Growing Partnerships and Opportunities: Investing in the Asia-Pacific Region
Workers package raw cocoa powder at the Big Tree Farms facility in Bali, Indonesia. OPIC committed a $3.7 million loan to the company, based in Oregon, that works with cocoa and coconut farmers in to produce a variety of products like sweetener that generate higher profit margins and help farmers earn more income.
By Geoffrey Tan
OPIC Managing Director, Asia Pacific
Five years ago, OPIC held an international conference in Indonesia for investors to explore opportunities in Southeast Asia. This past April, an OPIC team visited the region in a very different economic climate. In 2011, Asia was looking in the rearview mirror at the effects of the Global Financial Crisis after having recovered from the Asian Financial Crisis. Economies in the region were regaining their footing and contemplating the huge investment needed to make up lost ground and provide opportunities for their young, growing and more sophisticated populations. Opportunities for U.S. and other foreign investment seemed endless, but not without the typical challenges of emerging markets that OPIC is well-suited to help address.
What has changed since then?
A lot, is the short answer. Burma (Myanmar) opened up its economy to the world, and in 2013 foreign direct investment (FDI) into ASEAN (Association of Southeast Asian Nations) surpassed FDI into China. ASEAN GDP has grown at just over 5 percent per year, with per capita GDP climbing over 30 percent since 2010.
But it’s not that simple. While the above may sound impressive – which it is – much more investment is required to meet the needs and demands of the growing urban middle class as well as the underserved low income and rural populations. This is true in all countries across the broad economic spectrum in the region, but with more acute needs for basic services and infrastructure in the low and middle income countries. Regional infrastructure investment needs alone are estimated at over $80 billion per annum for the next ten years or more.
For its part, in 2014 OPIC opened its first Southeast Asia office in Bangkok, Thailand, covering the Asia-Pacific region. At that time it was OPIC’s second office overseas, and the first time OPIC had more than one office outside Washington DC. This still relatively new office where I am based is a clear signal that OPIC intends to do more to support development in emerging Asia Pacific nations, and also do its part to increase U.S. economic engagement with the region.
OPIC has in the last five years supported for example access to finance for SME and microfinance borrowers in Indonesia and aquaculture in Vietnam. More recently, since the opening of the Bangkok regional office, OPIC has approved investments as diverse as telecom tower infrastructure in Myanmar, SME financing in Cambodia, sustainable agriculture in Indonesia, and the first wind private power project in Indonesia.
OPIC is working with Apollo Towers to develop a network of telecommunications towers across Burma, one of the last places in the world without widespread infrastructure for this technology. Only three percent of Burma’s 50 million residents had access to mobile phones in 2011. OPIC’s work to provide financing to Apollo Towers will bring widespread information access to millions of people and provide a valuable demonstration effect for development in this newly-opened market.
In Cambodia OPIC will be providing up to $155 million in financing to ACLEDA Bank, which will help expand a portfolio of micro-, small and medium enterprise (MSME) lending by the largest bank in country. OPIC will be providing two facilities: $30 million in financing dedicated to women-owned SMEs that will be carried out in partnership with the Goldman Sachs Foundation’s 10,000 Women initiative, and a $125 million loan dedicated for ACLEDA’s broader MSME lending efforts.
Last year, OPIC committed $3.7 million in debt financing to Big Tree Farms, Inc., a U.S. company headquartered in Ashland, Oregon that is advancing sustainable, organic coconut and cocoa agriculture across the dispersed islands of Indonesia. The company is supporting sound U.S. business, labor, and environmental standards, and provides a reliable, increased livelihood for low-income farmers in this lush, tropical country.
OPIC is also supporting renewable energy in the region: up to $120 million in OPIC financing is helping PT UPC Sidrap Bayu Energi build a 75 megawatt wind power facility in Indonesia, which has the largest economy and population in the region and relies extensively on coal for power generation. This project – the first private wind power project in the country – will help the Government of Indonesia diversify its energy generation mix and progress towards its renewable energy target.
These investments, however meaningful on the ground for the countries and their people, are but a drop in the bucket compared to the needs of these economies. Much remains to be done, and much of that is in the domain of the respective governments in the region with respect to putting in place the right environment to attract private sector investment. As those legal and regulatory environments evolve, OPIC stands ready to work with these governments to meet their development objectives through private sector participation.