Late bloomers
Indochinese countries are showing promising signs of growth and renewed appeal to investors, writes Peta Tomlinson
On the face of it, there are some fairly healthy numbers coming out of Indochina. Cambodia, Laos, Vietnam and Myanmar - the "late bloomers" of the Association of Southeast Asian Nations (Asean). They are finally attracting foreign direct investment (FDI), even if they did have much ground to make up compared to their more-developed neighbours.
It's also happening faster. According to the Japan Research Institute, actual GDP growth in these four countries' economies has been outpacing the early-developing Asean members in recent years, and "are expected to maintain this pace over the next five years". Further, foreign invested development of infrastructure is "all the more feasible" now in Indochina, where local wages remain significantly lower than even in China, the institute notes.
Savills research confirms these trends. Based on half-year 2013 data, Cambodia achieved GDP growth of 7 per cent and 15.2 per cent FDI growth, Laos has 8.4 per cent GDP growth and 30 per cent FDI growth, Vietnam had 5 per cent GDP growth and 11.6 per cent FDI growth, and Myanmar had 5.5 per cent GDP growth and 41 per cent FDI growth.
However, there are stories behind the numbers - some of these markets are "very fragile", says Troy Griffiths, deputy managing director at Savills Vietnam. For example, Laos has seemingly performed very well, reaching a "high" of 12 per cent GDP at the peak before scaling back. Griffiths describes Laos as "a very small, shallow, fragile economy", which he believes will not meet GDP forecasts in the medium term.
"In Laos, the opportunity is very limited," he says. "The others [Indochina markets] are the ones we are excited about. Cambodia, Vietnam and Myanmar are all countries that have great structural elements."
Tim Horton, general manager of Cushman & Wakefield Vietnam, provides some background. The Indochina region, he says, was "once the darling of Southeast Asia, with planeload after planeload of new arrivals coming to visit". Land prices and rents "went through the roof"; business hotels' average daily rates and occupancy reached record levels; "and skylines were full of cranes as new projects, which had been dormant, suddenly became viable with the increase in interest from all corners of Asia and the globe".