A recent report done by IDC into the collective markets of six ASEAN countries has revealed a 43 % larger IT spend than India in 2007 - making ASEAN more attractive in terms of investment opportunities to multinational Information and Communications Technology (ICT) vendors.
According to the analyst group, the total IT spending for the six ASEAN countries, which consists of Malaysia, Indonesia, Thailand, Singapore, Vietnam and Philippines combined was USD25.1 Billion, compared to USD17.5 Billion in India.
“It has been a widely held notion that India has greater IT investment potential. But, a closer look at IDC's data shows that the ASEAN domestic IT consumption is collectively bigger which means that ASEAN could be a better bet in terms of attractiveness for global IT players,” said Managing Director Selinna Chin.
According to the World Bank, in 2006, the GDP of the six ASEAN markets in question amounted to USD1.03 Trillion, as compared to India’s USD906.27 Billion.
“ASEAN will continue to be a bigger IT market up to 2011, after which India's domestic IT spending is expected to overtake it. This is especially so given India's 20 per cent IT market growth estimate for next year, compared to ASEAN’s 6 per cent,” said Selinna.
A key factor for India’s high IT growth opportunity is that a significant number of global IT companies are investing in India for IT exports, and that many local Indian IT companies have gone global themselves.
“In order to remain competitive and attractive to MNC IT players/vendors beyond 2011, ASEAN's domestic businesses and local governments will need to be more aggressive in IT adoption,” Selinna adds.
IDC reiterates that China still holds the biggest IT investment attraction with a domestic IT expenditure of USD57.3 Billion in Asia/Pacific excluding Japan (APEJ). This is more than double ASEAN’s IT spending size and represents 36 percent of the APEJ IT spending in 2007. China’s IT market is forecasted to grow 12 percent in 2008 over the current year.
According to IDC, the US subprime and other economic issues pose a direct impact on the growth of ASEAN IT markets.
In a worst case scenario developed by IDC, US worsening economic issues will cause a “technical recession” in the US - defined as consecutive quarters of negative GDP growth, where US consumption will weaken further and detrimentally affect the IT markets in ASEAN.
“The ASEAN region’s IT market growth rhythm could slow to a mere 2 per cent in 2008, which is equivalent to a potential loss of market opportunity worth USD680 million, and USD1 billion in 2009,” said Selinna.
“The higher the country’s trade dependency is on the US, the greater the negative impact, although in some cases like China, significant domestic demands will offset some of the decline,” says Selinna.
These Asian countries, ranked in order of export business to the US, are Japan, Vietnam, China, Malaysia the Philippines, India, Taiwan, Hong Kong, Thailand, Korea, New Zealand, Indonesia, Singapore and Australia.
According to IDC, buffering the impact of the slowdown on Asia’s IT markets will be a challenge, due to the considerable reliance of Asian exports to the US, and more stringent credit policies as local banks become more risk adverse.
“However, in most slowdowns, leading companies tend to invest in IT for the next cycle of growth. Companies who lag behind those with the foresight will find themselves about nine months behind,” added Selinna. |
