:02:12.949 --> 1:02:15.239
<v Speaker 2>where I said based on current trajectory, this is gonna

1:02:15.250 --> 1:02:16.010
<v Speaker 2>be your growth rate,

1:02:17.110 --> 1:02:18.610
<v Speaker 2>but that's not what I want and that's not what

1:02:18.620 --> 1:02:22.010
<v Speaker 2>you want. And, and the question on everybody's mind is

1:02:22.020 --> 1:02:23.209
<v Speaker 2>how can we grow faster?

1:02:24.350 --> 1:02:29.280
<v Speaker 2>Um What we've said is export oriented manufacturing, which has

1:02:29.290 --> 1:02:29.679
<v Speaker 2>been

1:02:30.350 --> 1:02:35.320
<v Speaker 2>the label for the most successful development strategies. The last

1:02:35.330 --> 1:02:38.929
<v Speaker 2>30 years is still an important leg of the stool.

1:02:39.810 --> 1:02:43.330
<v Speaker 2>Um It works, it forces you to have to be

1:02:43.340 --> 1:02:46.270
<v Speaker 2>able to manage more complex enterprises. It ties you into

1:02:46.280 --> 1:02:49.300
<v Speaker 2>global supply chains, it forces you to have talent that

1:02:49.310 --> 1:02:53.189
<v Speaker 2>can work as an equal or part of a global organization.

1:02:53.959 --> 1:02:58.260
<v Speaker 2>Ee especially when it's foreign investment, it, it raises the

1:02:58.270 --> 1:03:00.899
<v Speaker 2>gain for at least a portion of your economy. And

1:03:00.909 --> 1:03:02.340
<v Speaker 2>then there are spillover benefits,

1:03:03.020 --> 1:03:04.760
<v Speaker 2>but it's only one wet leg of the stool. And

1:03:04.770 --> 1:03:06.939
<v Speaker 2>if you rely on that solely given the amount of

1:03:06.949 --> 1:03:10.020
<v Speaker 2>competition in the world right now, and China's leadership in

1:03:10.030 --> 1:03:13.229
<v Speaker 2>so many manufacturing sectors, we don't think you'll hit the

1:03:13.239 --> 1:03:16.330
<v Speaker 2>growth rates that you aspire to. So, in addition to that,

1:03:16.340 --> 1:03:18.250
<v Speaker 2>we think there are other legs of the stool. One

1:03:18.260 --> 1:03:22.679
<v Speaker 2>is to really ensure that your entrepreneurial sector prospers. Now,

1:03:22.689 --> 1:03:24.620
<v Speaker 2>it's so much more fun for a politician to go

1:03:24.629 --> 1:03:27.000
<v Speaker 2>to a big ribbon cutting of a billion dollar plant.

1:03:27.669 --> 1:03:31.100
<v Speaker 2>The equival nowadays is probably the gong of a new

1:03:31.110 --> 1:03:34.510
<v Speaker 2>unicorn on NASDAQ that came out of Indonesia or Thailand

1:03:34.520 --> 1:03:36.639
<v Speaker 2>or Vietnam. And there's a league table that we have

1:03:36.649 --> 1:03:39.139
<v Speaker 2>in the report of how many unicorns each country has

1:03:39.149 --> 1:03:42.629
<v Speaker 2>managed to foster. And you can see clearly that, that

1:03:42.639 --> 1:03:44.580
<v Speaker 2>the the winners right now are Indonesians,

1:03:44.699 --> 1:03:46.979
<v Speaker 2>Singapore and other countries are looking and say, well, what

1:03:46.989 --> 1:03:50.520
<v Speaker 2>can we do to foster more entrepreneurs? And it's a

1:03:50.530 --> 1:03:53.939
<v Speaker 2>whole host of things from ability to move talent in

1:03:53.949 --> 1:03:58.379
<v Speaker 2>your laws on, on venture capital and foreign ownership of assets,

1:03:58.389 --> 1:04:02.870
<v Speaker 2>your um your willingness to protect them from too strong.

1:04:02.879 --> 1:04:05.310
<v Speaker 2>Lo not, I won't say too strong local competition, but

1:04:05.320 --> 1:04:09.020
<v Speaker 2>I would say competition becomes so aggressive that it keeps

1:04:09.030 --> 1:04:09.959
<v Speaker 2>them out of the market.

1:04:10.399 --> 1:04:15.320
<v Speaker 2>Um And also in ensuring that there's a solid relationships

1:04:15.330 --> 1:04:19.020
<v Speaker 2>between your VC community and your university community that your

1:04:19.030 --> 1:04:21.979
<v Speaker 2>universities have an ability to invest in start ups that

1:04:21.989 --> 1:04:24.530
<v Speaker 2>the students there see going to a start up as

1:04:24.540 --> 1:04:27.239
<v Speaker 2>a viable uh employment opportunity.

1:04:27.399 --> 1:04:30.000
<v Speaker 2>It just being directed towards the government or state owned

1:04:30.010 --> 1:04:32.979
<v Speaker 2>enterprises or large enterprises in the country. So there's a

1:04:32.989 --> 1:04:35.300
<v Speaker 2>whole host of things you can do to make the

1:04:35.310 --> 1:04:38.520
<v Speaker 2>entrepreneurial sector take off. And we've seen countries that do

1:04:38.530 --> 1:04:41.760
<v Speaker 2>this well, get benefits from it. The green we've already

1:04:41.770 --> 1:04:46.419
<v Speaker 2>talked through. We just see, look, it probably could double

1:04:46.429 --> 1:04:49.020
<v Speaker 2>the level of FD I in a country. It just

1:04:49.030 --> 1:04:52.419
<v Speaker 2>becomes an equal. The infrastructure spending on FD I would

1:04:52.429 --> 1:04:56.729
<v Speaker 2>be equivalent to the multinational investment in, in manufacturing l exports.

1:04:57.060 --> 1:05:00.159
<v Speaker 2>I think the the issue of new sectors, the main

1:05:00.169 --> 1:05:02.840
<v Speaker 2>thing we pointed out to people is if you can't

1:05:02.850 --> 1:05:06.939
<v Speaker 2>point to an existing capability you have that you're building on,

1:05:07.139 --> 1:05:09.080
<v Speaker 2>you will probably not be able to pull it off.

1:05:09.429 --> 1:05:11.379
<v Speaker 2>There's a lot of people who want to be heroes.

1:05:11.530 --> 1:05:13.879
<v Speaker 2>This is like Indonesia saying, why can't we do an

1:05:13.889 --> 1:05:18.000
<v Speaker 2>airline sector? Brazil did it and I'm impressed by what

1:05:18.010 --> 1:05:20.840
<v Speaker 2>Brazil did. But when we see the Chinese have spent,

1:05:20.850 --> 1:05:22.399
<v Speaker 2>I I saw a piece of data, I think the

1:05:22.409 --> 1:05:24.399
<v Speaker 2>number was $80 billion

1:05:24.639 --> 1:05:28.080
<v Speaker 2>so far developing the Comac aircraft. Now it probably makes

1:05:28.090 --> 1:05:29.780
<v Speaker 2>sense for China to try to do that. They want

1:05:29.790 --> 1:05:31.719
<v Speaker 2>to be a leader in every technology. They don't want

1:05:31.729 --> 1:05:34.719
<v Speaker 2>to be dependent on us, technology, they're probably defense spinoffs

1:05:34.729 --> 1:05:36.969
<v Speaker 2>that they want from being in that sector. But there

1:05:36.979 --> 1:05:39.620
<v Speaker 2>aren't many countries that can spend that kind of money

1:05:39.699 --> 1:05:42.699
<v Speaker 2>and so know what you're up against and realize when, when,

1:05:42.709 --> 1:05:45.110
<v Speaker 2>when the competition is going to be too heavy. So

1:05:45.120 --> 1:05:46.969
<v Speaker 2>the case of Malaysia doubling down

1:05:47.090 --> 1:05:52.040
<v Speaker 2>on on semiconductors or Thailand seeking to win in electric

1:05:52.050 --> 1:05:56.659
<v Speaker 2>vehicles or Indonesia leveraging their nickel to to go into batteries. These,

1:05:56.669 --> 1:05:58.850
<v Speaker 2>these all make sense to us that the health tech

1:05:58.860 --> 1:06:01.830
<v Speaker 2>sector has so much further to run in Thailand and

1:06:01.840 --> 1:06:03.870
<v Speaker 2>Philippines should be getting a piece of that. They also

1:06:03.879 --> 1:06:06.050
<v Speaker 2>have a lot of doctors and nurses and they could

1:06:06.060 --> 1:06:09.590
<v Speaker 2>easily be a rival to Thailand in MedTech and health tech.

1:06:09.739 --> 1:06:13.929
<v Speaker 2>So build on, on an existing asset and that all

1:06:13.939 --> 1:06:16.030
<v Speaker 2>the countries in Southeast Asia have those assets.

1:06:16.370 --> 1:06:19.169
<v Speaker 2>And then uh I'm getting the last one. It was

1:06:19.179 --> 1:06:20.500
<v Speaker 2>the uh multilateral

1:06:20.510 --> 1:06:21.439
<v Speaker 1>initiative, multilateral

1:06:21.449 --> 1:06:24.909
<v Speaker 2>initiatives. We, this is a tricky area. We, what we've

1:06:24.919 --> 1:06:30.459
<v Speaker 2>seen is that some countries postpone difficult decisions

1:06:30.729 --> 1:06:32.870
<v Speaker 2>and say, well, we'll wait for ASEAN to kind of

1:06:32.879 --> 1:06:35.860
<v Speaker 2>resolve this. So we won't build our grid. We'll wait

1:06:35.870 --> 1:06:38.199
<v Speaker 2>till there's kind of an ASEAN grid or we won't

1:06:38.239 --> 1:06:41.750
<v Speaker 2>deal with this tricky. Legislation's too politically unpopular, but it's

1:06:41.760 --> 1:06:45.439
<v Speaker 2>forced on us by, by ASEAN. We'll do it. That's

1:06:45.449 --> 1:06:49.310
<v Speaker 2>waiting too long. Most country, most of the growth rate

1:06:49.320 --> 1:06:52.469
<v Speaker 2>increases in countries are within the control of the domestic

1:06:52.479 --> 1:06:55.629
<v Speaker 2>markets and don't require so called regional integration.

1:06:55.860 --> 1:06:59.459
<v Speaker 2>However, if the region does lower non tar bearers in

1:06:59.469 --> 1:07:01.919
<v Speaker 2>particular and tar bearers which are already coming down because

1:07:01.929 --> 1:07:05.070
<v Speaker 2>of our CE P. If they coordinate on an electric grid,

1:07:05.080 --> 1:07:09.000
<v Speaker 2>if they coordinate on certain internet elector, property protections or

1:07:09.010 --> 1:07:13.419
<v Speaker 2>how data is protected around the region. That's a good thing.

1:07:13.570 --> 1:07:16.110
<v Speaker 2>But we see that is just icing on the or

1:07:16.120 --> 1:07:19.840
<v Speaker 2>I I icing on the cake, not the cake itself.

1:07:19.850 --> 1:07:22.969
<v Speaker 2>And we want most governments to recognize that your destiny

1:07:22.979 --> 1:07:23.800
<v Speaker 2>is in your hit.

1:07:24.719 --> 1:07:26.909
<v Speaker 1>Uh Charlie final thought from my side is that we

1:07:26.919 --> 1:07:30.979
<v Speaker 1>also underscored the importance of a vibrant private and public

1:07:30.989 --> 1:07:33.820
<v Speaker 1>capital market. Yes, there's a lot of savings in the region.

1:07:33.830 --> 1:07:35.939
<v Speaker 1>There's a lot of FD I coming in, but we

1:07:35.949 --> 1:07:39.540
<v Speaker 1>need more liquidity. We need more hungry capitalists out there

1:07:39.550 --> 1:07:42.110
<v Speaker 1>in the region looking for deals within the country or

1:07:42.120 --> 1:07:44.060
<v Speaker 1>cross border. And that would be in my view, an

1:07:44.070 --> 1:07:45.419
<v Speaker 1>essential part of the group story.

1:07:45.449 --> 1:07:45.739
<v Speaker 2>And

1:07:45.750 --> 1:07:49.090
<v Speaker 2>I, I see maybe I'm naive but I see so

1:07:49.100 --> 1:07:52.300
<v Speaker 2>many people who are too pessimistic on this simply based

1:07:52.310 --> 1:07:54.459
<v Speaker 2>on past trends. But as you pointed out,

1:07:54.750 --> 1:07:57.889
<v Speaker 2>the amount of liquidity being created in the Middle East

1:07:58.320 --> 1:08:00.649
<v Speaker 2>and the desire of China to, to have a more

1:08:00.659 --> 1:08:05.379
<v Speaker 2>effective BR I and the desire of all the G7

1:08:05.389 --> 1:08:09.709
<v Speaker 2>country co countries to continue to have influence. And a

1:08:09.719 --> 1:08:12.949
<v Speaker 2>say in Southeast Asia tells me that there are three

1:08:12.959 --> 1:08:17.040
<v Speaker 2>large pools in addition to domestically generated pools that are

1:08:17.049 --> 1:08:18.568
<v Speaker 2>going to be available for investment

1:08:18.890 --> 1:08:22.520
<v Speaker 2>and, and, and the government simply have to find a

1:08:22.529 --> 1:08:25.310
<v Speaker 2>way to attract more of that to the capital markets

1:08:25.319 --> 1:08:27.819
<v Speaker 2>in this, in this region. If you build it, they

1:08:27.830 --> 1:08:28.189
<v Speaker 2>will come

1:08:29.680 --> 1:08:32.609
<v Speaker 1>Charlie. Uh It's been a great uh eight month collaboration.

1:08:32.620 --> 1:08:34.779
<v Speaker 1>I look forward to working with you again. Yes,

1:08:35.319 --> 1:08:36.310
<v Speaker 2>continuously.

1:08:36.839 --> 1:08:40.318
<v Speaker 1>Fantastic to have you. Thank you Charlie and thanks to

1:08:40.330 --> 1:08:43.990
<v Speaker 1>our listeners as well. Copy Time was produced by Ken Delbridge,

1:08:44.000 --> 1:08:47.629
<v Speaker 1>Violet Lee and Daisy Sharma provided additional assistance. It is

1:08:47.640 --> 1:08:51.528
<v Speaker 1>for information only and does not constitute any investment advice.

1:08:51.540 --> 1:08:54.790
<v Speaker 1>All 131 episodes of the podcast are available on youtube

1:08:55.009 --> 1:08:58.910
<v Speaker 1>and on major platforms like Apple and Spotify. As for

1:08:58.919 --> 1:09:01.259
<v Speaker 1>our research publications and webinars, you can find them all

1:09:01.270 --> 1:09:04.269
<v Speaker 1>by Googling D BS research Library. Have a great day.