China rust belt opens door wider to foreign investors

The EU business chamber has observed an uptick in foreign entrepreneurs arriving in Shenyang in recent years. Above, workers manipulate a machine to produce car interior pieces for a major European carmaker. (AFP)
Updated 24 September 2017

China rust belt opens door wider to foreign investors

SHENYANG, China: Trucks carrying hi-tech car components rumble in and out the gates of an American industrial zone in the heart of China’s rust belt — using roads that the city especially renovated for the complex.
While foreign firms complain about being locked out of large swathes of China’s vast market, the door has cracked open a bit wider in northeastern Liaoning province as the authorities seek to revive the recession-hit industrial region.
The bustling activity at the Shenyang American Industrial Park, which hosts international suppliers for global car brands, stands in contrast with the darkened windows and empty parking lots of the moribund Chinese factories nearby.
Foreign firms feel more welcome in the provincial capital, Shenyang, and in parts of the southwest, than anywhere else in the country, according to a survey by the European Union Chamber of Commerce in China.
“The local government offers many benefits, such as easing company registration, providing discounts for factory and office space and giving family members three-year visas,” said Harald Kumpfert, chairman of the EU chamber’s Shenyang chapter.
Elsewhere, companies are increasingly voicing frustration about investment barriers in sectors from automotive to finance, while China subsidizes its own domestic businesses.
The EU business chamber issued an annual report on Tuesday saying companies were “suffering from accumulated ‘promise fatigue’” as the government has yet to follow through on pledges to open the market.
And while Liaoning is more welcoming, Kumpfert said that after setting up shop, businesses in Shenyang face similar obstacles, including lengthy waits for permits and “unclear” regulations.
Settling in China can also come at a price: at least one-fifth of EU companies said they have had to share their technology in exchange for market access in the aerospace, machinery, environment, auto, utilities and primary energy industries.
Still, the chamber has observed an uptick in foreign entrepreneurs arriving in Shenyang in recent years.
Businesses that specialize in renewable energy, tourism, agriculture or advanced technology are well positioned to succeed in Shenyang as the city addresses pollution and undergoes a “painful restructuring process”, Kumpfert said.
The Liaoning Pilot Free Trade Zone was launched earlier this year, and construction continues in the 48-square-kilometer Sino-German Intelligent Equipment Manufacturing Park in Shenyang, which hosts BMW, Siemens and BASF.
The city’s Bureau of Foreign Trade and Economic Cooperation said data on foreign investment was not immediately available.
China’s northeast has long relied on state-owned enterprises plagued with severe overcapacity in heavy industries that have crippled the economy, costing thousands of jobs.
Liaoning was the only province in the country that was officially in recession in 2016, with its economy contracting by 2.5 percent. The province also admitted to faking economic growth figures from 2011 to 2014.
“All these government projects have ignored principles of supply and demand and created all these problems,” said Jason Lee, a director of business development for Eastern America, which bought the land from the city to build the Shenyang American Industrial Park.
“Nowadays, there is more government support for foreign businesses here. There’s a lot to catch up on, but now they want to work with us as a team,” Lee told AFP, adding that city officials sometimes accompany him to meetings to woo foreign clients.
A Shenyang car insulation factory manager, Li, is pinning his hopes on foreign capital to help the region.
“If more people come and invest, then the whole environment will improve. Employment, revenue, and other aspects will all get better,” said Li, who declined to give his first name because he was not authorized to speak with the media.
But at the Shenyang German Sino-Service Center, most of the offices in a new building were recently empty, showing that the process can still be slow.
Wolfgang Wagner, chief operating officer of the center, says it was not out of lack of interest — two dozen foreign companies have applied to join but they have struggled to get legal permits to allow them to rent in a government-owned building.
“First we thought they could move in 2018,” he said. “Now it’s not going to be until 2019.”

Indonesia’s Go-Jek close to profits in all segments

Updated 18 August 2018

Indonesia’s Go-Jek close to profits in all segments

  • Go-Jek is Indonesia's first billio-dollar startup
  • Ride haling app evolves into online payment platform

JAKARTA: Go-Jek, Indonesia’s first billion-dollar startup, is “extremely close” to achieving profitability in all its segments, except transportation, its founder and CEO Nadiem Makarim told Reuters.

Launched in 2011 in Jakarta, Go-Jek — a play on the local word for motorbike taxis — has evolved from a ride-hailing service to a one-stop app allowing clients in Southeast Asia’s largest economy to make online payments and order everything from food, groceries to massages.

“We’re seeing enormous online to offline traction for all of our businesses and are close to being profitable, outside of transportation,” said the 34-year old CEO.
The startup is expected to be fully profitable “probably” within the next few years, Makarim added.

Already a market leader in Indonesia, where it processes more than 100 million transactions for its 20-25 million monthly users, Go-Jek is now looking to expand in Southeast Asia.

Ride hailing services in Southeast Asia are expected to surge to $20.1 billion in gross merchandise value by 2025 from $5.1 billion in 2017, according to a Google-Temasek report.

Go-Jek said in May it would invest $500 million to enter Vietnam, Singapore, Thailand and the Philippines, after Uber struck a deal to sell its Southeast Asian operations to Grab — the bigger player in the region.

Go-Jek is seeing strong funding interest from its backers as it targets an aggressive expansion, Makarim said.

“Since its Aug. 1 launch, the app has already grabbed 15 percent of market share in Ho Chi Minh,” Makarim said. The firm this week opened recruitment for motorcycle drivers in Thailand.

The startup expects anti-monopoly concerns swirling around the Grab-Uber deal, which Singapore said had substantially hurt competition, to help clear a path for its expansion.

“We’re bringing back choice. The Singapore government is particularly eager to bring back competition,” Makarim said, adding that the order of overseas rollouts had not been set.

Go-Jek’s offshore push comes at a time when Singapore-based Grab is stepping up funding to expand in Indonesia and transform itself into a consumer technology company, starting with a partnership with online grocer HappyFresh.

“Mimicking Go-Jek’s strategy is the highest form of flattery,” laughed Makarim.

Grab told Reuters in a statement, “The super app strategy has been around for a while now and no Southeast Asian player can claim to have pioneered it.” The company also said Grab has not lost market share in Ho Chi Minh since August, but declined to provide market share data.

Makarim believes Go-Jek’s understanding of food merchants will give it an edge over Grab, which counts investors such as Chinese ride-hailing firm Didi Chuxing and Japan’s SoftBank Group Corp. among its backers.

Makarim, who sees food delivery as Go-Jek’s core business, said he was not concerned about funding, without giving details.

Go-Jek was reported in June as being in talks to raise $1.5 billion in a new funding round and was valued at about $5 billion in a prior fundraising, sources have told Reuters. The firm had said in March it was considering a domestic IPO.

Makarim noted Go-Jek’s backers were sharing both capital and expertise. The company is collaborating with Alphabet Inc’s Google on platform mobility, Tencent on payments strategy, on logistics operations, and Meituan Dianping on merchant transactions and deliveries.

Go-Jek has set up a venture capital arm, Go-Ventures, to invest in startups in Southeast Asia “with strategic importance to our business,” the CEO said.