Asian Economy Unlocks Static Demand

Paperboard Packaging, July, 1999

Singapore-A faster than anticipated rebound of the Asian economy is generating renewed consumer and investor confidence throughout the region. Although Asian regional prosperity has yet to reach the pre- crisis level of three years ago, packaging companies are serving as a barometer of current upward movement. Even in the lackluster European carton board market, signs of Asian recovery are being felt with a return to exports of virgin grade board to several countries, including China, South Korea and Thailand.

While the national economies of Japan and Indonesia are increasingly seen as being distanced from the remainder of Southeast Asia (because of their endemic macroeconomic problems), the rest of the region is again starting to rebuild its prosperity.

Jane McDermott, director of CMM International Events, says the unexpected upsurge in Asian markets has many economic forecasters and several exhibiting companies predicting solid growth for most industry sectors. "Instead of the negative growth originally predicted, the International Monetary Fund and the Asian Development Bank (ADB), recently reported that the Asian markets on the whole actually grew by 2.6 percent in 1998," she says. The ADB now projects average growth in Asia will be 4.4 percent for 1999 and 5.1 percent in 2000.

An expectation that the collective manufacturing sector may produce a 10 percent growth this year is excellent news for the corrugated and converting carton sectors.

According to Philip Wong, president of the Asian Corrugated Case Association, Asia's share of the world corrugated market will be in the 30 to 36 percent range by 2005, making it the world's largest.

Meanwhile, international packaging companies are again flexing their expansion muscles in anticipation that Asia will long-term hold the promise of major development opportunity. One company, SCA, is taking a long-term view on Asia, and has just acquired an 11 percent stake in Singapore's Central Packaging Group.

SCA paid SEK26 million ($3 million) for the 50 million square meter per year producer of corrugated board and other packaging. SCA has an option to expand its interest to a controlling stake of 51 percent within five years. The Singapore group will complement its existing Asian network with Weyerhaeuser. Central Packaging Group has operations in China, Singapore, Malaysia, Thailand, and Indonesia. Anthony T.H. Chen, its current majority owner, is said to possess unique in-depth knowledge and an ability to contribute to the management of the Chinese operation.