Southeast Asia sits below the region's two most populous nations, China and India and as a consequence is often overlooked by economists, financiers and politicians alike. But trade delegations and big business are increasingly looking to the region, not just as a base for low cost manufacturing, but to partner for scientific research and product development.
Southeast Asia is split between the mainland countries of Thailand, Vietnam, Cambodia, Laos, Myanmar and the island nations of Indonesia, Malaysia, Philippines, Singapore and Brunei. Around 600 million people live in the region and the population is rapidly increasing. Around 280 million people live in Indonesia, Southeast Asia's largest country.
The economies of these countries are also rapidly growing. By 2018 analysts predict the region as a whole will have a GDP of 5%. Another indicator of the increasing wealth is the growing middle class in several of the countries. By 2020 there will be 125 million middle class households in Southeast Asia, around 400 million people.
Underlying the increasing prosperity is a political movement to integrate the countries of the region into an economic bloc similar to the European Union to enable the freer movement of goods, people and money. An agreement between the Association of Southeast Asian Nations (ASEAN) plans to create the ASEAN Economic Community (AEC) by the end of next year. The creation of the AEC will see the realisation of an idea first discussed in 1997.
The report, “Spotlight on stimulating innovation in South East Asia”, published by European think-tank, the Centre for Social Innovation, says that the AEC creates “substantial” potential for more trade. “The region is an attractive destination for investments, still mostly coming from outside the region,” it says. “Southeast Asian countries are no longer merely considered low-cost production economies in labour-intensive industries, but as innovative production centres. Southeast Asia, with both its human and natural resources, can play an important role in solving some of the world's most challenging problems.”
The creation of the AEC is also improving the science and technology research base in the region. Examples include the Krabi Initiative, signed in 2010 and the ASEAN “Plan of Action on Science Technology and Innovation”. Both of these policies share commitments to research areas including new media, green technology, biofuels, biotechnology, food science and technology and micro electronics.
Alex Degelsegger, deputy head of research policy and development at the Centre for Social Innovation, and lead author of the report, says governments in the region have widely backed the development of science parks and created financial measures to support R&D. Thailand's science and technology government agency, the NSTD (National Science and Technology Agency) was set up in 1991 and is one of the most mature. Singapore has the highest level of both public and private R&D spending, with two world class research universities and 700 companies reporting R&D spend to the government. Malaysia has the second highest R&D spend in the region and has already outgrown Singapore in terms of published academic papers.
“It goes without saying, the opportunities are large,” says Degelsegger. “However, there are large inequalities between countries. Most face large challenges such as improving health and transport infrastructure, especially in megacities.”
According to the report, the EU is the single largest direct investor in South East Asia, while the US is its biggest trading partner. The strongest sectors in the region include electronics, automotive, aerospace, petrochemical, services and food. However the EU's academic institutions have a strong presence within the region and are exporting educational knowledge and expertise in engineering and industry. Several UK universities have a presence in the region, including Heriot-Watt, Reading and Leeds. Perhaps the leading example is the University of Nottingham, which has a campus in Malaysia.
Andrew Spowage, engineering manager for Wood Group Intetech, has lived in South East Asia for seven years, first in Singapore and now in Kuala Lumpur, Malaysia, and was involved in setting up the engineering department at the Nottingham campus there. He says it was created because of long standing ties between the country and the University of Nottingham. “Malaysia has a long history with the British education system, a lot of schools here are based on similar principles and processes. The campus came about because of the strong ties the University has with a lot of important Malaysians, many of whom were top students at Nottingham.”
Intetech supplies software and consultancy services for materials and well integrity to the oil and gas industry in Southeast Asia, which involves “a lot of design work”, says Spowage. The oil and gas sector, he says, has a strong track record of growth in the region, with a steady stream of new developments. “There's a lot of reshaping and replacing of older assets. There's a lot of oil here, mostly offshore, but also some onshore in places like Myanmar and Vietnam. Downstream is also well developed – the biggest oil and gas development in the world is being built here,” he says.
Malaysia's oil and gas sector is dominated by the national company Petronas. The company's Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor, is part of a development called the Pengerang Integrated Complex development, which is due to be commissioned by 2019 and is worth an estimated $27bn. The development is seen as one of the largest in the world. Rapid's refinery will have a capacity of 300,000 barrels per day and also be able to produce up to 7.7 million tons per annum of products, including differentiated and specialty chemical products.
Rapid is a good example of how Southeast Asian governments are backing industrial development and engineering. Spowage says: “They have a sophisticated process. In Malaysia for example, the oil and gas sector represents around 40% of their GDP. Combined with palm oil and electronics, the engineering sector contributes a huge amount to their economy. Without engineers the country would sink. A lot more people study engineering. More families want their children to be engineers.”
Spowage says that the AEC is a good idea. “It's really early to have had much impact. But there is so much disparity between the countries, say Singapore compared to Myanmar, in terms of economic progress and propserity, it will be hard. Infrastructure is a key issue in these developing economies, and it's one where engineers play an important role.”
The growing prosperity and maturing research base has not escaped the attention of global firms. Early entrants to the market include pharmaceutical companies Glaxcosmithkline and Astrazeneca, engineering firm GKN as well as perhaps most famously in the UK, home appliance manufacturer Dyson. This is increasing the number of opportunities for foreign engineers to work in Southeast Asia, with many using Singapore as their gateway into the region. “Singapore is often called easy-Asia,” says Spowage. “It's a straight-forward place, pleasant to be, with lots of high end science and technology companies.
“I'd recommend working in the region. It's a different perspective from elsewhere, there's a different way of doing things and you can learn a lot. If you have a good degree you can go anywhere.”