Yes, South-east Asia's technology could be a winner from Chinese investment pivoting from Silicon Valley following the latest US tariffs. But this argument downplays the region's pull as an investment destination in its own right.
2018 was already a high watermark year for South-east Asian technology investment with inbound flows across the 10-member countries of Asean reaching a record S$11 billion - almost doubling the S$5.8 billion invested in 2017 - according to Singapore-based venture capital firm, Cento Ventures.
Among this, China's tech giants caught the lion's share of the headlines with the likes of Alibaba and Tencent Holdings and JD.com entering the region.
That China has begun to increasingly invest in the region's technology should not come as a surprise given the consumer and manufacturing potential that the region presents.
So if 2017 and 2018 have been the breakthrough years, what's next for China's tech investment into the region, and should this matter for local businesses?
In short, yes, it does matter; and there are a few avenues that come to mind.
An interesting space to look out for will be Chinese investment into tier-two and emerging tech players in South-east Asia.
Research by Bain reveals that more than 1,300 companies in South-east Asia have received a first-round of seed financing since 2011. A recent example includes Singapore-based startup Trax, which received US$125 million in 2018 in a round led by private equity firm, Boyu Capital.
What this indicates is that demand is meeting supply, and highlights the increase in comfort that company owners across South-east Asia have towards venture capital and private equity investment.
China is among the top three countries for venture capital investment in digital technologies, and Asean remains relatively under-represented in terms of startups, so the potential to scale up is huge.
A second area will be linked to the region's urbanisation and smart cities.
McKinsey estimated that the market for smart mobility applications across the Asean Smart City Network could be as large as US$70 billion, while opportunities to make the built environment smarter could be worth up to US$26 billion.
With more than 500 smart city projects underway, China has the largest number of smart cities in the world and certainly has the experience to make a meaningful contribution. We have already begun to see this. In Malaysia, Kuala Lumpur signed an agreement in January 2018 with Alibaba's cloud service, City Brain, to work on traffic management, town planning and incident response.
But the solutions that will surface through the Smart Cities programme will not be the exclusive domain of multinationals. In fact, many of the specific needs of these cities can only be developed from bottom-up companies who know and intimately understand these urban centres' needs.
Reflecting Asean's supply chain potential, a third avenue for investment could be improving local business manufacturing capacity.
China wants to see South-east Asia position itself as a viable alternative for lower-end production, but South-east Asia cannot expect to see a shift in supply chains to the region unless production technology and capacity increases. A clear example is Chinese car maker Geely being able to announce in 2018 drastic cuts in production costs at its Malaysian car-maker subsidiary, Proton, through technology transfer.
Rising incomes, digital consumption and manufacturing make the region an attractive investment destination. However, its geographic diversity, challenging ease of business and different foreign investment laws can sometimes make it a tough nut to crack.
Broadband speed and capacity is clearly another crucial pain point, as is the need for aligned policies across Asean that enable the smoother exchange and sale of data, goods and services via digital platforms.
Despite these challenges, Chinese companies have signalled their intention to expand.
Undoubtedly, investment-hungry local companies and startups are alive to the commercial opportunities that will be opened up or that are emanating from technology, but perhaps seeing the potential of China's tech companies and venture capital firms as partners or investors, might still be less understood.
This needs to change because the competition for investment will only heat up, particularly as the rapid and all-consuming nature of digital and technology means that nearly all sectors are considered technology plays and opportunities.
Attracting investment requires establishing the right environment, culture and mindset within a company to actively seek technology investment or technology disruption before it gets thrown upon you. More specifically, this means adopting an open and digital-first mindset, encouraging innovation, and being open to new ideas.
It also requires an openness to see investors as partners who can drive a business to higher levels of growth and performance.
For many companies either at the cutting edge of technology advancement or which may be beefing up their technology credentials, making these changes - whether strategic or cultural - will not be a straight-line process, nor will it be without challenges. But it is important to start making the shift now to capitalise on these opportunities. After all, the digital arena - like time - waits for no one.
The writer is CEO of HSBC Singapore.
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This article was written by Tony Cripps from The Singapore Business Times and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.
