Investing in Asia's Telecom and Internet Potential

Leong Keng Thai, Deputy Chief Executive/Director-General (Telecoms), IDA Singapore - Speech CommunicAsia 2001 Summit Plenary Session, Singapore Expo

Leong Keng Thai, Deputy Chief Executive/Director-General (Telecoms), IDA Singapore - Speech
CommunicAsia 2001 Summit Plenary Session, Singapore Expo

Singapore, 18 June 2001

Introduction

1 The theme of today's plenary session, "Investing in Asia's Telecom and Internet Potential" is, I am sure, a topic hotly deliberated by many telecom financiers and industry players currently. It is widely recognised that Asia's ICT sector holds tremendous growth opportunities as living standards in this region continue to increase along with an ICT savvy population. Yet, the diverse state of ICT development and markets in the region plus the perhaps lack of well publicised information on the Asian market may cast doubts on investing in our ICT sector. Although, ultimately, I cannot make any investment decisions for you, I would like to highlight the opportunities and challenges in Asia to set the stage for this morning's discussion.

Opportunities

2 First, let us look at some of these opportunities. With sizeable populations in many Asian countries that do not have access to telecommunications networks and Internet services today, the region offers tremendous opportunities for market growth and expansion in these areas. Telecommunications growth in Asia has outpaced and is still outpacing similar growth in other parts of the world. In fact, according to a report published by the International Telecommunications Union (ITU), during the Asian economic crisis, the top 20 public telecom operators in the region generated more than US$200 billion in 1999, a 10 percent increase over 1998 and a 35 percent increase over 1996 figures. In the same report, the ITU expected nations in the Asia-Pacific region to drive nearly half of the world market for telecommunications services and products by the year 2010.

3 The study also said that, with half of the world's top 10 Internet markets in Asia, the region is fast becoming a powerful force in the online market, as all but one of the region's top 10 incumbent telephone companies are also leading Internet service providers (ISPs) themselves. The report noted that rapid liberalization of telecom markets in the region has led to unusually aggressive growth in the Internet sector. In fact, depending on which analyst's report you refer to, the number of Internet users in the region is expected to reach anywhere between 240 and 374 million by the end of 2005.

4 As for mobile phone users, the ITU predicted that by the year 2010, more than 50 percent of all mobile phone users in the world would reside in the Asia-Pacific region. This is up from the current 35 percent.

5 A number of Asian governments are also gearing themselves up to promote and develop the ICT sector as a major growth sector as well as to facilitate electronic commerce and electronic businesses. Last year, all 10 member states of ASEAN inked a framework agreement to develop the eASEAN initiative to position the region as a common marketplace of half a billion people for ICT products, services and investments. Besides the facilitation and liberalisation of trade in these areas, there will also be harmonisation of legal frameworks and technical standards to enable cross-border electronic commerce and electronic transactions. Such moves are aimed at transforming the region into an attractive place for doing business in the new digital economy.

6 Outside ASEAN, bilateral arrangements and strategic alliances have also been forged to facilitate access to markets, talents and resources, and to co-develop economic strengths. For example, the ICT MOU between India and Singapore enables Indian software talents to be tapped by Singapore, and for Indian companies to team up with Singapore companies to develop ICT products and solutions for export to the region. In Northeast Asia, South Korea is actively discussing with Japan and China, on ways to co-ordinate and standardise future developments in IT, mobile telephony and Internet. These collaborative efforts will help to bring synergy to the collaborating countries.

Challenges

7. What are some of the challenges? Asia, like the rest of the world, is undergoing uncertain times. Unlike the Asian Economic Crisis four years ago, which was largely due to capital flight from the region, the current economic weakness is more global in nature, resulting from a weakened demand for electronics and ICT products and services in the US. From mid-1995 to mid-2000, the US economy soared, growing at an average of 4.5% per annum. Because of the outsourcing of manufacturing to Asia and the globalisation of world trade, surging US demand became a key driver of exports around the world. Therefore, when the US economy softened recently, its effect on the growth across Asia is not spared. Fortunately, many analysts argue that a rebound in the US economy may be expected sometime around middle of next year, as the effects of the Federal Reserve's monetary policy kicks in. If this is indeed so, it would not be long before we see a resurgence in exports to the US, and along with the economic expansion, an increase in demand for telecom and ICT products and services.

8 Meanwhile, this period will be a trying time for most ICT companies. But it will also be a time for consolidation in the industry with the survival of the fittest at the end. When the world emerges out of the current slow down, these companies would be more competitive globally.

9 Before I conclude, I would like to reiterate and stress a very important point, that is to see the Asian market as a whole rather than as individual markets in each country. As I mentioned earlier, there is great diversity in the state of ICT development and capabilities. There is no doubt that there is a digital divide within the region. But Asia is indeed a very big market comprising the markets of China, Korea, Japan, India and a group of countries in ASEAN. As a region, we have a market of more than 3 billion people, which is more than half of the world's population. If you look at the region as a whole, you will find the various components of strengths in different countries. And if you can map the strengths and market potential of the different countries in the region, Asia will provide an extremely attractive investment opportunity. Countries are realising the potential of collaboration in building an attractive regional market place. Initiatives such as eASEAN that I mentioned earlier and the various strategic partnerships and alliances among countries are designed to remove barriers and smoothen the path for investors and businesses in this region. Strong commitments from both the government and private sector are essential to ensure success in creating a vibrant ICT marketplace in Asia.

Conclusion

10 In this short time, I hope I have given you some initial thoughts to help in the discussion at this morning's plenary session. I now wish you all an insightful and fruitful discussion ahead.

11 Thank you very much.