Ethnic Chinese Aggressively Investing In Southeast Asia

JAKARTA (Nikkei)--An unprecedented investment spree is taking place in such countries as Indonesia and the Philippines, as companies owned by ethnic Chinese are now trying to capitalize on brisk demand in these heavily populated Southeast Asian nations.

In Indonesia, Salim Group plans to jump back into the automotive industry. It gave up on the Indonesian market in the late 1990s, at the height of the Asian currency crisis.

It sold off management control of PT Indomobil Sukses Internasional Tbk, a major automaker in the country. But it has since agreed to buy back a stake of around 70% in Indomobil for 809.3 million dollars (75 billion yen).

Cars And Malls

New car sales in Indonesia reached a high in 2012 for the third year in a row, topping 1 million units for the first time. This was due to an increase in the number of middle-income consumers in the country.

Salim decided to regain management control of Indomobil, which has formed business tie-ups with Japanese automakers Suzuki Motor Corp. (7269) and Nissan Motor Co. (7201), to take advantage of growing domestic demand for vehicles.

The Lippo Group is ramping up efforts to build more shopping malls. Real estate developer and group firm Lippo Karawaci Tbk plans to increase the number of shopping malls it manages from 28 at present to 50 locations by 2016. In 2013, it will build three shopping malls for some 1 trillion rupiah (9.7 billion yen).

In the Philippines, the SM Group, a leading retail group led by Chinese business tycoon Henry Sy, opened five large shopping malls in 2012.

The Charoen Pokphand Group of Thailand is set to expand its stockbreeding and feed business to neighboring countries such as Cambodia, Laos and Myanmar.

Preferential Treatment

Conglomerates run by ethnic Chinese businesspeople from these Southeast Asian nations enjoyed preferential treatment from the local authorities in the 1960s and 1970s. They now help to lure foreign capital into these countries, and they often team up with Japanese firms and other foreign companies with advanced technologies and services to help them expand.

"(Chinese conglomerates) are attractive because of their capital, land holdings and logistics networks," said a senior official at one major Japanese trading house.

These companies want to start new trends and offer unique services. They can expand their tie-ups with foreign companies that also want to rapidly expand into Southeast Asia.

Temasek Holdings, an investment company owned by the government of Singapore, has acquired a 26% stake in a major retailer under the Lippo Group. Meanwhile, Japanese retail giant Aeon Co. (8267) plans to run big shopping malls with Sinar Mas Group, an Indonesian-based conglomerate.

Fast Retailing Co. (9983) runs its Uniqlo casual clothing business in the Philippines through a joint venture with SM Group.

Meanwhile, Shanghai Automotive Industry Corp. (Group) plans to set up a joint company with Charoen Pokphand Group to produce and sell vehicles under its MG brand in the Philippines, from 2014.

Spending Spree

Chinese conglomerates in Southeast Asia were forced to cut back their operations in the wake of the 1997 Asian currency crisis. Now they are aggressively investing, partly because they have the financial leeway to do so, thanks to management reforms made possible by strong domestic demand.

Their investment offensive is also due to rising uncertainty over the Chinese market, where they have been expanding their investments since the 2000s.

With active stock trading making it easier to raise funds, Chinese business conglomerates appear to be shifting their investments back to Southeast Asia.

--Translated from an article by Nikkei staff writer Sadao Watanabe

(The Nikkei, Feb. 22 morning edition)

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