Smaller companies head to Asia for investments

OVERSEAS ventures are not meant merely for conglomerates. 

Apart from the large investments abroad that have made headline news such as the acquisition of Unilever group assets by IOI Corp Bhd and Wessex Water by YTL Power International Bhd, there were also many companies with smaller market capitalisation which crossed the border last year. Their investment destinations are mostly in Asia. 

Many Malaysian companies are looking at emerging markets, where there is rising need for infrastructure development.  

Some are tapping into highly populated markets such as China and India to take advantage of the low labour costs and also the huge consumer market size for their final products. 

These companies are seeking to cushion the impact of any slowdown in domestic earnings, particularly for those with limited room for growth at home.  

Certain risks are involved, particularly when investing in emerging countries where political risks are rather high.  

But investing abroad is, in fact, a healthy trend for the country's economy in the long run. 

Those investments will increase foreign exchange earnings for the country when entrepreneurs repatriate their profits from overseas, although there will be outflow of funds in the short run. 

India is a relatively popular spot for Malaysian construction companies compared with other parts of the region.  

An obvious reason is that National Highway Authority Board of India has in recent years awarded many turnkey projects that have attracted Malaysian construction companies which intend to diversify earnings in case the Malaysian government tightens its belt on infrastructure spending. 

IJM Corp Bhd is one of the first to move into the subcontinent. Last year alone, it secured two road projects worth RM125.2mil.  

About 20% of the projects in IJM's RM1.4bil order books are in India. 

Water treatment and property development are the new areas that Malaysians are looking at in India, which is now enjoying a rather strong economic growth. 

IJM has started its first housing development project worth RM250mil in Hyderabad, in central India.  

In view of India's fast population growth, IOI Properties Bhd has also formed a joint venture with Andhra Pradesh State Trading Corp Ltd as its maiden venture into the country to develop a commercial complex in Hyderabad.  

Puncak Niaga Bhd, meanwhile, won a RM234mil contract with the Chennai Metropolitan Water Supply and Sewerage Board in November for its consortium to lay pipelines in Chennai, the largest city in southern India. 

Meanwhile, Ranhill Bhd has submitted unsolicited bids for RM2bil water treatment projects in Chennai. 

The engineering group is also bidding for other oil and gas, infrastructure and utilities-related projects in Myanmar and the Middle East, which is part of its strategy to have equal earnings contributions from local and overseas projects within the next five years. 

Malaysian entrepreneurs have ventured further to the West into the Middle East too.  

There is an estimated RM6bil worth of infrastructure projects at the bidding stage in countries such as United Arab Emirates, Qatar, Bahrain, Saudi Arabia and Iran. 

Bahrain, situated in the Arabian Gulf, has been increasingly popular nowadays. 

DRB-Hicom Holdings Bhd has secured a seven-year contract worth an annual RM30.3mil to provide waste management and cleaning services in Bahrain, a stepping stone for it to go big in waste management in the Middle East. 

The group is now waiting for a reply to its bid for another waste management project worth RM150mil in Abu Dhabi, United Arab Emirates. 

WCT Engineering Bhd is now building the Formula One racing circuit in Bahrain. And the Turkish party involved in the project has approached the company. 

United Engineers (M) Bhd's subsidiary UE Construction Sdn Bhd is also awaiting the outcome of its bid for the RM1bil Salwa highway upgrading project in Qatar. 

Looking East, Gamuda announced in October that it had been awarded a 50% stake in a RM400mil project in Taiwan.  

This covers the civil works for the design, construction and completion of part of the Kaoshiung Mass Rapid Transit System Project. 

AIC Corp Bhd plans to send a team of professionals to conduct a due diligence study on MTN Inc of South Korea early this year before setting up a joint venture with the latter to produce multimedia display products. 

MTN manufactures TFT LCD monitors and display boards used in personal computers, in military, medical, recreational, and global positioning systems, and televisions and telecommunication products. 

In China, PJI Holdings is in the last stage of negotiation for a second water concession in the Fujian province, which would require an investment of more than RM100mil. 

There are also opportunities for travel exchange with China.  

Reliance Pacific Bhd has established a network of offices in China in collaboration with its Chinese partners focusing on two areas: MICE (meetings, incentives, conventions and exhibitions), which is high yielding and suits its company’s profile of a travel logistic planner; and increasing traffic to Malaysia using the KL International Airport as the entry hub. 

According to the World Trade Organisation (WTO) data, China is the world’s No. 7 in terms of tourism spending at US$13.1bil in 2000.  

With the emergence of China as an economic powerhouse, this position can only strengthen. 

While expanding products and services in China, Reliance Pacific is also exporting its know-how in travel retail distribution, both “brick and mortar” and online, to the mainland.  

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