South and Southeast Asia - the industrial growth market of the future

Paul Boughton

Home to more than half the world's population and an ever-increasing share of its industry, the South and Southeast Asia region has become an economic and industrial powerhouse

The nations of South and Southeast Asia are weathering the current economic storm with varying levels of success. India remains among the few nations worldwide posting growth in gross domestic product (GDP), while the export-dependent Asian Tiger economies of Hong Kong and Singapore are feeling the squeeze from reduced global demand.

Foreign investment

Still, the region remains a major target for foreign direct investment.

"Everyone acknowledges that this region represents the growth market of the future," says Kay Jin Tan, Managing Director of Trelleborg Engineered Products Asia. "In the longer term there is no doubt that Asia will grow faster than any region in the world."

"It is positive that US and European companies are still looking to invest here," says Weng Chong Lee, President Marketing Asia Pacific for Trelleborg Sealing Solutions.

Weng Chong describes the current business climate in the region as more competitive than before, with companies fighting over every deal. Many companies are looking to serve the stable domestic market rather than export.

"Our customers who sell within Asia are less affected than those exporting to the U.S. and Europe," he says.

Southeast Asia is growing as a centre for the aerospace industry. Malaysia is positioning itself as an assembly hub for aerospace component manufacturers, while Singapore is growing as a service hub for the aerospace maintenance, repair and operations business.

"We see many European and US aerospace companies relocating assembly and manufacturing plants to this region to leverage the lower cost base, availability of workforce and close proximity to the growing marketplace," Weng Chong says.


Thailand is positioning itself as the Detroit of Southeast Asia with production of cars and pickup trucks both for local consumption and for export, while the south of the country has a growing petrochemical industry. Malaysia is also experiencing growth in its agricultural sector due to continued strong demand for its palm oil.

While automotive manufacturers in most Western markets continue to struggle, their subsidiaries in India have fared considerably better.

"India is becoming a hot spot for small cars," says Dinesh Pawar, General Manager of Trelleborg Automotive India, whose factory near Delhi produces anti-vibration systems for Maruti Suzuki, Toyota and Ford, among others.

"The OEMs (original equipment manufacturers) are now targeting the rural market and getting a good response. Banks are offering good interest rates to buyers, and this is contributing to a boom in sales."

Car sales were up 8.3 per cent in June, and India's GDP growth is expected to slip from last year's 6.5 per cent to about 5 or 6 per cent this year, before returning to around 7 per cent in 2010.

Such growth rates have kept up optimism in the world's biggest democracy.

"We recently had elections, and the people are expecting a lot from the government," Pawar says. "People realise that we are lacking in infrastructure, and the government is focusing on bringing it up to the next level. Better roads and infrastructure will help the automotive industry."

Pawar expects Trelleborg to benefit in turn. "For Trelleborg India, the coming years will be good."

Kay Jin Tan is overseeing Trelleborg Engineered Systems' latest investment in China, a production facility in Qingdao.

"We are moving up the value chain and providing more value in our products and solutions," he says.

"In the past we made products that we sold more or less as a commodity. What we provide now is more engineering content."

Tan says the region has benefited from the fact that many governments there have learned the lessons of the past.

"The governments have enough reserves and are putting up stimulus packages, so there is more confidence here now than there was during the financial crisis of 1997," he says. "Everyone is optimistic that this current crisis too will pass, and when it does we will come up stronger than ever. This is a good opportunity for Trelleborg. Our market share is small in Asia today, but if you capture market share in a growing market, the potential is tremendous. We are very well positioned, as our technology gives us a competitive edge in the region."

Dynamic environment

"Population-wise, South and Southeast Asia comprise some very large countries," says Peter Nilsson, Trelleborg President and CEO. "Western companies seem to appreciate the potential of India, but many of those companies seem to underestimate the other countries as markets. Trelleborg does not, and I would say that almost all of our solution segments have an interesting future in this rapidly developing part of the world."

Following this logic, where market potential is just as important as low production costs, Trelleborg has invested heavily to increase company presence in Asia, as well as in Latin America and Central and Eastern Europe since Nilsson became CEO in 2005, and the trend looks set to continue.

This development has gradually changed the historically strong company focus on Western Europe and North America, and thereby the Trelleborg global footprint.

"South and Southeast Asia make up a very dynamic entrepreneurial environment," says Nilsson. "Our strategy is to grow here with local management and personnel resources. An important element in this process is high education levels.

"Although India is the classic example, there is a strong ambition to improve education levels in all of the countries in the region."

In South Asia, important Trelleborg plants are situated in India in Noida, outside Delhi (automotive), and in Bangalore (seals), as well as in Sri Lanka in Kelanyia (industrial tires). Recently, a Trelleborg centre for engineering and sales of marine systems (fender systems) was established in Ahmedabad, India, and more is to come.

"We are well positioned for the future in India and Sri Lanka," Nilsson says. "We have modernized our plants and are working with interesting customers."

He points to Indian Railways (see T-Time 4-2008) and Indian car makers as examples, and the offshore center in Kerala as a future business opportunity.

In Southeast Asia, several of the economies are showing impressive growth rates.

"Singapore has become sort of a hub for us," says Nilsson. "It's a country with high standards, an extremely international environment, competent people and good links to its neighbours."

With strong manufacturing bases and substantial populations, Vietnam and Malaysia are undergoing rapid development, and Indonesia is expected to catch up. Samples of the business in the region for Trelleborg includes seals for aerospace, sales of which are growing in Malaysia with Singapore as the service hub. While agricultural and, especially, forestry tires are benefiting from Indonesia's ambition to be the global leader in palm oil production, which is used to produce biodiesel.

"Just as BRIC has been an important acronym for the group of fast-growing economies in Brazil, Russia, India and China, we will hear more and more about VISTA, which comprises Vietnam and Indonesia as well as South Africa, Turkey and Argentina," Nilsson says. "VISTA will be the next wave of rapidly emerging markets in focus for both investors and global industrials, and Trelleborg has ambitious plans for this development."

Offshore and afloat

In offshore, the float-over process is where a topside structure is transferred from a transportation vessel onto a pre-constructed structure. The transport vessel enters the jacket, and by ballasting, float-over hardware, Leg Mating Units (LMU) and the Deck Support Unit (DSU) work together to transfer the load from vessel to jacket. Once complete, the vessel exits the jacket.

"Float-over is a definite trend," says Julian Wee, Managing Director for Trelleborg in Singapore, where the LMUs and DSUs are manufactured. "Since we entered the market a couple of years ago, we have secured two major projects, in Qatar and Turkmenistan."

The LMUs consist of a steel structure incorporating rubber elements to achieve specified spring stiffness, depending on the expected design loads and metocean data.

"The float-over process is more cost-effective than the alternative, floating cranes," Wee says. "As the weight of the topside structure increases, the number of suitable cranes diminishes."

Seals for Indian aircraft

The light combat aircraft Tejas is India's first modern fighter aircraft, designed to meet the requirements of the Indian Air Force. Deployment will start in 2010. The Tejas, most often described as a product of Hindustan Aeronautics Limited (HAL), has actually been developed by a national consortium of more than 100 defense laboratories.

Trelleborg Sealing Solutions in India has supplied T-seals, Plus Seals, Wear rings, Excluder seals, O-Rings and Back-up Rings for the advanced digital fly-by-wire flight control system and the hydraulically actuated control surfaces, along with seals for main and nose landing gears.

Thailand, Indonesia and Malaysia are global giants in natural rubber, accounting for more than 70 percent of the world's production. "These three countries, along with Sri Lanka, are also the most important suppliers to Trelleborg," says Pio Gizzi, Vice President Group Purchasing, Raw Materials at Trelleborg.

Wheel Systems accounts for more than 50 per cent of Trelleborg's consumption of natural rubber annually. "The use of natural rubber in tires is fundamental and required for performance reasons," says Gizzi. The natural rubber content is especially high in industrial tires, products for which the Trelleborg plant in Kelanyia, Sri Lanka, has the advantage of sourcing locally. "Sri Lankan rubber quality is excellent and can be delivered quickly, which makes this a very attractive solution for us," says Gizzi.

Rubber industry

The history of Sri Lanka's rubber industry dates back to the late 19th century. Trelleborg has played a part in the local industry for more than 20 years.

"Today we have two factories in Sri Lanka," says Antonio Garcia, Managing Director for Trelleborg in Sri Lanka. "The total volume of tires produced in 2008 exceeded 29 000 tons."

Recently major investments have been made to upgrade these production facilities to world-class efficiency and to cope with even higher volumes.

Besides upgrading the infrastructure of the plant and installing new technology, focus has also been on developing the competencies and working conditions for the employees.

"Over the past few years we have put in considerable effort to enhance the relations with our employees, and we are now regarded as one of the best employers in Sri Lanka," Garcia says.

"Nevertheless, we will not be complacent about our achievements and we will strive to achieve even better results in the future."

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