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Five emerging Asean cities

31 Oct 2012

Across the Asean region, there are a number of cities whose economies are beginning to boom. These are either national capitals which have recently opened up after long laying under oppressive regimes or states of conflict, or they are other locations whose favourable characteristics have just caught the eye of international companies. In both cases, the cities have been drawing in increasing amounts of foreign investment and seen airlines launching new connections to link them to the rest of the region. Here we take a look at some of the Asean region’s rising stars.

Phnom Penh, Cambodia 

Overview: Cambodia’s capital is located in the centre of the more developed south of the country. It is about 120km northwest of the Vietnamese border. On the banks the Mekong River, it has Cambodia’s largest port that allows water-based trade with other ASEAN nations and through Vietnam into the South China Sea.

What’s happening? Cambodia’s economy has seen double-digit growth in recent years. Large numbers of international firms have chosen to locate their manufacturing in the country, especially garment manufacturing. Phnom Penh is at the centre of this boom, with companies such as H&M and Benetton present there. In 2006, the city established a 365ha Special Economic Zone aimed at drawing foreign investment by offering a favourable business and trade environment.  

Challenges: After three decades of conflict and civil war, Cambodia’s infrastructure has been left very weak. At the end of last year, the IMF estimated that the country needed US$13 billion in infrastructure works by 2020 if it was going to continue attracting foreign investment. Ground transportation (both road and rail) from Phnom Penh remains undeveloped. The city’s airport is small and close to capacity, with large tourist flows. A project is underway to expand it, due to be completed in 2014, but in September this year the Prime Minister Hun Sen also suggested a second airport would be needed. 

Who is flying there? Qatar Airways announced on October 26 that it would begin daily flights to Phnom Penh from February 20 next year (see here). Air France restarted thrice-weekly flights after a 35-year interval in March last year (see here). From October 28 this year, Hong Kong airline Dragonair increased its services to the Cambodian capital from seven to 10 weekly. 

The city is also served by Bangkok Airways, Thai Airways, AirAsia, SilkAir, Tiger, Jetstar Asia, China Southern, Shanghai Airlines, Korean Air, Malaysia Airlines, and Vietnam Airlines.


Yangon, Myanmar 

Overview: A city of 4 million people, Yangon is located in the south of Myanmar (discounting the narrow peninsula which extends further south). It is at the convergence of the Yangon and Bago Rivers, which flow 30km further south into the Andaman Sea. It has land trade routes with Thailand, which lies to its east.

What’s happening? Myanmar began making moves towards democracy last year after a decade under military rule, leading to the lifting of many economic sanctions this April and renewed investor interest in the country. International firms are looking to get access to the country’s rich natural resources, which include natural gas, tungsten and gems. Manufacturers are eyeing the country, especially its capital, as offering a good production base. According to CNBC, Labour costs in Yangon are a fifth of those in Bangkok and a third those in Shanghai.

Challenges: The country is still an extremely young democracy and has not proven its stability will last. Currently it has an incoherent exchange rate regime, poor infrastructure, has weak investment laws, a crippled banking system, decades of mismanagement and a shortage of skilled labour.

Who is flying there? Myanmar International Airlines plans to start flights to Yangon before the end of the year (see here). Dragonair announced in October that it would start four-times-weekly flights between Hong Kong and Yangon from January 9, 2013.

ANA launched flights there on October 15 this year, becoming the first airline to link Japan and Myanmar (see here). Korean Air begun flying non-stop to Yangon on September 15 (see here) and Malaysia Airlines started servicing KL and Yangon on September 2. Meanwhile, Vietnam Airlines started flying between the city and Hanoi in March of 2010. China Airlines has repeatedly increased its flights to Yangon (see here).  

Other airlines flying to Yangon include Thai AirAsia, Thai Airways, Bangkok Airways, Yangon Airways, Air India, China Southern, Air China, China Eastern, Silk Air, Eva Air, and Air Mandalay.
 

Vientiane, Laos 

Overview: The Laotian capital, population 910,000, is located in the northwest of the country on the border with Thailand. It is also located on the bank of the Mekong river.

What’s happening? In recent years, the city has seen rapidly increasing foreign investment. Foreign businesses, drawn by its cheaper costs than other Asian nations, have chosen to establish manufacturing bases there, producing everything from garments to pharmaceuticals. According to LaoVoices.com, between 2010 and the city’s Khoksa-ath Industrial Zone gained 11 factories and now has a total of 31 with an investment value of about 300 billion kip (US$37.5 million). The city has also established other industrial parks and special economic zones such as the Vita Park, which are set up to attract investment.

Challenges: According to the Asian Development Bank, urban infrastructure remains relatively undeveloped, with congested roads and other issues. Vientiane’s Wattay International Airport has recently undergone an upgrade, expanding its parking apron so that up to 25 large and medium-sized aircraft can be accommodated.  

Who is flying there? Bangkok Airways has announced it will start flights to Vientiane from December 1 this year.

Lao Airlines, which is based in Vientiane, is expanding its network. It plans to launch flights to Guangzhou from November 29 and to Seoul and Busan in December (see here). It began flying to Singapore in November 24 last year (see here).

AirAsia began operating flights from Kuala Lumpur to Vientiane in 2007. Other airlines serving the city include Thai, Vietnam Airlines, Jin Air and China Eastern.


Clark, The Philippines

Overview: Clark is located close to Angeles City which is about 40 miles northwest of the Philippine capital of Manila. It is positioned inland, at the base of the expansive northern regions of the country.

What’s happening? In the mid 1990s, the former military airbase in Clark was reopened as the Diosdado Macapagal International Airport (DMIA), since renamed to Clark International Airport, and the surrounding areas were designated as a Special Economic Zone offering favourable policies to attract overseas businesses. Over 700 international firms have located in the area including UPS, Sumidenso, Rolls-Royce, Yokohama, and Cyber City Teleservices.  

Challenges: While the road between Clark and Manila is good, the two places would benefit from a rail link. DMIA is a relatively small airport and will need expanding if the region wishes to grow significantly. 

Who is flying there? The Philippines low-cost carrier Zest Air began flying between Clark and Seoul on October 27 this year (see here). Jin Air began flying to Clark in October of 2010.

At the end of 2008, Cebu Pacific began using Clark as a hub for flights to Hong Kong and Singapore (see here), and now also flies between there and Macau and Bangkok.

Tiger Airways and AirAsia also link Clark to Singapore, Malaysia and other destinations around the region. Philippines domestic carrier South East Asian Airlines (SeaAir) likewise flies out of Clark.


Da Nang, Vietnam

Overview: Da Nang, one of Vietnam’s largest cities with a population of 807,000 in 2009, is located in the centre of the country on the coast. It is about 850km south of Hanoi, and almost an equal distance north of Ho Chi Mihn City. Da Nang is the commercial hub for central Vietnam and has one of the country’s largest ports.

What’s happening? Da Nang is the centre for the government-designated Central Economic Zone. According to the Vietnamese government’s online portal for Da Nang, it has attracted 228 FDI projects in total, with a combined value of US$3.58 billion. The Netherlands, one of the largest European investors in Vietnam, has firms including Solar Energy Company Ltd, and the Da Nang branches of Metro Cash and Carry and KFC Vietnam. The Da Nang Hi-Tech Park is drawing numerous international tech companies, such as Japan’s Tokyo Keiki Inc.

Challenges: The city has been limited for a long time by insufficient domestic connections and the general difficulty of flying around Vietnam, although this has improved somewhat it still needs to do so further if Da Nang is going to continue developing. 

Who is flying there? AirAsia began direct flights between Kuala Lumpur and Da Nang in December last year (see here). Korean Air began twice weekly flights from Seoul to Da Nang in January.

In September Lao Airlines announced that from November 4 it will start a three-times-weekly flight from Vientiane to the city (see here).

Other airlines flying to Da Nang include Jin Air and Vietnam Airlines.

Nicholas Olczak 

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