In the first week of May 2016 the Asian Development Bank (ADB) for the first time is holding its yearly meeting in Frankfurt, Germany. Focus topics will be in line with the ADB´s 2020 strategy. These are centred around the prioritized issues of clean energy, climate change as well as sustainable production and supply chains.
The ADB is the biggest financing organ in the Asia Pacific Region, supporting development projects lowering poverty and encouraging inclusive, ecologically sustainable growth. Overall, the bank counts 67 member states, of which 48 are located in the Asia-Pacific region. Germany is both founding partner and biggest European share holder. In 2014, the lending volume for the first time surpassed 13.7 billion USD. Until the year 2017 this figure shall be raised to 20 billion USD. In the future, the bank wants to foster private investment in particular.
In order to overcome the consequences of climate change, Asia will need around 240 billion USD until the year 2020, another estimated 800 billion USD will need to be invested in infrastructure. In facing the immense challenge of redirecting the economic growth of the Asian markets into a more ecologically sustainable direction, it is evident that a sole reliance on public funds will not be sufficient. This opens up substantial opportunities for companies in the field of renewable energy, infrastructure, engineering consulting and sustainability management.
In the field of renewable energies Thailand currently is the frontrunner amongst ASEAN nations. According to the Power Development Plan until 2036 the contribution of renewable energy to the national energy generation shall be raised to 25%, a 10% increase compared to the 2015 level. The solar branch is promising the strongest expansion, with a planned capacity of 6000 megawatts. This would make solar energy the biggest source of renewable energy. Currently, ground and roof installations make up for around 1600 MW. Other quickly expanding branches are biomass energy, wind energy, recycling and waste management as well as green construction. Following in Singapore´s footsteps, Jones Lang LaSalle, an American real estate consultancy, forecasts Thailand to become the leading market in ASEAN for green buildings. Moreover, the Cash-for-Clunkers initiative by the energy ministry offers great opportunities for foreign companies. Incentivizing the switch from inefficient machinery to energy saving options by financing 1/3 of the costs, alone in 2012 70 companies replaced their old machinery for new, mostly imported one.
But other countries in the region too, offer opportunities. Waterpower is Myanmar´s biggest energy source and urgently needs further development. European companies increasingly enter the market. French EDF will be the first to invest 1.4 billion USD via a public private partnership. The Shweli-3 hydroelectric plant, located in Shan State, will have a capacity of 1050 MW. American ACO will invest 480 million USD in two solar energy plants opening in 2016. Other identified potentials are wind, biomass and geothermic energy.
In tropical Malaysia, rain harvesting technology bears great potential. In 2011, the Malaysian government made rain water protection systems obligatory for new buildings. The market size is estimated to be worth close to 9.4 million USD and growth potential for the young market is thought to be huge as increasingly many home owners buy into the advantages of flooding protection. Moreover, a growing number of local solar manufacturers such as Tek Seng Holdings is settling in the free trade zone Penang Island. Experiencing double digit growth these companies are expanding their capacities. Tek Seng Holdings is planning to invest 43 million USD in its production capacity in 2016, but the machinery needed in the production of solar technology needs to be imported.
BDG Insights
The advancing refocusing on sustainability experienced in the Asian markets holds great potential for international companies as high-tech technology and specialized consulting services, often not available locally, are urgently needed. With the ADB increasingly focusing on sustainability, substantial investment projects lay in the future. For their realization Asia is looking west. The ADB´s yearly conference is not without a reason located in the country known for its energy transition.
