Speaker 1: Welcome to Kobe Time, a podcast series on markets and
Speaker 1: Economies from Devious Group research. I'm Tambe, chief economist. Welcoming
Speaker 1: you to our 131st episode
Speaker 1: at CBI time. Repeat guests are rare and repeat guests
Speaker 1: within a year. It's never happened, but today we will
Speaker 1: make an exception. Charles Oron was our guest last November.
Speaker 1: On episode 112, we talked about China and Southeast Asia
Speaker 1: in that episode. And after that, we talked and we
Speaker 1: decided to do a collaboration. So today's podcast is about
Speaker 1: the outcome of that collaboration,
Speaker 1: Charles Orson founded, ran and grew BA in Southeast Asia
Speaker 1: from 1993 to 2007. He's presently the chair of the
Speaker 1: S Sana Council, a Singapore based Think tank backed by
Speaker 1: Monks Hill Ventures. It is focused on growth potential of
Speaker 1: Southeast Asia. Charlie. Welcome back to Copy Time. Thank you, Turner.
Speaker 1: It's great to have you Charlie. So you and I
Speaker 1: had a couple of conversations late last year. And then
Speaker 1: at the beginning of this year, we got some people
Speaker 1: together and we started doing some work. What did we do, Charlie?
Speaker 2: Well, we had, I guess the journey began two years
Speaker 2: ago when we did the Southeast State, the first edition
Speaker 2: of the report and we looked out 10 years
Speaker 2: to forecast growth and to do that, we had to
Speaker 2: look historically at what had gone on in the region.
Speaker 2: Uh I think we did a good job, you know,
Speaker 2: for a first effort, let's say I give myself a
Speaker 2: b uh but you could see a couple of gaps.
Speaker 2: I think one was, none of us had a really
Speaker 2: strong economics background.
Speaker 2: Uh Number two, the way a consulting firm looks at
Speaker 2: capital markets is different than the way a bank looks
Speaker 2: at capital markets. I think number three, I kind of
Speaker 2: miss deep collaboration.
Speaker 2: Best work I did at Bain was always with somebody else.
Speaker 2: Uh Even the the large accounts that I worked on,
Speaker 2: I always co led them, which wasn't the Norman Bin,
Speaker 2: but it was the way I preferred to work. So
Speaker 2: I approached you to see if you'd be interested in collaborating.
Speaker 2: And uh I was lucky to say you said yes
Speaker 2: and sure enough, I think it's fit like a glove.
Speaker 2: Um I think where your your expertise in economics with
Speaker 2: the IMF with D BS perfectly complements what, what my
Speaker 2: background in business, some economics
Speaker 2: and also thinking through uh market entry, which is probably
Speaker 2: one of the most relevant lenses for, for looking at
Speaker 2: country strategy,
Speaker 1: right? So just for the viewers and listeners edification, the
Speaker 1: way it worked was um Charlie brought in Anana Council
Speaker 1: and his contacts and resources from Bain.
Speaker 1: And Bain was kind enough to assign episodically full time
Speaker 1: consultants to work on the project. We had support from
Speaker 1: Glas Baig whos at San Council and then Ma T
Speaker 1: Yen Hunt Chu and Radhika Rao, three economists from D
Speaker 1: BS site came together. And Charlie, the idea was initially
Speaker 1: that you with your experience and with support from Bain
Speaker 1: would draw a picture of what brings Southeast Asia where
Speaker 1: it is today. Is it
Speaker 2: when you look back
Speaker 2: the golden years for Southeast Asia were really before 1997
Speaker 2: those are the years where economies were growing. 78, even
Speaker 2: 10 plus percent a year. We've forgotten that um maybe
Speaker 2: China had a few years like that, but it's been
Speaker 2: 30 years since Southeast Asia has had that, that kind
Speaker 2: of growth.
Speaker 2: And we asked ourselves, you know, why is that, why,
Speaker 2: why has Southeast Asia not slowed the level of Latin
Speaker 2: America or the Middle East or, or Africa? But nonetheless,
Speaker 2: is really not grown the way that China or India
Speaker 2: or other developing markets have and certainly given its potential,
Speaker 2: it feels like it was falling short of potential. What are, what,
Speaker 2: what we came up with at the time was that
Speaker 2: Southeast Asia had focused a bit more on stability than
Speaker 2: on growth
Speaker 2: and largely as a result of the 97 crisis and
Speaker 2: that had carried through all the way to the state
Speaker 2: when we did this report two years ago, it was
Speaker 2: just coming out of COVID, we were just coming out
Speaker 2: of COVID
Speaker 2: and it was hard to escape that. It was hard
Speaker 2: to look out. You, you call it recency bias, I think.
Speaker 2: But it was hard to look out 10 years when
Speaker 2: you've just been through the worst crisis in the world in,
Speaker 2: in years. And it affected the CO co the region
Speaker 2: in an unusual way and it affected different countries at
Speaker 2: different levels depending on, you know, the mix of tourism
Speaker 2: and export and how dependent they were on China versus us,
Speaker 2: et cetera.
Speaker 2: Um The good news is two years later, we could
Speaker 2: see that the green shoots that were evident two years
Speaker 2: ago have prospered
Speaker 2: and in fact, a number of the transitions in government
Speaker 2: that have taken place have led us to believe that
Speaker 2: most Southeast Asian governments are going to be more pro
Speaker 2: growth in the next 4 to 5 years. We really
Speaker 2: can't see beyond that politically than they have been for
Speaker 2: the last 20 or 30. We see that particularly in
Speaker 2: the Philippines under Marcos Malaysia, under Anwar. Uh I think
Speaker 2: in Indonesia, they started earlier, Prabowo was considered very pro
Speaker 2: growth and sorry. Um Jacoby
Speaker 2: and Prabowo is committed to following his footsteps and then
Speaker 2: Singapore has always been pro growth and Lawrence Wong may
Speaker 2: try some new things, but it's exciting to see where
Speaker 2: he plans to head. Um Vietnam seems to have just
Speaker 2: secured a more stable outcome after two years of some,
Speaker 2: you know, a lot of changes in the, both the
Speaker 2: Prime Minister and the President. And um and there's a
Speaker 2: lot of uh a lot of the insiders we talked
Speaker 2: to who are quite optimistic that Vietnam is now ready
Speaker 2: to kind of have pursue stable growth for the next
Speaker 2: 5 to 10 years. So it's a different time than
Speaker 2: two years ago. And so even though the approach was similar,
Speaker 2: our optimism has increased in that two year period.
Speaker 2: And so for the first time, in a long time,
Speaker 2: we are willing to say, we believe Southeast Asia will
Speaker 2: grow faster than China for the next 10 years. And
Speaker 2: in addition, in absolute terms, will attract more foreign direct
Speaker 2: investment than China. And that was a hypothesis a year
Speaker 2: or two ago. But we decided we weren't ready to,
Speaker 2: to lay it in uh to put it in on print.
Speaker 2: And now we are
Speaker 1: so Charlie uh just going back to the process over
Speaker 1: the last six months on San Council Ba
Speaker 1: D BS got together, we did quite a bit of
Speaker 1: data work. You sort of look back at some of
Speaker 1: the analytics from your earlier report, you sort of refresh them,
Speaker 1: you have been on a listening tour around the world
Speaker 1: and you brought in some of those perspectives from those
Speaker 1: who had read your earlier report and then we went
Speaker 1: ahead and wrote the report down. We now have a website.
Speaker 1: It will be in the show notes, the link and
Speaker 1: the visualization and all the work in there.
Speaker 1: The title of a report is navigating high winds. You
Speaker 1: have some views on high winds, not just from geopolitics,
Speaker 1: but just very specifically vis a vis China. So let's
Speaker 1: start with that discussion,
Speaker 2: right? So high winds, unfortunately, they are not all tail winds,
Speaker 2: but fortunately, they're not all head winds as well.
Speaker 2: Yeah,
Speaker 2: there are a lot of analysts including us who are
Speaker 2: optimistic about the prospects for the next few years because
Speaker 2: of what many analysts refer to as China plus one.
Speaker 2: China plus one is the idea that being dependent on
Speaker 2: China for all of your sourcing is a mistake.
Speaker 2: Now, it could be a mistake because you have all
Speaker 2: your eggs in one basket. Uh It could be the
Speaker 2: the wonderful place to source from. But uh in, in
Speaker 2: times like COVID, when you could had trouble getting exports
Speaker 2: out or you, your management couldn't fly into the market.
Speaker 2: You you realize that having your eggs in different baskets
Speaker 2: made more sense as a as a manufacturer. A second
Speaker 2: could be political.
Speaker 2: Um You could be either under guidance from your respective
Speaker 2: government or just have your own concerns and decide you
Speaker 2: want at least some of your production outside of China.
Speaker 2: And so some people are diversifying for that reason. The
Speaker 2: third could be, your costs are escalating in China. Uh
Speaker 2: China is, has started to decline in terms of its
Speaker 2: working age population. Um There's a great competition for the
Speaker 2: best workers in China. And so people have seen uh
Speaker 2: wage inflation in China, that's uh ahead of inflation in China.
Speaker 2: And that has caused some concerns particularly at the very
Speaker 2: low end, semi skilled or unskilled labor value, a low
Speaker 2: value added and something that naturally falls now outside of China.
Speaker 2: Um I think the last could be tariffs which sometimes
Speaker 2: is related to national security but not always you, it'd
Speaker 2: be hard for me to argue that solar panels or
Speaker 2: wind turbines are a national security issue is more a
Speaker 2: desire to protect local industries, same with electric vehicles or batteries.
Speaker 2: And as a result, not just us firms, but Chinese
Speaker 2: firms are being forced to establish bases offshore uh in
Speaker 2: order to not evade tariffs, but to comply with law
Speaker 2: and use a different export base in order to, to
Speaker 2: uh receive lower tariff uh paid lower tariff levels. So it's,
Speaker 2: it's all very rational in a, in a world where
Speaker 2: uh some markets are becoming more protectionist.
Speaker 2: It doesn't matter what your reason is. The outcome is,
Speaker 2: you're going to move some of your manufacturing outside of China.
Speaker 2: Now, that's a nice tailwind.
Speaker 2: Southeast Asia has always been friendly to M and C investment.
Speaker 2: Um One thing people forget is that in the eighties
Speaker 2: and nineties while Korea and Japan were on a tier
Speaker 2: in terms of growth. And so so was Taiwan, at
Speaker 2: that point, they weren't that receptive to foreign investment. It
Speaker 2: was very hard to invest in the markets. A lot
Speaker 2: of hurdles, hard to participate in the domestic market.
Speaker 2: And suddenly starting with Singapore, Southeast Asia threw up its
Speaker 2: openness market and said we want you to come here
Speaker 2: e especially if you're there to export, there was all
Speaker 2: kinds of incentives, you could have 100% ownership. There was
Speaker 2: uh they built infrastructure for you. And so some of
Speaker 2: the most interesting investments in the world landed here in
Speaker 2: Southeast Asia. It didn't take much, it took cheap land,
Speaker 2: cheap taxes, cheap labor, but mainly a willingness to allow
Speaker 2: M and CS to invest here.
Speaker 2: Um It was open for business over the next 30 years,
Speaker 2: it got a lot harder. Suddenly others started to copy
Speaker 2: this approach of trying to attract M and C investment
Speaker 2: as supposed to resist it. And the most successful dose
Speaker 2: was China
Speaker 2: and China went from very difficult to do business in
Speaker 2: when I was working in China in the nineties. Um
Speaker 2: it was very difficult to get 100% ownership of an entity.
Speaker 2: It was hard to get access to the local market.
Speaker 2: You were often you found it difficult to operate for
Speaker 2: various reasons. Um The road transport was not good. Rail
Speaker 2: transport was very difficult to access and very slow. So you, you,
Speaker 2: you went to China because you saw the long term prospect,
Speaker 2: but it wasn't cheaper
Speaker 2: and, and then gradually it all changed. And now we're
Speaker 2: in a situation where the competitiveness of China is just
Speaker 2: staggering to people who are not deeply involved in manufacturing,
Speaker 2: the scale of the facilities you put in. There are
Speaker 2: usually the largest you have in the world, the scale
Speaker 2: of the ecosystem supplying you, whether it's a chemical provider
Speaker 2: or certain kinds of components or accessories. A lot of
Speaker 2: those are produced in China and it's cheapest to get
Speaker 2: them in China. The the facilities to help you export
Speaker 2: are some of the best in the world. Now, you
Speaker 2: can access almost any port in the world directly from China.
Speaker 2: And so the list goes on,
Speaker 2: but it's also generally very easy to work with government
Speaker 2: in China. If you're setting up some kind of manufacturing
Speaker 2: facility and you're not just working with the national government.
Speaker 2: In fact, rarely do you interact with the national government.
Speaker 2: It's usually you're choosing between different kind of city ecosystems
Speaker 2: that will back you and support you. But you have
Speaker 2: to be careful who you pick because just as you
Speaker 2: pick one to support you, others may then be annoyed
Speaker 2: that you chose one of their rivals. There's tremendous rivalry
Speaker 2: between the different cities in China to attract investment and
Speaker 2: to see the companies that invest locally prosper. So China
Speaker 2: has become a big competitor, competitor So I was talking,
Speaker 2: I was in one of the Southeast Asian countries late
Speaker 2: last week talking to a
Speaker 2: some a minister there.
Speaker 2: And he said, look
Speaker 2: 30 years ago, we were almost the only game in
Speaker 2: town Vietnam didn't exist. China didn't exist. We really just
Speaker 2: competed against Singapore some degree, Philippines, Malaysia and Indonesia. And
Speaker 2: now we compete with at least 10 countries. We, we
Speaker 2: compete with Mexico, we compete with India. We compete with
Speaker 2: different provinces in China. We compete with Eastern Europe. So
Speaker 2: nothing falls into our lap. We have to win everything.
Speaker 2: So while the there are opportunities that are coming out
Speaker 2: of China, they are heavily contested and nothing will fall
Speaker 2: into a country's lap.
Speaker 1: I think your line that is very evocative of that
Speaker 1: issue is that the era of just drawing investment through
Speaker 1: cheap land, labor doesn't work anymore. You got to do
Speaker 1: more than that. A there is this hyper competitiveness within China.
Speaker 1: So just because labor cost is rising in China does
Speaker 1: not guarantee that the capital would flow out. And if
Speaker 1: even if it does, you better offer some of those
Speaker 1: competitive aspect, otherwise not going to come. Yes.
Speaker 2: Yes. And the one probably the biggest
Speaker 2: tail wind in Southeast Asia is the attitude of government
Speaker 2: to the MNC S.
Speaker 2: But I would say probably the biggest headwind to Southeast
Speaker 2: Asia is the general education level of the population. And
Speaker 2: there are objective ways to assess that the piece of
Speaker 2: scores which take place in eighth grade. There are indices
Speaker 2: of human capital, competitiveness, et cetera. But it's also experience
Speaker 2: of people on the ground. Those that are educated are
Speaker 2: some of the best. It's not a, it's not a
Speaker 2: raw capability, there's nothing there.
Speaker 2: But the reality is the amount spent on education, the
Speaker 2: availability to the full mass population is limited everywhere but
Speaker 2: Singapore and Vietnam.
Speaker 2: And so one reason we have seen Vietnam outperform the
Speaker 2: other Southeast Asian countries we believe is they have everything else, right?
Speaker 2: But they have a far more educated general population than Philippines, Indonesia,
Speaker 2: Thailand and Malaysia.
Speaker 2: And also their English speaking skills tend to be above
Speaker 2: those countries as well for the mass population. And we
Speaker 2: think that's made it easier for a lot of MC
Speaker 2: to operate there. And therefore they've, they've had a better
Speaker 2: experience and they've been willing to, to invest again.
Speaker 1: Um Charlie, a skeptic would look at Southeast Asia's track record,
Speaker 1: say after the Asian financial crisis and will say, well,
Speaker 1: they recover from the crisis, they had some growth performance,
Speaker 1: but it doesn't seem like they really embraced manufacturing. So
Speaker 1: talk us through the level of industrialization in South Asia
Speaker 1: and where we are right now.
Speaker 2: If uh
Speaker 2: part of what I'll share is the anecdotal and part
Speaker 2: will be, you know, data. Um
Speaker 2: When I was here in the eighties,
Speaker 2: uh I started work in Singapore in 1986. I was
Speaker 2: doing a lot of work in the oil and gas sector.
Speaker 2: And Singapore already had a leadership position as a what
Speaker 2: we call screen producer, which meant very little of what
Speaker 2: they produced in the local refineries for the local market.
Speaker 2: And depending on what needs, there were, there was suddenly
Speaker 2: a diesel shortage in Thailand or there was a surplus
Speaker 2: of light crude oil from Indonesia back in the days
Speaker 2: when they exported heavily. Um They, the, the, the the
Speaker 2: facility here was so flexible that they could quickly tweak
Speaker 2: the settings on the refinery and produce what was needed
Speaker 2: with the crude that was cheapest and it was, it
Speaker 2: was an arbitrage opportunity. It meant the refineries here were very,
Speaker 2: very profitable. So Indonesia, Malaysia, Thailand all saw this and decided,
Speaker 2: why are we letting Singapore win this? After all, we
Speaker 2: have cheaper land most in those days, Malaysia and Indonesia
Speaker 2: were both major producers of oil. At that point, Thailand
Speaker 2: actually hadn't found significant gas reserves and maybe they found,
Speaker 2: but they weren't being brought to the surface. And so
Speaker 2: they wanted to build large
Speaker 2: refining facilities and neither really succeeded. They, they succeeded in
Speaker 2: building refineries and with some attached chemicals that serve the
Speaker 2: local market, but they weren't able to be a producer
Speaker 2: for the region.
Speaker 2: What also occurred at the time is Taiwan was doubling
Speaker 2: down on their chemicals capability. Korea was as well and
Speaker 2: so was the Middle East. So it was a competitive market.
Speaker 2: It didn't create the kind of margins that maybe you could,
Speaker 2: if you weren't operating a refinery perfectly, you could really
Speaker 2: make money on.
Speaker 2: And that was when I first learned that there was
Speaker 2: a lot more to the where you put a a
Speaker 2: manufacturing facility than low cost labor, low cost land.
Speaker 2: Over the subsequent 20 years, we could see some really
Speaker 2: smart efforts to build manufacturing, but we also saw some
Speaker 2: real failed ones. So for example, Indonesia spent and I
Speaker 2: believe it's correct to say billions of dollars trying to
Speaker 2: develop an aerospace industry under Habibi.
Speaker 2: And I don't believe they may have produced about eight planes,
Speaker 2: but it, it squandered quite a bit of money that
Speaker 2: could have gone into some sectors that would have been
Speaker 2: more appropriate. I don't think Malaysia got a significant payback
Speaker 2: from the proton project, which was again a significant a
Speaker 2: a way of approaching it. So we want our own
Speaker 2: auto industry. We don't want to rely on MN CS.
Speaker 2: Whereas Thailand approached the market by saying, let's attract Japanese
Speaker 2: and C investment in automotive. So they took the best
Speaker 2: players and allowed them to use Thailand as a base
Speaker 2: and gave them more control. And the winner after all
Speaker 2: that was Thailand. Thailand became the leader in producing combustion
Speaker 2: engine vehicles.
Speaker 2: So as you look through different sectors, you can actually
Speaker 2: see that not every step was a misstep, but not
Speaker 2: every step was a solid step towards attracting a sector,
Speaker 2: attracting a promising company, getting them to set it up
Speaker 2: as a base and then continue to invest behind that
Speaker 2: base
Speaker 2: cast forward. And uh
Speaker 2: the big competitors started to become China
Speaker 2: and China started to attract far more investment than Southeast Asia.
Speaker 2: And I I just had this gut feeling that uh
Speaker 2: in the words of Ross Perot who was a famous
Speaker 2: uh independent candidate for president,
Speaker 2: uh he probably was the reason Bill Clinton beat uh
Speaker 2: George Bush senior for his second term because he drew
Speaker 2: away enough votes. But he said the North American free
Speaker 2: Trade agreement will create this massive sucking sound of jobs
Speaker 2: to the South. And, and I, I'm kind of
Speaker 2: perjured that or whatever the right term is. And I
Speaker 2: think we've seen a bit of a sucking sound to
Speaker 2: the north. And so we looked at data on manufacturing
Speaker 2: value added in uh Southeast Asia and we also looked
Speaker 2: at a couple of academic papers, one by a guy
Speaker 2: named Dan Roderick, who's a, who's a phd at, at Harvard.
Speaker 2: And they all led us to the same conclusion that
Speaker 2: the developing world, it it is not just the developed
Speaker 2: world that has lost jobs
Speaker 2: and manufacturing to China, it's also the developing world. And
Speaker 2: his paper was title the premature indus deindustrialization of the
Speaker 2: developing world. And when we looked at the data, we
Speaker 2: saw a similar pattern. But now what's interesting if you
Speaker 2: go into the details of the data which I encourage
Speaker 2: you to do. It's on the website is that Malaysia
Speaker 2: and Singapore and I believe Thailand have started to improve things.
Speaker 2: But Indonesia and the Philippines continued their decline for this entire, since,
Speaker 2: since the early two thousands. So Southeast Asia peaked in
Speaker 2: terms of manufacturing value added in the two thousands, with
Speaker 2: one exception, Vietnam, but three have started to turn the
Speaker 2: corner in the last 10 years. And so it, what
Speaker 2: it told us is good policy and particularly follow through
Speaker 2: on your commitments with Mn CS that have have invested
Speaker 2: in your country will often result in
Speaker 2: continued presence in manufacturing. However, if you don't fall through
Speaker 2: your commitments, if you play games with some of the rules,
Speaker 2: if you make it harder to import parts or chemicals,
Speaker 2: if you force downs streaming into new sectors that they
Speaker 2: hadn't intended to go into, if you cut off exports
Speaker 2: for a period of time, because it will keep prices
Speaker 2: low in the domestic market. All those send signals to
Speaker 2: people that this is not a desirable place to invest
Speaker 2: and that might, you might get away with it if
Speaker 2: there are only three or four options.
Speaker 2: But as, as, as I learned in Thailand last week,
Speaker 2: there are a lot of options for any investor considering investment.
Speaker 2: And so we see continuity and policy following through on
Speaker 2: your commitments, trust is probably the key driver of raising
Speaker 2: both FD I and manufacturing. Value added.
Speaker 1: So Charlie, uh in doing the presentation, we have done
Speaker 1: several presentations already with this report. Um And I've seen
Speaker 1: that people sort set upright when you show the chart
Speaker 1: on the premature destri. So I highly recommend
Speaker 1: uh listeners to the podcast to look up the website.
Speaker 1: But the second area where I see a lot of
Speaker 1: people pay a lot of attention. I think it's gotten
Speaker 1: some newspaper headline also is the fact that majority of
Speaker 1: the FD I that's come into the region over the
Speaker 1: last 5, 1015 years has been the same
Speaker 1: thing.
Speaker 2: Yeah, I, I continue to be surprised by the number.
Speaker 2: In fact, one night I bolted awake in a cold
Speaker 2: sweat thinking what if we got that number wrong because
Speaker 2: it's so glaring. But the data was, or is that
Speaker 2: from 2013 to 2018, Southeast Asia
Speaker 2: uh of Southeast Asia's FD I Singapore attracted 56%.
Speaker 2: And then in the next five years, it went up
Speaker 2: to 62.
Speaker 2: Now this is a net FD I number. Um And,
Speaker 2: but still Singapore is a major investor in other countries. So,
Speaker 2: you know, the net number doesn't necessarily just favor Singapore.
Speaker 2: Um And uh one of one of our council members
Speaker 2: from uh Indonesia, Geeta Weir Jwan. I didn't put it
Speaker 2: well at an investor conference I was at in, in,
Speaker 2: in Malaysia. He said, look, it all comes down to
Speaker 2: trust and
Speaker 2: we think we can attract these companies with a deal.
Speaker 2: But what the first thing they do is they talk
Speaker 2: to their friends and they said, what has been your
Speaker 2: experience in this country? And if they've ever had a
Speaker 2: difficult experience, whether it was customs or immigration or getting
Speaker 2: work permits or getting chemicals in an appropriate time or
Speaker 2: spare parts or somebody asking for, for, um, for some
Speaker 2: share of the revenue share of the business itself. These
Speaker 2: things happen in developing world, then they aren't going to
Speaker 2: share a good story.
Speaker 2: And, and ultimately Singapore has people's trust. There's a great
Speaker 2: article in today's straits Times by the pfizer Ceo and
Speaker 2: he talked about why they keep investing billions of dollars
Speaker 2: into Singapore and he didn't use the word trust. But
Speaker 2: every if you distilled his words down, it came down
Speaker 2: to that, that we have had a strong working relationship
Speaker 2: with the Singapore government for years and we believe in
Speaker 2: what they, that, that they'll do what they say they'll do.
Speaker 2: So I, I uh now do I think Singapore can
Speaker 2: keep this up? No.
Speaker 2: Um I this is a very small place and if
Speaker 2: Southeast Asia really gets its act together, then you start
Speaker 2: to be optimistic that more while Singapore will probably still
Speaker 2: grow ft I, the greater growth will take place in
Speaker 2: other parts of Southeast Asia
Speaker 2: and we can see it occurring already. Uh For example,
Speaker 2: if there really is a uh an sez as a
Speaker 2: special economic zone between Singapore and Johor, we would expect
Speaker 2: some of Singapore's investment and foreign investors to divert investment
Speaker 2: that would have gone to Singapore to Johor. But this
Speaker 2: will benefit both Singapore and Johor. Uh We know Thailand
Speaker 2: is very eager to attract more of the investments that
Speaker 2: they see going to Malaysia, Vietnam and Indonesia.
Speaker 2: And we know Vietnam is keen to reverse a recent
Speaker 2: slide in kind of the league tables. And uh they're
Speaker 2: very disappointed that they lost a couple of investments. One
Speaker 2: was with Intel um to uh I believe it was Poland.
Speaker 2: And so this is a, this is a region that
Speaker 2: is committed to attracting a greater share in FD I
Speaker 2: and realize the next 5 to 10 years might be
Speaker 2: a unique period to secure Greenfield investments.
Speaker 1: But Charlie, when we talk about having
Speaker 1: an environment of trust and rule of law and governance
Speaker 1: that is conducive to investment, we're still talking about investment
Speaker 1: that will go into the export oriented sector of the economy.
Speaker 1: And does that open up the areas of vulnerability as well?
Speaker 2: You're absolutely right.
Speaker 2: I don't think the the West is as discerning as
Speaker 2: this but pretty much everywhere. In Asia,
Speaker 2: the rules are different if you were planning to be exporting,
Speaker 2: uh you're in a special economic zone, um you're treated
Speaker 2: differently and you just have to comply with whatever you
Speaker 2: might even allow, be allowed to export only 90% or
Speaker 2: only 80% whether it's automotive or it could be solar panels,
Speaker 2: it could be to get the special tax breaks, etcetera. Now,
Speaker 2: part of that is a reasonable political consideration
Speaker 2: that in order to get to, to persuade the public
Speaker 2: that we should give this kind of tax break is
Speaker 2: to say, well, look, they're creating jobs that otherwise wouldn't
Speaker 2: exist here and they're not really competing with a local company,
Speaker 2: they're doing something that no local company can do. So
Speaker 2: I understand the political rationale for it. The challenge is
Speaker 2: that
Speaker 2: most of these economies would benefit from more competition in
Speaker 2: their domestic market. And if you as we go to
Speaker 2: other sources of growth beyond export led manufacturing, things like
Speaker 2: the green transition, entrepreneurial activity, uh growing new sectors, particularly
Speaker 2: in the services side, almost all of them benefit significantly
Speaker 2: from local competition. It tends to attract more investment which
Speaker 2: is a surprise to people. It tends to attract uh
Speaker 2: result in more innovation,
Speaker 2: more, more and better outcomes for consumers. Competition is good.
Speaker 2: There's always a tendency to want to protect local players
Speaker 2: and to be worried about MNC protection IMNC is taking
Speaker 2: over the market. We do find that yeah, there are
Speaker 2: certain businesses where you could look and say their global
Speaker 2: scale gives them an unfair advantage against a local player.
Speaker 2: And we have to, we have to adjust the rules
Speaker 2: to some degree
Speaker 2: so that there is strong competition, but it's still fair competition,
Speaker 2: it would, it would be like uh weight class or
Speaker 2: certain kind of handicapping. But if you exclude them from
Speaker 2: the market entirely, then what you'll end up with less competition,
Speaker 2: it has to be done. Sector by sector, financial services
Speaker 2: is typically done separately because of the unique characteristics of, of,
Speaker 2: of financial crises. Versus if, if you know, if you
Speaker 2: had a shortage of croissants, it wouldn't bring down the
Speaker 2: economy in the same way it would if, if you
Speaker 2: had a bank run. So II I understand particularly why
Speaker 2: financial services might be regulated differently. But in general, we
Speaker 2: f one of our main recommendations in addition to addressing
Speaker 2: the short shortcomings in education is to have more competition
Speaker 2: in local markets in order to attract investment and get
Speaker 2: better outcomes.
Speaker 1: So that that outcome brings me to the point that
Speaker 1: we in this report have identified seven traditional drivers of
Speaker 1: growth uh from ease of doing business to competition policies
Speaker 1: to institutions, to your point of workforce quality and then
Speaker 1: infrastructure stability and the investment environment overall. Um does one
Speaker 1: country just stand out that it's better in all these
Speaker 1: traditional broad drivers?
Speaker 2: I mean, Singapore has traditionally stood out and it, and
Speaker 2: it's been a leader, let's be clear, not just in
Speaker 2: Southeast Asia, but in the world in terms of attracting
Speaker 2: MNC investment. And if you look at the outcomes,
Speaker 2: you'd say it worked, you know, and, and in fact, if, if,
Speaker 2: if I were Korea or Japan and I could wind
Speaker 2: back the clock. I would have been more receptive to
Speaker 2: foreign investment because I think their economies ended up slowing
Speaker 2: mainly because they, the there was over consolidation among these
Speaker 2: big exporting firms. The Tribals, in the case of,
Speaker 2: of uh Korea, the trading firms in case in Japan,
Speaker 2: they ended up dominating both local services and export oriented
Speaker 2: manufacturing and somewhat stifling the economies and neither has really
Speaker 2: grown as fast as one would think they should given
Speaker 2: the quality of their workforce and all the other factors
Speaker 2: that they they have as a country. Um
Speaker 2: Vietnam also stands out now uh what two years ago
Speaker 2: when we saw the growth rates for Vietnam, I have
Speaker 2: to admit I was, I was caught by surprise. Uh
Speaker 2: the work I had done in Vietnam in the nineties,
Speaker 2: I had found it one of the more challenging countries
Speaker 2: to work in. Um There was a uh
Speaker 2: a very challenging power sharing between the, the central government,
Speaker 2: the provincial governments and the military.
Speaker 2: And we were doing quite complex deals in Vietnam, buying
Speaker 2: up uh assets uh in, in a manufacturing sector in
Speaker 2: order to serve the domestic market, which is always the
Speaker 2: trickiest place to play. And in each one, each of
Speaker 2: those three entities had objectives that they wanted served. And
Speaker 2: if either thought the other was getting more than them,
Speaker 2: the deal was off and, and, and, and it was
Speaker 2: just hard to, to get things done.
Speaker 2: And so, you know, my career took different paths and
Speaker 2: when I came back to work in Vietnam, I was,
Speaker 2: oh my gosh, this is now just on fire. And
Speaker 2: I went in, uh, I went to a couple of
Speaker 2: industrial parks and
Speaker 2: one guy who's particularly nice to me. I still owe
Speaker 2: him a golf game because he, he just opened up
Speaker 2: his plant to me and let me ask any question
Speaker 2: I want. And one of the questions I asked is OK,
Speaker 2: you have two other plants, one in Mexico and one
Speaker 2: in Arizona. Is it true? The Vietnamese workers are more
Speaker 2: productive than those in Mexico and the US. And he said, oh,
Speaker 2: you bet
Speaker 2: he goes, let me give you an anecdote if I
Speaker 2: were to go to the US and demand that the
Speaker 2: workers spend the weekend working and I'd pay them overtime,
Speaker 2: half of them would quit.
Speaker 2: If I went to Mexico and demanded that they work overtime,
Speaker 2: they'd all say yes, but only half would show up
Speaker 2: in Vietnam. If I didn't give them overtime, half would quit.
Speaker 2: He said they want to work 60 hours a week.
Speaker 2: And if I don't give them 60 hours, they'll start
Speaker 2: looking for another job because they have a certain amount
Speaker 2: of money. They, they wanna take home every day. But
Speaker 2: he said, just aside from, from that attitude, he just
Speaker 2: said the quality of the work and I you know,
Speaker 2: he let me observe them working for a couple of hours.
Speaker 2: We went to different workstations and
Speaker 2: I could see the, it wasn't a, a super complex product,
Speaker 2: but it was a very uh uh delicate one. They
Speaker 2: were producing surgical gowns for, for surgeries in the US.
Speaker 2: And they had to be done, as you might imagine
Speaker 2: in a way that was uh resulted in a sterile document.
Speaker 2: That was absolutely perfectly done because you couldn't have leakage. And,
Speaker 2: and they were, you know, he just said the quality, they,
Speaker 2: they almost stopped inspecting because they just never found issues in,
Speaker 2: in this particular facility. So
Speaker 2: that's just an anecdote. But when you, when you talk
Speaker 2: to others in Vietnam, what you heard time and time
Speaker 2: again was
Speaker 2: we were given a deal and not only did the
Speaker 2: government fulfill that deal, but they kept coming back just
Speaker 2: to say, how could we get you to invest more?
Speaker 2: Whereas in some countries, if I asked the same question,
Speaker 2: they'd say after we got established, we didn't, the people
Speaker 2: that we worked with left and then we no longer
Speaker 2: knew who to call. And, and gradually some of the
Speaker 2: parts of the deal started to fall away. Like I was,
Speaker 2: I was in one situation recently where somebody's power bill
Speaker 2: had gone up three times in the last few years.
Speaker 2: And it's because it's something that the government says is
Speaker 2: outside their control, the, the, the power, the costs are
Speaker 2: being set by the private sector and they could not
Speaker 2: control it, but they were no longer competitive with other,
Speaker 2: other markets in Southeast Asia. And so when time came
Speaker 2: to set up a new facility, they put it in
Speaker 2: Malaysia and, and the government was quite upset that they said, look, I,
Speaker 2: I mean, you, you allowed the power to go up
Speaker 2: on us. So governments are going to have to recognize
Speaker 2: that
Speaker 2: if they don't have competitive provision of utilities and eventually
Speaker 2: that's going to be green utilities, then they won't be
Speaker 2: able to win business even if they give them low
Speaker 2: taxes and cheap land and, and you know, uh relatively
Speaker 2: cheap labor is available in the market,
Speaker 1: right?
Speaker 1: So Charlie in the report, I think we have like
Speaker 1: a 12 by six matrix where we summarize these scores
Speaker 1: revolving around the points they're making that, you know, which
Speaker 1: country offers the best business environment and which country offers
Speaker 1: the most competition.
Speaker 1: And to your point, Singapore and Vietnam are the ones
Speaker 1: that take most of the Laurels. It is interesting nonetheless
Speaker 1: that Malaysia scores the highest in public infrastructure investment as
Speaker 1: a share of GDP going forward as strategic investments become
Speaker 1: more critical about the government's role in some of these
Speaker 1: investments become important. I think that gives Malaysia a degree
Speaker 1: of strength. And then one of the things that we
Speaker 1: brought into this report was trying to get financial stability
Speaker 1: and buffer markers and there, Indonesia,
Speaker 1: I suppose because of the post 97 recovery was tepid
Speaker 1: has kept external debt to a rather minimum. And as
Speaker 1: a result in a world where we might be embracing
Speaker 1: more volatility, Indonesia's external debt burden is the best in
Speaker 1: terms of management.
Speaker 2: Although
Speaker 2: although Prabowo has been on record saying that he intends
Speaker 2: to borrow more to funds from the infrastructure and, and
Speaker 2: that he has a room. Yeah, and that, and he
Speaker 2: is the room to do that. Let me say something
Speaker 2: on Malaysia. I mean, in all these reports, you want
Speaker 2: to be hypothesis led.
Speaker 2: And going in six months ago, our hypothesis was Malaysia
Speaker 2: would continue to have relatively anemic growth. And that is
Speaker 2: one of the hypotheses that we decided we were wrong about.
Speaker 2: We see a lot of indicators that Malaysia is turning
Speaker 2: the corner and I, I'd point to three things. I
Speaker 2: think one is just purely anecdotal that a number of
Speaker 2: the
Speaker 2: business leaders that I either inter interact with directly or
Speaker 2: indirectly through other people that I know are saying that
Speaker 2: if they have a good opportunity that Anwar or his
Speaker 2: team will pull all stops to try to do a
Speaker 2: deal to attract the business in a way that they
Speaker 2: haven't felt for years that they're, they're focused on getting
Speaker 2: more of this investment. I think the second is that
Speaker 2: um the special economic zone with Joor sends a lot
Speaker 2: of signals,
Speaker 2: but it also creates interesting competition between Penang Kl, the
Speaker 2: Kang Valley and Johor and it's a dynamic we've seen
Speaker 2: in Vietnam, we've seen in China as well that when
Speaker 2: different regions of a country start to compete with each other,
Speaker 2: you end up with better outcomes and businesses have options
Speaker 2: and they like that and, and the, and, and people
Speaker 2: can't get away with taking things easy. Um Penang was
Speaker 2: probably in the driver's seat
Speaker 2: recently simply because of some very good decisions that were
Speaker 2: made 20 or 30 years ago to attract a number
Speaker 2: of leading players uh affiliate with the uh the semiconductor sector,
Speaker 2: consumer electronic sector, they produce build servers and things there
Speaker 2: that are now in high demand due to to the
Speaker 2: data centers and also a decision in the mid nineties
Speaker 2: to develop Cyber JIA is what was called there, the
Speaker 2: Multimedia Super Corridor, if you're old enough to remember,
Speaker 2: and they attracted a lot of data centers into uh
Speaker 2: just south of KL. And so suddenly two sectors that
Speaker 2: are super hot
Speaker 2: semiconductors and data centers. Malaysia is in the best position.
Speaker 2: When you see this investment in infrastructure, you realize that
Speaker 2: they have also got the utilities and the road infrastructure
Speaker 2: and port infrastructure to handle these investments. And then the
Speaker 2: third is I think Malaysia has been very smart and
Speaker 2: I would recommend all the countries in Southeast Asia to
Speaker 2: form commercial relationships with both the West and China. Um
Speaker 2: China is the biggest export partner of every Southeast Asian country.
Speaker 2: It will we think over time become the largest investor
Speaker 2: in Southeast Asia. They have the leading low cost position.
Speaker 2: A lot of important manufactured products. They can build infrastructure
Speaker 2: cheaper than others, they can build solar panels and wind
Speaker 2: turbines cheaper than others. And so to ignore that opportunity
Speaker 2: to work with China, to develop your infrastructure and to
Speaker 2: provide it to other investors in the region, I think
Speaker 2: would be foolhardy.
Speaker 2: And so we're we're bullish on Malaysia because we see
Speaker 2: them pursuing three tracks will raise their growth rate beyond their,
Speaker 2: their recent history.
Speaker 1: Surely, I'm just gonna add two quick things. But first,
Speaker 1: I was in Kal for two days over the weekend
Speaker 1: and I haven't seen this kind of energy in Kel ever.
Speaker 1: Uh It to me always struck me as a city
Speaker 1: that was built around commodity monetization
Speaker 1: at some tourism. Now it seems like a really serious
Speaker 1: opportunity minded businessmen from China, from elsewhere in the world,
Speaker 1: coming to Malaysia and looking at the signals that you
Speaker 1: are precisely talking about. So the two things that I
Speaker 1: want to add is one is the green aspect that
Speaker 1: if indeed we need data centers that have clean energy
Speaker 1: as their driving force, Malaysia is in a position to
Speaker 1: deliver that I think that would hold them in very
Speaker 1: good shape, especially with respect to Johor because if there
Speaker 1: are certain FD I coming into Singapore,
Speaker 1: it wants to spill over into the Malaysian side of
Speaker 1: the border. It better be green energy. Otherwise the big
Speaker 1: emacs of the world would not go for it. And
Speaker 1: the second is while
Speaker 1: Malaysia is playing a fairly delicate but fairly successful so
Speaker 1: far game of courting investment, both from the West as
Speaker 1: well as from China. I think there's a third pillar
Speaker 1: which is the Middle East among the South countries, even
Speaker 1: though Indonesia is also a Muslim majority population,
Speaker 1: Malaysia seems to be very good at this. They have
Speaker 1: a thriving supermarket, they have very good relationship with the
Speaker 1: Middle Eastern wealth funds. And I think that as more
Speaker 1: and more projects and we are talking about multibillion dollar
Speaker 1: projects in Johor elsewhere that get into fruition, we'll see
Speaker 1: large part of that being
Speaker 1: under being funded or underwritten by Middle Eastern capital.
Speaker 2: I think you made a good point. I mean, one
Speaker 2: of the advantage of the Western and Chinese investment is
Speaker 2: often tied you into a global supply chain kind of
Speaker 2: a ready made market. A lot of the products that
Speaker 2: are exported from Southeast Asia aren't finished goods, they're intermediate
Speaker 2: that go on to other markets and become part of
Speaker 2: the finished goods. I think Middle East has always wanted
Speaker 2: to invest in in Southeast Asia but finding the right
Speaker 2: vehicle because they they often don't have companies that have
Speaker 2: global supply chains
Speaker 2: but is Southeast Asia builds up infrastructure, particularly the green infrastructure,
Speaker 2: the logical place to source some of that funding will
Speaker 2: be the Middle East. And, and you're right, Malaysia more
Speaker 2: than I think almost any market in the world and
Speaker 2: you see it in the tourism as well. You know,
Speaker 2: when you're in, when you're in Thailand, there are tourists
Speaker 2: from everywhere but you see particularly from China, Korea, Japan.
Speaker 2: But when you're in Malaysia, you see a lot of, uh, of, uh,
Speaker 2: tourists from the Middle East and,
Speaker 2: and it's, it's funny if you're out late, you realize
Speaker 2: that's when the restaurants are open.
Speaker 1: Well, Charlie, I was out late and I was by
Speaker 1: the restaurants and not only did I see a lot
Speaker 1: of Chinese tourists, uh some Middle Eastern tourists. The other
Speaker 1: thing that I was completely taken aback and retrospect sounds logical.
Speaker 1: Central Asian tourists, there are direct flight to many parts
Speaker 1: of Central Asia. Uh that I've never really seen anywhere
Speaker 1: else in Southeast Asia. And that linkage was also very
Speaker 1: interesting
Speaker 2: and a lot of Durian sales.
Speaker 1: Yes, the season.
Speaker 1: Uh Charlie, you have uh in these presentations always ended
Speaker 1: with these um seven growth strategy for the countries. Um
Speaker 1: Maybe you can walk us through before we go to
Speaker 1: the next part of the discussion.
Speaker 2: Ok. Ok.
Speaker 2: So when we, they aren't really tail winds or headwinds,
Speaker 2: they're a combination of both. But what we're saying is
Speaker 2: if you, if you think that country strategies or forecasting
Speaker 2: country growth is extrapolating from the past, you're probably going
Speaker 2: to get things wrong
Speaker 2: that there's too many changes that are going on. Some
Speaker 2: in the last three years, some of the last 10,
Speaker 2: but they come together to say the future is going
Speaker 2: to be different in the past. And it's very important
Speaker 2: to articulate those differences.
Speaker 2: So one is something we've already talked about that, the
Speaker 2: sheer competitiveness of China and we do not think that's
Speaker 2: going to change. Yes, people might have tariffs. Yes, you
Speaker 2: may want to diversify away from China. But in general,
Speaker 2: if you're developing a strategy or you're trying to attract investors,
Speaker 2: you need to do so conscious that you need to
Speaker 2: complement what is probably a very competitive player in in China.
Speaker 2: In addition, you have to take into account that you
Speaker 2: may end up with excess capacity in a particular sector.
Speaker 2: Let me take for example,
Speaker 2: um
Speaker 2: I was talking to a government that was saying, look,
Speaker 2: you're you're saying that we should try to attract some
Speaker 2: Chinese investment. Should I try to get them to build
Speaker 2: a very large solar plant in my country?
Speaker 2: And I said it's tempting but I'd probably say no
Speaker 2: because right now based on what I read in the
Speaker 2: economist last week and kind of what I know working
Speaker 2: a little bit in the sector,
Speaker 2: China has enough capacity to meet the world's current consumption
Speaker 2: by 2.5 times. So capacity ization is about 40% in
Speaker 2: the solar panel sector. So if you put a plant in,
Speaker 2: it's gonna lose money because any industry that has that
Speaker 2: level of credit, at least for period. So what you
Speaker 2: would rather do is say I'd like you to build
Speaker 2: in this way, maybe an auto plant where you can
Speaker 2: provide a large domestic market and do exports that go
Speaker 2: around barriers and I will buy your panels. Because if
Speaker 2: there's anything that right now, China needs somebody to buy
Speaker 2: their panels. And I also want you to provide low
Speaker 2: cost financing to install those panels. And I want you
Speaker 2: to help me with the grid
Speaker 2: that will use the electricity from those panels. So I
Speaker 2: think you need to be pretty thoughtful about not just saying, oh,
Speaker 2: we don't want you to import anything into our country.
Speaker 2: We want to force you to build a plant when
Speaker 2: their need is to get rid of their excess production.
Speaker 2: And there may be opportunities to work together to, to
Speaker 2: solve both needs you, you buy their excess production, but
Speaker 2: you get very cheap, well financed green energy, for example.
Speaker 2: And that could be, that could be true for ports,
Speaker 2: it could be true for the grid. It could be
Speaker 2: true for other investments you want to make.
Speaker 2: The second is that China is going to be a,
Speaker 2: a bigger and bigger player in Southeast Asia. It's the
Speaker 2: largest trading partner. And we think over time it will
Speaker 2: probably become the largest investor in the region. Simply they
Speaker 2: have surplus of funds. Uh It's logical to invest in
Speaker 2: your trading partners and they have political and economic interests
Speaker 2: in Southeast Asia we have seen, for example, us, investment
Speaker 2: has gradually been declining as a share of total investment
Speaker 2: in the region for the last 1020 years, you pick
Speaker 2: the time frame.
Speaker 2: And so given that that kind of likely outcome, we
Speaker 2: do think it's important for you to, to
Speaker 2: enjoy peaceful productive relations with both major powers. Let's face it,
Speaker 2: China and the US ending together about half the global economy.
Speaker 2: And so you don't want to lose half of that.
Speaker 2: The third is the rivalry between the US and China.
Speaker 2: And this is kind of in the goldilocks scenario which
Speaker 2: we're currently in not too hot, not too cold. Southeast
Speaker 2: Asia benefits from the rivalry.
Speaker 2: Both will seek to gain favor with Southeast Asia. Both
Speaker 2: will be willing to negotiate with Southeast Asia. And we
Speaker 2: don't believe in general that you should pick one over
Speaker 2: the other. You should seek friendly and, and, and strong
Speaker 2: relations with both.
Speaker 2: I think in terms of FD, I, we talked about
Speaker 2: this a bit but what are people making decisions on
Speaker 2: the FD? I? And what's changing? It was never so
Speaker 2: much about cheap land, cheap labor, cheap taxes, it was
Speaker 2: for certain businesses. But those move very quickly to depend
Speaker 2: on what the latest offer is, whether it's a shoe
Speaker 2: factory or certain kind of textiles or very low end manufacturing.
Speaker 2: Um Well, the desirable manufacturing that comes with a big
Speaker 2: price tag, a lot of capital commitment and maybe long
Speaker 2: term returns
Speaker 2: needs things like reliable green utilities, a supply of highly
Speaker 2: educated laborers, laborers, labor laws that allow them to bring
Speaker 2: in expatriate talent at all levels. It might be a
Speaker 2: 25 year old programmer. It might be somebody from Germany
Speaker 2: who has been through a special process training that they need.
Speaker 2: You don't want to get too involved in second guessing
Speaker 2: who they need or why they need to move people
Speaker 2: in and out so that they're at different stages in
Speaker 2: the development of their enterprise in order to grow. And
Speaker 2: we find, in fact, my discussions last week in one
Speaker 2: of the Southeast Asian countries was focused mainly on this
Speaker 2: issue that there were just too many hurdles to moving
Speaker 2: talent into the country for people to put their best
Speaker 2: processes and factories in that country. Um Another is that
Speaker 2: there's a lot of Western press on how much tariffs
Speaker 2: are going up and it's true for us and maybe Europe.
Speaker 2: But from what we see in Asia, most of the
Speaker 2: intra region, tariffs are declining because of our ce P.
Speaker 2: Um India hasn't joined yet, but presumably, you know, India
Speaker 2: will also open itself up more for trade. Now, one
Speaker 2: has to be careful, it's not all about tariffs. And
Speaker 2: we also hear stories about non tariff barriers going up
Speaker 2: as the, the tariff bearers kind of come down. But nonetheless,
Speaker 2: we don't necessarily think that globalization is dead. We certainly
Speaker 2: think regionalization is very much alive. Um, on the green transition,
Speaker 2: there was a tendency a few years ago
Speaker 2: to kind of say, look,
Speaker 2: the West has all the money, the West created all
Speaker 2: the problem if they don't give us the money to
Speaker 2: s to solve this. Well, screw them.
Speaker 2: I think that's misguided.
Speaker 2: I think the first two are actually true, but it
Speaker 2: doesn't lead you to the third point. If green energy
Speaker 2: becomes very cheap
Speaker 2: and very reliable,
Speaker 2: then you want to do it for three reasons. One,
Speaker 2: you should do it just for the environment. You wanna
Speaker 2: do it because it's more secure. The next time there's
Speaker 2: an oil crisis, at least half of your energy is
Speaker 2: coming from locally generated green sources. And then the third
Speaker 2: is um so economics, security. And then the third is
Speaker 2: its balance of payments. I was in uh one country
Speaker 2: and
Speaker 2: I estimated they'd have to spend 30 to 40 billion
Speaker 2: a year on green transition over the next 10 years.
Speaker 2: It was a very rough calculation. So I'm not gonna
Speaker 2: name the country because I don't wanna be, be a
Speaker 2: second guest on it. And they're like, where are we
Speaker 2: gonna find that kind of money? There's no way that's just,
Speaker 2: you know, smoking dope kind of thing. And I said, well,
Speaker 2: you spend 60 billion a year on imports of oil
Speaker 2: and gas.
Speaker 2: I said you find the money for that and it
Speaker 2: just flows out. It just goes mainly to the Middle East.
Speaker 2: And so surely you can rebalance that if, if you
Speaker 2: only spent 30 billion in the Middle East and 30
Speaker 2: billion on local capital projects
Speaker 2: where your local work, even if you were bringing in
Speaker 2: the solar panels in the winter, but they were installed locally,
Speaker 2: they were maintained locally. And from the point it was
Speaker 2: put in, basically, the uptake was practically free. Isn't that
Speaker 2: a better outcome? And, and that's a, that's a simplistic
Speaker 2: way of looking at it. You know, green energy is,
Speaker 2: it's is more variable, you need some battery backup, there's
Speaker 2: all kinds of other considerations. But by and large, the
Speaker 2: cost curves are such
Speaker 2: that over time, it will be cheaper, it will be
Speaker 2: more reliable and it will be better for your national security.
Speaker 2: And so what, what we're recommending is go after the
Speaker 2: easiest 20% 1st. It just makes total sense and then
Speaker 2: go up to the next 20. Don't worry about the
Speaker 2: last 20 now, just keep going at the easiest parts
Speaker 2: first and then the final one, which is uh a
Speaker 2: tricky one is innovation.
Speaker 2: We were in a world 30 years ago where a
Speaker 2: lot of the innovation was coming out of the US,
Speaker 2: but it was still quite dispersed. Japan was a leader.
Speaker 2: Germany was a leader, good things. Were, you know, a
Speaker 2: lot of telecoms capability came out of Scandinavia. And China,
Speaker 2: everybody said wasn't an innovator. They were just copying everybody
Speaker 2: fast forward to now. And the world has changed. The
Speaker 2: two great innovation ecosystems are the US and China and
Speaker 2: they actually dominate most leading edge technologies. There's a paper
Speaker 2: by the Australian Strate Strategic Policy Institute that I cited
Speaker 2: in a paper I wrote that says that of the
Speaker 2: 44 most important technologies, the US and China are the
Speaker 2: co-leaders in 41 of them. So and only three is
Speaker 2: one of them, not one of the co leaders and
Speaker 2: and they were always second, I think two were India,
Speaker 2: one was Korea or something like that.
Speaker 2: And, and I looked through the technologies and I, you know,
Speaker 2: I'm not the world's expert in this, but I said
Speaker 2: these make sense, these are the ones you want to
Speaker 2: lead in. And China figured this out 2030 years ago
Speaker 2: and went on a path and spent billions of dollars
Speaker 2: to close the gaps. So now you have a situation
Speaker 2: where you have two that are vying for leadership, neither
Speaker 2: wants to be dependent on the other for either of
Speaker 2: the technologies.
Speaker 2: And the result is we think going to be an
Speaker 2: acceleration in the pace of technology innovation, which is a
Speaker 2: good thing for the world, the world will benefit. But
Speaker 2: on the other hand, it makes it much harder for
Speaker 2: other countries to keep up because even in Germany, Japan,
Speaker 2: the best researchers will often now go to either the
Speaker 2: US or China. Because to, to get the Nobel Prize,
Speaker 2: you need to be in the market where the most
Speaker 2: money is available, the smartest colleagues are available, it's easiest
Speaker 2: to be with the university to get published, et cetera.
Speaker 2: And those happen to be the ecosystems in China and
Speaker 2: the US. So I won't pick a winner. Depends on
Speaker 2: the technology, which one and sometimes leadership like take space.
Speaker 2: China actually emerged as the leader for a short period
Speaker 2: of time. The US was launching most of its satellites
Speaker 2: on both Russian and Chinese rockets, believe it or not
Speaker 2: spacex came along through a different innovation model and has
Speaker 2: now surpassed everybody in the world. It's it's more reliable
Speaker 2: and lower cost than everybody else in the world through
Speaker 2: a different innovation model that the US has versus China
Speaker 2: and nobody has been able to close the gap. And
Speaker 2: so you can see that leadership can shift, but it
Speaker 2: will often be between these two ecosystems as opposed to outside.
Speaker 2: Where does that leave Southeast Asia? Make sure you're tied
Speaker 2: into both ecosystems, make sure your best and brightest are
Speaker 2: getting an opportunity to study and work in both of
Speaker 2: those markets. Make sure that your leading companies are tied
Speaker 2: in to the best research being done in both markets.
Speaker 2: If you tie yourself to only one ecosystem, then you
Speaker 2: may not be working with the leader,
Speaker 1: right. So this challenges around innovation um becomes one of
Speaker 1: the foundational considerations for the forward looking part of the
Speaker 1: report Charlie. Because when we took on board some of
Speaker 1: your points that can do straight line extrapolation of recent turn,
Speaker 1: can't rely on massive pickup on total factor productivity, even
Speaker 1: if you believe that technology will play an important role.
Speaker 1: So the biggest TFP growth is probably coming elsewhere, then
Speaker 1: what kind of growth forecast can we build?
Speaker 1: So I think we began by thinking first in scenarios,
Speaker 1: we present this in the report that there are three scenarios,
Speaker 1: there is a central expected growth scenario which probably odds
Speaker 1: on favorite, but that doesn't necessarily mean it's like an 80% growth.
Speaker 2: Although I will say like I showed this to one
Speaker 2: of our mutual friends and
Speaker 2: he went through and graded and he's like, I'm on
Speaker 2: the left and all but one and it was like, whoa,
Speaker 2: you know, this is a AAA person who works for
Speaker 2: a major multinational and he thought we were being too
Speaker 2: optimistic and I've, I've shown it to others and we're like, no,
Speaker 2: I'm on the right side. You guys are being too pessimistic.
Speaker 2: So I think the idea is this is where we are,
Speaker 2: but it's not, you know, we, we wanna lay that
Speaker 2: out so anybody else could look and say, well, if
Speaker 2: I'm further to the right, I I would assume a higher,
Speaker 2: I I would have to believe in that
Speaker 2: we would lead to a higher rate of growth. Right. Again,
Speaker 1: encouraging our listeners and viewers to check out the report.
Speaker 1: But what we're going to talk about now is the
Speaker 1: Southeast Asia Macro scenario for the next 10 years. And
Speaker 1: to Charlie's point that we have a left hand side,
Speaker 1: middle and a right hand side scenario. So let's talk
Speaker 1: first of all, the low growth scenario where I don't
Speaker 1: think we're being that outlandish in thinking that if things
Speaker 1: don't go right, if management of growth risks are not adequate,
Speaker 1: that we might see, for example, China growing by 2 3%
Speaker 1: we might see substantial additional fragmentation between China and the US.
Speaker 1: Um We might see a financial stability issues around feds
Speaker 1: management of monetary policy or PB O CS management of
Speaker 1: the property sector in China,
Speaker 1: disappointing developments on the green transition and perhaps even some
Speaker 1: geopolitical exacerbation over Taiwan. So that's Charlie is the low
Speaker 1: growth scenario. My question to you is how much probability
Speaker 1: would you assign to that scenario?
Speaker 2: First,
Speaker 2: when you're a consultant,
Speaker 2: you always know you're gonna end up in the middle
Speaker 2: but you want right the left,
Speaker 2: so that you say actually, I believe any one of
Speaker 2: these could happen.
Speaker 2: Um
Speaker 2: I would have different probabilities for each of those. Um So, and, and,
Speaker 2: and frankly, my assessments change over time. My concern uh
Speaker 2: over say Taiwan was higher a year ago than it
Speaker 2: is now and I won't go through the reasons why,
Speaker 2: but it's just, there does appear to be some settling
Speaker 2: of of the process. There's more dialogue between the US
Speaker 2: and China over the issues, et cetera. But on the
Speaker 2: other hand, the slowdown in China hasn't gotten better.
Speaker 2: And the recent third plenum,
Speaker 2: uh uh at least from my, my feeling didn't address
Speaker 2: the core issue of domestic demand and addressing the property
Speaker 2: crisis in the way that would, would start to accelerate
Speaker 2: growth in the near term. So I would put those
Speaker 2: as kind of the 20 to 25% scenario on the
Speaker 2: left and then kind of 50 in the middle and
Speaker 2: then 20 to 25 on the high
Speaker 2: side.
Speaker 1: So
Speaker 1: things could go wrong. But we have a full scenario
Speaker 1: where things could be way better than our central scenario
Speaker 1: where we can assume China getting its act together. And
Speaker 1: the last few years of doldrums in the capital and
Speaker 1: real economy, capital markets in the real economy will be
Speaker 1: behind this and they'll get things going. I think there
Speaker 1: are some tentative markers for that already. And Charlie while
Speaker 1: the third plenum did not have
Speaker 1: too many new things. Post third plenum, some of the
Speaker 1: measures that are being announced on the consumption site, I'm
Speaker 1: more optimistic. And then the issue of, you know, coming
Speaker 1: back from the brink on tariff war, both with respect
Speaker 1: to the US and Europe sitting here in August of
Speaker 1: 2024 with 5050 odds of Trump coming back to power.
Speaker 1: It may seem too optimistic, but we have seen many
Speaker 1: different scenarios play out on this area and, and it's
Speaker 1: a 5050 election so it can go either way.
Speaker 1: Um And then the issue of, you know, global macro management,
Speaker 1: whether its spillover from China's property market to the rest
Speaker 1: of the world or the exit from tight monetary policy
Speaker 1: for the FED. We right now may think that they're
Speaker 1: not getting it right. But it doesn't take too many
Speaker 1: levers and too many things to come in place for
Speaker 1: that to align and the issue of technology and green
Speaker 1: investment
Speaker 1: uh and the new levels of productivity being unlocked, I
Speaker 1: think very much. Uh
Speaker 2: and one other point when we wrote this time where we,
Speaker 2: we were taking a 10 year view, right? So often
Speaker 2: these forecasts are only six months or a quarter or
Speaker 2: a year out. And so we're not for, you know,
Speaker 2: we're not forecasting the next year or two. This is
Speaker 2: kind of what could happen over the next 10 years,
Speaker 2: which is 2034 a long way off. And, and that
Speaker 2: was the kind of the, the, the most important vein.
Speaker 1: So let's talk about what could happen over the next
Speaker 1: 10 years.
Speaker 2: And here
Speaker 2: I get to ask you the questions. Um You know,
Speaker 2: one of the reasons that we asked D BS to
Speaker 2: help us was the rigor of your forecasting methodology. So
Speaker 2: why don't you tell us a little bit about how
Speaker 2: we did the forecast before we get into the numbers?
Speaker 1: Right. Charlie, I, I never thought that I would spend
Speaker 1: substantial amount of time in front of 100 decision makers
Speaker 1: like we did last week and talk about total factor
Speaker 1: productivity and growth models. But, uh, I didn't see anybody
Speaker 1: fall asleep. I think people were engaged.
Speaker 1: So let's share that. Uh So again, big shout out
Speaker 1: to hunting Chua who really ran the model. Uh Typical
Speaker 1: growth forecasting uh framework would look at a country's projection
Speaker 1: of the labor force would make some assumptions about capital
Speaker 1: formation and the productivity around that capital. Uh What we
Speaker 1: did was we decided to make the framework richer
Speaker 1: by adding what we think is one of the most
Speaker 1: important sources of growth going forward, which is the quality
Speaker 1: of human capital and its contribution to productivity. So we
Speaker 1: brought in capital, labor and human capital and we made
Speaker 1: some reasonable assumptions about what was the residual and the
Speaker 1: growth regression or the growth model, which is total factor productivity.
Speaker 1: Um To your point recognizing the hyper competitiveness of the
Speaker 1: US and China, we decided to be a bit modest
Speaker 1: in our assumptions of growth factor productivity. So there are
Speaker 1: charts in the report that compare productivity in the good
Speaker 1: years in recent years which have not been that great
Speaker 1: and forward looking years. We're not talking about a mean reversion.
Speaker 1: We are cognizant of the various realities out there that's
Speaker 1: already been discussed. But we still get a pretty decent
Speaker 1: set of numbers.
Speaker 1: We get about 6.5% around the 6.6% growth for Vietnam.
Speaker 1: Based on our assumptions again of demographic dynamic and productivity
Speaker 1: and labor and capital contribution. Second highest is Philippines huge
Speaker 1: demographic tailwind but also some uh path dependency coming from
Speaker 1: the recent success in growth up performance, especially between 2010
Speaker 1: and 2019.
Speaker 1: Uh Indonesia and Malaysia are commodity producing economies. Typically, their
Speaker 1: performance has to sort of zigzag with commodity performance. We
Speaker 1: like to think especially since we have discussed a lot
Speaker 1: of time, I spent a lot of time in this discussion,
Speaker 1: talk about Malaysia that there are reasons to be optimistic
Speaker 1: about Malaysia's non commodity future. And that consideration goes into
Speaker 1: the 4.5% average growth forecast that we have for Malaysia.
Speaker 1: I'm going to talk about Thailand, Singapore and then we'll
Speaker 1: come back to Indonesia because I want to ask you
Speaker 1: a question on Indonesia. So in Thailand, we are not
Speaker 1: particularly optimistic. Although there have been the Detroit of Southeast Asia,
Speaker 1: they are embracing the supply chain. But
Speaker 1: unlike most other developing countries, they unfortunately are going through
Speaker 1: a very adverse demographic dynamic going forward. And the immigration
Speaker 1: safety valve they had in the past does not seem
Speaker 1: to be working that well. Uh and that drag sort
Speaker 1: of bring them to a sub 3% growth outlook over
Speaker 1: the next decade.
Speaker 1: Singapore, which raises some eyebrows when we share that. We're
Speaker 1: expecting it to grow at 2.5%. The question being, why
Speaker 1: so poor? And our answer is actually it's not poor
Speaker 1: at all. Uh 2.5% for one of the richest per
Speaker 1: capita economies in the world is very good, especially when
Speaker 1: we take into account the very strong demographic area
Speaker 2: with low population growth.
Speaker 1: Exactly.
Speaker 1: So now let's talk a little bit about Indonesia in
Speaker 1: our product launch or report launch. We had Guida, former
Speaker 1: Trade Minister of Indonesia there. He felt our 5.7% forecast
Speaker 1: for the next decade was rather pessimistic.
Speaker 2: Yes, I think Indonesia, it's the most important economy in
Speaker 2: Southeast Asia in the largest. Um
Speaker 2: There's, there's all kinds of anecdotes about how rich the
Speaker 2: soil is, for example, Indonesia and, and just how, how,
Speaker 2: how fertile country it is. It, it also seems to
Speaker 2: have incredible mineral growth, uh mineral availability that has been
Speaker 2: mined and has been exported coal, copper, you name it.
Speaker 2: Um And so to some degree, Indonesia was always very
Speaker 2: successful without having to try too hard.
Speaker 2: Um One of the other changes in Indonesia that's taken
Speaker 2: place since I've been working here is they went from a,
Speaker 2: you know, six terms of Suharto to a pretty vibrant
Speaker 2: democracy and a lot of people wonder is that good
Speaker 2: for growth or not so good for growth. And it's
Speaker 2: certainly in, in my view, been very good for growth.
Speaker 2: Indonesia has been one of the most entrepreneurial econ economies
Speaker 2: in Southeast Asia. And that
Speaker 2: I, I didn't, I, I expected all the Southeast Asian
Speaker 2: countries to have an entrepreneurial success but that it's concentrated
Speaker 2: in Indonesia came as a bit of a surprise to
Speaker 2: me and I can't really explain why,
Speaker 2: but it's given them AAA kind of another leg of
Speaker 2: the stool for growth that we think has really helped
Speaker 2: them in the last 10 years. Um Things like shopee
Speaker 2: and grab and, you know, just, you name it, whether
Speaker 2: it's in Edtech or in health tech, Indonesia has some
Speaker 2: of the most pro promising start ups in Southeast Asia.
Speaker 2: So why would we have any concerns? I think number one, the,
Speaker 2: the infrastructure continues to lag what's needed even though Jacoby
Speaker 2: really took this on and some high profile projects were
Speaker 2: done and more roads were completed than have been completed. And,
Speaker 2: you know, like more in the last decade than several
Speaker 2: decades before. That's great. They just need a lot more.
Speaker 2: It still doesn't have good infrastructure compared to a Vietnam
Speaker 2: or Singapore or Thailand and Malaysia.
Speaker 2: The second is the education levels in Indonesia continue to
Speaker 2: lag and that's a problem is that's a multigeneration problem.
Speaker 2: It's very, or even if a government were absolutely committed
Speaker 2: to fixing it, it would take 30 or 40 years
Speaker 2: to bring them up to the levels of say of Vietnam.
Speaker 2: Um simply because of the challenges of building out the
Speaker 2: schools and finding the teachers and, and, and, and figuring
Speaker 2: out a way to, to efficiently spend the money. And
Speaker 2: so those will always be drags on the Indonesian economy.
Speaker 2: Um The last is the governments have tended to be
Speaker 2: slightly protectionist and they don't use those terms. Um But
Speaker 2: when you look at, for example, the export controls that
Speaker 2: were put on palm oil or the restrictions that were
Speaker 2: put on nickel production that you had to downstream while
Speaker 2: ostensibly successful and certainly attracted more FD I. As a result.
Speaker 2: In the case of nickel, you had to think about
Speaker 2: every other industry and how they would respond to those
Speaker 2: kind of control.
Speaker 2: And it, it would, it would certainly, if you have
Speaker 2: alternatives make you think twice about, well, I could put
Speaker 2: it in a plant but let's say I put in
Speaker 2: a toy factory, what if I'm forced to also produce
Speaker 2: the plastics locally or buy plastics locally versus from the
Speaker 2: lowest cost global player? You'd think twice about being in
Speaker 2: an environment where those rules might change very suddenly and
Speaker 2: impact the economics of your business.
Speaker 1: Charlie. When we wrapped up the report, we put these
Speaker 1: five pieces of jigsaw. Uh And, and we said that,
Speaker 1: you know, there are multiple solutions to the jigsaw and
Speaker 1: you don't need all five pieces to make it work.
Speaker 1: But what we had was one invest in emerging growth
Speaker 1: sectors to foster tech enabled disruptors. Third, strengthen capital markets. Fourth,
Speaker 1: embrace multilateral initiatives and five accelerate green transition.
Speaker 1: So parting thoughts, what strategy should businesses as well as
Speaker 1: governments pursue? Given the thoughts that we have provided these.
Speaker 2: So a big part of that was to say
Speaker 2: it, it came out of the discussions I had in
Speaker 2: Thailand the last two years
Speaker 2: where I said based on current trajectory, this is gonna
Speaker 2: be your growth rate,
Speaker 2: but that's not what I want and that's not what
Speaker 2: you want. And, and the question on everybody's mind is
Speaker 2: how can we grow faster?
Speaker 2: Um What we've said is export oriented manufacturing, which has
Speaker 2: been
Speaker 2: the label for the most successful development strategies. The last
Speaker 2: 30 years is still an important leg of the stool.
Speaker 2: Um It works, it forces you to have to be
Speaker 2: able to manage more complex enterprises. It ties you into
Speaker 2: global supply chains, it forces you to have talent that
Speaker 2: can work as an equal or part of a global organization.
Speaker 2: Ee especially when it's foreign investment, it, it raises the
Speaker 2: gain for at least a portion of your economy. And
Speaker 2: then there are spillover benefits,
Speaker 2: but it's only one wet leg of the stool. And
Speaker 2: if you rely on that solely given the amount of
Speaker 2: competition in the world right now, and China's leadership in
Speaker 2: so many manufacturing sectors, we don't think you'll hit the
Speaker 2: growth rates that you aspire to. So, in addition to that,
Speaker 2: we think there are other legs of the stool. One
Speaker 2: is to really ensure that your entrepreneurial sector prospers. Now,
Speaker 2: it's so much more fun for a politician to go
Speaker 2: to a big ribbon cutting of a billion dollar plant.
Speaker 2: The equival nowadays is probably the gong of a new
Speaker 2: unicorn on NASDAQ that came out of Indonesia or Thailand
Speaker 2: or Vietnam. And there's a league table that we have
Speaker 2: in the report of how many unicorns each country has
Speaker 2: managed to foster. And you can see clearly that, that
Speaker 2: the the winners right now are Indonesians,
Speaker 2: Singapore and other countries are looking and say, well, what
Speaker 2: can we do to foster more entrepreneurs? And it's a
Speaker 2: whole host of things from ability to move talent in
Speaker 2: your laws on, on venture capital and foreign ownership of assets,
Speaker 2: your um your willingness to protect them from too strong.
Speaker 2: Lo not, I won't say too strong local competition, but
Speaker 2: I would say competition becomes so aggressive that it keeps
Speaker 2: them out of the market.
Speaker 2: Um And also in ensuring that there's a solid relationships
Speaker 2: between your VC community and your university community that your
Speaker 2: universities have an ability to invest in start ups that
Speaker 2: the students there see going to a start up as
Speaker 2: a viable uh employment opportunity.
Speaker 2: It just being directed towards the government or state owned
Speaker 2: enterprises or large enterprises in the country. So there's a
Speaker 2: whole host of things you can do to make the
Speaker 2: entrepreneurial sector take off. And we've seen countries that do
Speaker 2: this well, get benefits from it. The green we've already
Speaker 2: talked through. We just see, look, it probably could double
Speaker 2: the level of FD I in a country. It just
Speaker 2: becomes an equal. The infrastructure spending on FD I would
Speaker 2: be equivalent to the multinational investment in, in manufacturing l exports.
Speaker 2: I think the the issue of new sectors, the main
Speaker 2: thing we pointed out to people is if you can't
Speaker 2: point to an existing capability you have that you're building on,
Speaker 2: you will probably not be able to pull it off.
Speaker 2: There's a lot of people who want to be heroes.
Speaker 2: This is like Indonesia saying, why can't we do an
Speaker 2: airline sector? Brazil did it and I'm impressed by what
Speaker 2: Brazil did. But when we see the Chinese have spent,
Speaker 2: I I saw a piece of data, I think the
Speaker 2: number was $80 billion
Speaker 2: so far developing the Comac aircraft. Now it probably makes
Speaker 2: sense for China to try to do that. They want
Speaker 2: to be a leader in every technology. They don't want
Speaker 2: to be dependent on us, technology, they're probably defense spinoffs
Speaker 2: that they want from being in that sector. But there
Speaker 2: aren't many countries that can spend that kind of money
Speaker 2: and so know what you're up against and realize when, when,
Speaker 2: when the competition is going to be too heavy. So
Speaker 2: the case of Malaysia doubling down
Speaker 2: on on semiconductors or Thailand seeking to win in electric
Speaker 2: vehicles or Indonesia leveraging their nickel to to go into batteries. These,
Speaker 2: these all make sense to us that the health tech
Speaker 2: sector has so much further to run in Thailand and
Speaker 2: Philippines should be getting a piece of that. They also
Speaker 2: have a lot of doctors and nurses and they could
Speaker 2: easily be a rival to Thailand in MedTech and health tech.
Speaker 2: So build on, on an existing asset and that all
Speaker 2: the countries in Southeast Asia have those assets.
Speaker 2: And then uh I'm getting the last one. It was
Speaker 2: the uh multilateral
Speaker 1: initiative, multilateral
Speaker 2: initiatives. We, this is a tricky area. We, what we've
Speaker 2: seen is that some countries postpone difficult decisions
Speaker 2: and say, well, we'll wait for ASEAN to kind of
Speaker 2: resolve this. So we won't build our grid. We'll wait
Speaker 2: till there's kind of an ASEAN grid or we won't
Speaker 2: deal with this tricky. Legislation's too politically unpopular, but it's
Speaker 2: forced on us by, by ASEAN. We'll do it. That's
Speaker 2: waiting too long. Most country, most of the growth rate
Speaker 2: increases in countries are within the control of the domestic
Speaker 2: markets and don't require so called regional integration.
Speaker 2: However, if the region does lower non tar bearers in
Speaker 2: particular and tar bearers which are already coming down because
Speaker 2: of our CE P. If they coordinate on an electric grid,
Speaker 2: if they coordinate on certain internet elector, property protections or
Speaker 2: how data is protected around the region. That's a good thing.
Speaker 2: But we see that is just icing on the or
Speaker 2: I I icing on the cake, not the cake itself.
Speaker 2: And we want most governments to recognize that your destiny
Speaker 2: is in your hit.
Speaker 1: Uh Charlie final thought from my side is that we
Speaker 1: also underscored the importance of a vibrant private and public
Speaker 1: capital market. Yes, there's a lot of savings in the region.
Speaker 1: There's a lot of FD I coming in, but we
Speaker 1: need more liquidity. We need more hungry capitalists out there
Speaker 1: in the region looking for deals within the country or
Speaker 1: cross border. And that would be in my view, an
Speaker 1: essential part of the group story.
Speaker 2: And
Speaker 2: I, I see maybe I'm naive but I see so
Speaker 2: many people who are too pessimistic on this simply based
Speaker 2: on past trends. But as you pointed out,
Speaker 2: the amount of liquidity being created in the Middle East
Speaker 2: and the desire of China to, to have a more
Speaker 2: effective BR I and the desire of all the G7
Speaker 2: country co countries to continue to have influence. And a
Speaker 2: say in Southeast Asia tells me that there are three
Speaker 2: large pools in addition to domestically generated pools that are
Speaker 2: going to be available for investment
Speaker 2: and, and, and the government simply have to find a
Speaker 2: way to attract more of that to the capital markets
Speaker 2: in this, in this region. If you build it, they
Speaker 2: will come
Speaker 1: Charlie. Uh It's been a great uh eight month collaboration.
Speaker 1: I look forward to working with you again. Yes,
Speaker 2: continuously.
Speaker 1: Fantastic to have you. Thank you Charlie and thanks to
Speaker 1: our listeners as well. Copy Time was produced by Ken Delbridge,
Speaker 1: Violet Lee and Daisy Sharma provided additional assistance. It is
Speaker 1: for information only and does not constitute any investment advice.
Speaker 1: All 131 episodes of the podcast are available on youtube
Speaker 1: and on major platforms like Apple and Spotify. As for
Speaker 1: our research publications and webinars, you can find them all
Speaker 1: by Googling D BS research Library. Have a great day.