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Mr Chris Raine I think that as an Australian, working for a European company in Asia, addressing and Australian audience I am able to provide a rather unique perspective. Hopefully I will be able to provide some different insights for you from this perspective. WHO IS ALSTOM To set the reference point of my talk I will firstly tell you a little about ALSTOM. ALSTOM is an international manufacturer, supplier and contractor in the fields of power and transport infrastructure. Our primary products are power generation, power transmission and distribution, trains and speciality ships. The global company has its headquarters in Paris and is present in 70 countries. We generate an annual turnover of around 23 billion Euros and employ about 120,000 people. The company’s shares are traded in Paris, London and New York. In 2000 ALSTOM completed its acquisition of the power
generation business of ABB. In ASEAN, ALSTOM has permanent operations in Malaysia, Singapore, Indonesia, Thailand, Philippines and Vietnam. Malaysia is a regional centre for many of our power related activities, particularly gas turbine and services businesses. Some of our major projects in the region at the moment are gas power plants in Malaysia, Singapore and Thailand; a large coal power plant in Malaysia; and extensions to the MRT in Singapore. We have a large manufacturing plant in Indonesia. The substance of my talk is therefore from the viewpoint of a company involved in infrastructure projects, with some local manufacturing. My colleagues Sandy Elliot and Mike Dureau can tell you about our operations in Australia and New Zealand. THE EVENTS THAT HAVE A MAJOR IMPACT IN ASIA IN THE PAST FEW YEARS As you are all well aware, there have been a series of dramatic events in the past few years, which have significantly impacted international business. These events alone and collectively have had an important impact on ALSTOM’s activities in Asia and around the world. Naturally this has created challenges and of course opportunities. Let me list the key events:
SOME WORLDWIDE IMPACTS The impact of these events on the world travel business has hit us in our cruise business. A key US customer went into Chapter 11 shortly after 9-11 and the market temporarily disappeared. It is now slowly returning. We are fortunate to be building the Queen Mary II for Cunnard which is double the size of the QE2 and 3 times the size of the Titanic… I hope this is not an omen. The reverberations of the Enron bankruptcy are making the financing of infrastructure projects more difficult, particularly for private companies. Many of the US developers are withdrawing from Asia which will slow the push to privatisation in several countries and delay projects. Enron, together with the general turndown in the US has caused a massive bubble in our USA gas power plant market to collapse. The railway business continues to be strong throughout the world, although Asian projects are often slow to come to fruition. New projects are proceeding in Singapore, Malaysia and Thailand. Nevertheless, despite the troubled times our Asia/Pacific order intake grew in the financial year till the end of March. To a large extent this driven by the underlying demand for new infrastructure and to some extent by the economic stimulation it creates. This market represents almost 20% of ALSTOM’s worldwide business. A QUICK COMMENTARY REGARDING THE HEALTH OF EACH OF THE MARKETS IN ASIA A quick run around the region. Singapore is having a tough year and is recession. Privatisation of the power industry has slowed with the American developers in particular suffering the effects of the Enron collapse. Many of the developers had established regional offices in Singapore and these have been closed. The relationship with Malaysia continues to be strained and this is creating opportunities with power and water infrastructure. Indonesia continues to struggle with social and political problems. Our factory is heavily loaded with export projects, but faces rivalry from other ASEAN countries who are often reluctant to allow supply from fellow ASEAN partners — despite AFTA. This protectionist attitude is common throughout the region. Philippines is still slow to recover from the financial crisis. Security is an issue in the South with the Muslim extremists (Abu Sayyaf) still very active. ALSTOM sees no major opportunities for our business in the near term in the Philippines. Thailand is still suffering from the financial crisis, which has delayed many projects. Environment activists and legal issues are hindering some projects. Two large coal fired power plants have been indefinitely delayed. On one hand this has created opportunities for rival gas projects, whilst on the other hand the arbitrary nature of the political decision making process, raises real concern for business. A number of developers supported by companies like ALSTOM have spent considerable time and money on project development only to see it come to nothing. The combined effect of the financial crisis and environmental concerns has delayed the development of the Malaysian/Thai joint gas development in the Gulf of Thailand. Whilst not directly adversely effecting Thailand this is causing a serious gas shortage in Malaysia. Muslim extremists in the South of Thailand have caused some concern. Vietnam is performing well and power generation projects are proceeding. ALSTOM sees a strong future potential in Vietnam. Two weeks ago ALSTOM signed a contract for another gas fired project in the south. Laos still offers opportunities for privately funded hydro projects. These rely on cross border electricity sales, which appear to be particularly difficult in the current environment. Cambodia is offering no serious opportunities and Myanmar is off limits. There are plans to pipe gas to Cambodia via Vietnam, however this will take years to develop. Finally as I have already mentioned Malaysia is facing a serious gas shortage. This is likely to provide opportunities for new coal fired power plants. The first step in the Trans-ASEAN railway has commenced in this country and we see real opportunities in this sector. I will now speak in more detail in relation to Malaysia. SOME SPECIFIC OBSERVATIONS REGARDING MALAYSIA The Malaysian Economy had recovered well from the economic crisis but this past year has seen a slowing due the US recession. We expect to see a pick up in coming months. Despite this our strong order backlog has meant that we have had a very busy time in this country. As I mentioned earlier there are still opportunities emerging particularly for coal fired power plants and in the railway sector. On the political front, Dr Mahatir’s stocks have risen significantly since the events of 911. This has been seen both inside the country with the government taking a hard line against extremist Islamic groups and support for opposition parties waning. Internationally, Dr Mahatir’s dialog with the US has been well received domestically in all quarters. Accordingly the coalition government remains strongly entrenched in power. The next election is due in late 2004 but it is widely believed that it will be brought forward to 2003. Dr M is now 76 and there appears no sign of him retiring. ALSTOM sees Malaysia as politically and socially stable country and a good place to business. Exchange and Capital Controls introduced during 98 on the grounds as a counter to speculators has made operation of routine international business dealings more difficult. Whilst the exchange rate controls have been beneficial for us in that they bring stability, the capital controls have been a serious hindrance to our international transactions due to the size of our Malaysian business. I cannot make this speech without mentioning the relationship between Malaysia and Australia. Whilst there is excellent relations at all levels of business and officially, the well-known undertones still exist. We have noticed that when doing business with government enterprises, there is an underlying concern that for Australian companies the Old Issues may re-emerge. There are many well meaning and prominent Malaysian businessmen who try to help this issue but the issue persists. It is difficult to see a resolution before a ‘changing of the guard’. Security Issues were a concern after 9-11. Perceptions from outside the country were, for a time, a problem for our business. Malaysia was grouped with countries like Afghanistan and Pakistan in terms of security for westerners — in this respect we are all Americans. I would have to say that the perception was relatively speaking, unfounded. In my opinion our employees and business were truly less at risk than many in so called safe havens. This view was generally shared by the Embassies, with the possible exception of the US. Whilst Malaysia is no longer at the top of the security alert list, the management of internal company perceptions is still important part of our activities. On going events such as the recent terrorist attack on French engineers in Karachi has a direct impact given our large number of French expats in Malaysia. On that occasion the French Ambassador acted quickly and personally to address any issues raised by our French employees. Clearly security concerns will continue to effect all of us. Law and Order anecdotally is an issue in Malaysia with street crime, house break-ins and so on, apparently on the rise and this a concern. Whilst reliable statistics are not readily available, it does seem that the problem is relating to the growing number of illegal immigrants and the government is taking strong steps to deport these people. Some unofficial estimates put the number of people involved at 2 million. Local Content (Bumi) participation is always an issue in Malaysia and recent events have done nothing to dampen the cause. The government continues to try to address the dilemma created by this policy and it certainly creates a challenge in our project business. The main issue is the achieving the balance between our obligations to achieve nominated Bumi content on one side against commercial realities of cost, capability and quality of local industry on the other. Corporate governance has been the subject of much legislative attention. Real steps have been taken to deal with the perceptions of cronyism and non-transparency of the past. The banking industry has consolidated and strengthened. Nevertheless questions are till asked about the viability of some projects and the rising fortunes of some corporate figures linked to government. This is generally a positive development for our business. CONCLUSION ASEAN has experienced a difficult few years but for ALSTOM’s infrastructure business we have continued to experience a strong activity. The next year or two don’t appear particularly promising except for perhaps in Malaysia and isolated projects elsewhere. Malaysia is still misunderstood by the west, but has weathered the recent storms very effectively. |
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