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Tamara Trinh

Senior Economist

Think tank of Deutsche Bank Group

Asia 2010+

Trends determining Emerging Asias future


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Tamara Trinh Frankfurt, Sep 18, 2006 page 2

VDMA Zentraler Arbeitskreis Export

Overview

11 Asia - the global growth center

Risks33

22 Factors driving growth

44 Conclusion and outlook


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Overview


Risks33




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Slowing growth momentum near term,

0

2

4

6

8

10

12

China

Ind

ia

Indones

ia

Phillippines

Thailand

Malays

ia

Taiwan

SouthKorea

Singapo

re

HongKon

g

2005 2006e 2007f

Real GDP growth, % yoy

Source: DB Research


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but overall, Asia is the current and future globalgrowth star

0

2

4

6

8

10

2001 2002 2003 2004 2005 2006 2007 2008 2009

Non-Japan Asia-10 Eastern Europe

Middle East* Africa

Latin America

% p.a.

GDP growth in emerging market regions to

remain relatively high

*Includes North Africa. Source: Deutsche Bank Research

0 1 2 3 4 5 6

India

Malaysia

China

Thailand

Turkey

Ireland

Indonesia

Korea

Mexico

Chile

USA

Germany

Japan

Ranking of GDP growth 2006-20, % p.a.

Source: Deutsche Bank Research, Formel-G


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Still some way to go in many countries

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

China

India

Indonesia

Phillippines

Thailand

Mala

ysia

Taiwan

SouthKorea

Singapore

HongKong

2005 2006e 2007f

GDP per capita (nominal, USD)

Source: DB Research


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Overview

11

Asia - the global growth center

Risks33




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Factors driving growth I:Large population = big labor force & potential market

EU-25

460 million people

USA

290 million people

Asia 10

2.9 billion people

1.3 billion in China

1.1 billion in India


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Factors driving growth II:Huge improvements in the quality of workforce

0246810121416

India

China

South Africa

Thailand

Spain

Korea

France

Germany

USA

Average years of education in 2005

Sources: OECD, Deutsc he Bank Research

0 10 20 30 40 50

Change in years of education 2005-2020 in %


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Factors driving growth III: High domestic investment andcontinuing attractiveness for FDI

0.0 0.5 1.0 1.5 2.0 2.5

25 (42) Romania

23 (21) South Korea

20 (20) Thailand

18 (18) Singapore

15 (10) Japan

10 (8) Hongkong

9 (5) Germany

8 (7) Australia

7 (17) Brazil

6 (11) Russia

5 (12) Poland

4 (4) UK

3 (2) US

2 (3) India

1 (1) China

Source: A.T. Kearney

A.T.Kearney FDI Confidence Index 2005

( ) = 2004 ranks

(0 low - 3 high confidence)

0

10

20

30

40

50

60

1990 1992 1994 1996 1998 2000 2002 2004 2006e

China India South Korea

US Germany Malaysia

Investment, % of GDP

Source: DB Resesarch


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especially in terms of R&D: Asia is a major locationand Asian firms are becoming major spenders

0 10 20 30 40 50 60 70

US

UK

China

France

Japan

India

Canada

Germany

Singapore

Italy

Brazil

Russia

Poland

Taiwan

South Korea

Thailand

% of all the world's largest R&D spenders

Source: UNCTAD WIR 2005

Locations of foreign R&D efforts (based on a

survey of the world's largest R&D spenders)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Samsung

Electro

nic

HyundaiMotor

LGE

lectronics

Taiwan

Semiconductor

PetroCh

ina

KoreaElec

tric

Power

KT

POS

CO

Petro

leo

Basileiro

SKTelec

om

R&D expenditure, in % of world's top R&D spender in 2003

Source: UNCTAD WIR 2005

Top 10 emerging markets R&D spenders


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Factors driving growth IV: Closer trade integration withthe rest of the world

The problem is choice

0%

20%

40%

60%

80%

100%

120%

140%

160%

1990 1992 1994 1996 1998 2000 2002 2004 2006e

China

India

South Korea

Thailand

Exports + Imports (g&s), % of GDP

Source: DB Research


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Overview


Risks33




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Risks I: Despite increase in intra-regional trade, stillhighly dependent on US demand

Intra-regional trade: 40% of total trade

0.0

0.5

1.0

1.5

2.0

2.5

2000 2001 2002 2003 2004 2005

-10

0

10

20

30

Intraregional Asian trade, USD tr (left)Total Asian trade, USD tr (left)

Growth in intraregional trade, % yoy (right)

Source: DB Research

Rising intraregional trade

-30

-20

-10

0

10

20

30

97 98 99 00 01 02 03 04 05 06

US durable orders for computer Asia 10

Sources: Bloomberg, CEIC data

US durable orders for computers & Asia-10 exports, % 3mma

Asia: Export growth moving in synch with

US demand


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Risks II: Geopolitical hotspots

Kashmir

conflict

North Korea

Cross-strait

relations

Offshore oil reserves

Sino-Japanese

relations

Threat from Islamic militants


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Risks III: High dependency on energy imports

0

500

1000

1500

2000

2500

1970 1980 1990 2000 2005

China

India

South Korea

Germany

US

Thailand

Energy efficiency needs to be improved

Primary energy demand per GDP, in tonnes of oil equivalent

per GDP in million USD at 2000 prices

Source: WMMD

-20 0 20 40 60 80

Malaysia

Vietnam

Singapore

Sri Lanka

Pakistan

Philippines

Hong Kong

Thailand

Taiwan

India

Korea

China

Most Asian countries are net oil importers

Net oil imports 2005, USD bn

Source: CEIC


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Overview

11 The future is in Asia

Risks33




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Go East!

Indien

South

Korea

Asia 2010+

Asian growth

performancesurpasses other

regions

A large workforce,

better education andcloser trade

integration will drive

economic growth

Beware of the risks,

but fundamentalfactors point to

superior growth

performance


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Asian Fortune 500 firms:Only a few today how many in the future?

0

20

40

60

80

100

120

140

160

180

Asia EU-15

China (20)

India (6)

South Korea (12)Germany

(35)

France

(38)

UK

(38)

Italy (10)

Netherlands

Spain (9)Sweden (6)

Austria (1)

Luxem-

bourg (1)

Ireland (1)

Finland (2)

Denmark

Belgium (5)

Malaysia (1)

Singapore (1)

Taiwan (3)Thailand

44 firms

163 firms

Source: Fortune

Number of firms included

in the Fortune Global 500

list

A few examples

China: Sinopec, China

National Petroleum,ICBC, China Mobile,

CCB, Baosteel, China

First Automotive Works,

Shanghai Automotive

India: India Oil, Reliance

Industries, Hindustan

Petroleum, State Bank

of India

Southeast Asia:

Petronas, PTT,

Flextronics International


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Copyright 2006. Deutsche Bank AG, DB Research, D-60262 Frankfurt am Main, Germany. All rights reserved. When quoting please cite

Deutsche Bank Research.

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