new energy: You represent the interests of German companies in Thailand, one of the largest economies in Southeast Asia. Are small and medium-sized enterprises from Germany beating a path to your door?
Jörg Buck: I’m pleased to say that SMEs from Germany are becoming increasingly interested in the countries that form the Association of Southeast Asian Nations, or ASEAN for short. (Editor’s note: ASEAN consists of Thailand, Indonesia, Malaysia, the Philippines, Singapore, Brunei, Vietnam, Burma, Laos and Cambodia.) However, I think that Germany still underestimates this economic region, which is the third largest in Asia after China and India. We need to change Germany’s view and we are working on it.
ne: What do you see as the most important aspects as regards encouraging German companies to work with Southeast Asia?
Buck: The ASEAN region comprises ten countries and almost 600 million consumers. A single market, the ASEAN Economic Community, will be in place from 2015. It’s a huge market. We have noticed that German companies are increasingly adopting a “China-plus-one” or an “India-plus-one” strategy, where they use ASEAN as a second important pillar of their operations in Asia after either of the two big economic powers. This is also a good risk-management strategy in case one of the markets fails to develop as expected. Another thing in Southeast Asia’s favour is that, thanks to a free trade agreement, you pay virtually no trade duties when you do business with China from an ASEAN country. Negotiations to set up a similar arrangement with India are currently underway.
ne: The German-Thai Chamber of Commerce has around 500 members. Do they include companies from the renewable energies sector?
Buck: Yes, around 20 companies come from the renewables sector. Most of them are SMEs, but the global player Siemens, which has a good market presence in Thailand and supplied the rotor blades for the country’s first large wind farm, is also a member. We have a few project developers and we are also seeing greater interest in the region from the financial sector.
ne: Southeast Asia's energy needs are increasing at a rate of four percent per year. Many countries in the region want to make greater use of renewables in the future. Is this a new market for German photovoltaic and wind-turbine manufacturers?
Buck: Definitely. You can tell by the way that SMEs and especially firms that provide project financing are getting more interested in the region. When renewable energy funds get involved in a market, as is the case in Thailand and the region in general, it is a very clear sign that the market is interesting and will provide the necessary returns on investment. Now that the German and European renewables market is so saturated, the sector has to look towards Southeast Asia.
ne: The region already makes extensive use of hydropower, but the potential of other renewable sources has hardly been tapped at all. In your opinion, which types of energy production will Southeast Asia use in the future?
Buck: That depends on the individual country. Biomass and bioenergy are bound to play an important role, as they are closely linked to agriculture, which is a strong sector in many ASEAN countries. Some regions prefer solar energy. In Thailand we are currently seeing a shift from solar farms to roof-top systems installed on industrial buildings. The next step will be panels on household roofs, and the government is currently planning a support scheme for these. Biofuels are also on the agenda, and wind energy is really big in Thailand. The region is also interested in stand-alone energy supply systems, where renewables play a very important role. Just think of Indonesia – it has 17,000 islands and they all need to be supplied with energy.
ne: In which ASEAN countries do you see the greatest potential for investments by German companies?
Buck: We have development programmes in Thailand, Malaysia, Indonesia, Vietnam and the Philippines. Thailand is the pioneer in Southeast Asia – it has the largest solar farm, the largest wind farm and the largest biomass plant in the region.
ne: Will it actually be possible to feed large quantities of renewable energy into the national and international grids?
Buck: There is still a lot to be done in this area. And I’m not even talking about smart grids – this is just the national grids. But although the grids need a great deal of expansion, the governments are aware of the situation. And besides, it also provides investment opportunities. Regional stand-alone solutions are another important trend. The topic of energy storage will also become relevant. All of these things provide business opportunities. In summary, you can say that there is a big need for investment, particularly when we have to take the next step towards smart grids.
ne: What are the ASEAN members doing to attract foreign investors, for example companies interested in setting up solar or biogas plants?
Buck: The main thing is that there are tax incentives in a wide range of areas, including exemption from customs duties for importing machines and raw materials, and exemption from VAT for the first five or seven years after a company opens. The incentives often depend on whether or not a company sets up local production facilities, and they get even better when product development takes place locally. In addition, the feed-in tariffs are becoming increasingly attractive.
ne: Who guarantees companies that they will continue to receive these incentives after a change of government?
Buck: I don’t see any risk there. The feed-in tariffs are contractually agreed and therefore don’t depend on who is in government. The same applies to policies designed to attract businesses. In general, the ASEAN countries are interested in new investments.
ne: What are the biggest barriers for German companies that want to enter the Southeast Asian market?
Buck: That depends on what sector you are in and at what level you enter. It is important to identify the right local business partners in the market. Germany’s chambers of commerce can help with that. It is not always easy for non-locals to understand and participate in the tender procedures. This means you need local contacts so that you can react quickly to tender procedures if necessary. But as a supplier, you are of course completely separate from all that.
ne: As you already mentioned, the ten ASEAN members will form an economic community at the end of 2015. What does that mean for German companies?
Buck: We are currently working on an ASEAN Economic Community roadmap that will explain what the changes will mean for any German SME weighing up a strategic investment decision. We will report on more than ten sectors, as well as on cross-cutting topics such as how logistics flows will change and what the implications for the financial sector will be. There is already free trade between the ASEAN members, but there are still some obstacles when it comes to customs and to harmonising standards. However, logistics will become a lot simpler and things will become far more efficient in general. There will also be freedom of services in the AEC, and workers – including those in the engineering sector – will find moving between countries far more straightforward. Overall, it will be easier to produce, work and, above all, trade within ASEAN.