Intrigued by Chasen Holdings’ recent announcement to the Singapore Exchange that it had won $21 million worth of projects thanks to what it described as “an improvement in the regional economy”, I went to see its management last week to learn more about its story.
Based in Jurong, Chasen, whose core business is the specialist relocation of high-value equipment used in electronics manufacturing and third-party logistics, is one of those small and medium-sized operations that have powered the East Asian economic miracle.
Amid the worst health crisis in living memory that devastated already-slowing economies, the robustness of the manufacturing sectors related to semi-conductors, solar panels and thin film transistor LCDs in Singapore, Malaysia and China has thrown up new business opportunities for the group, led by chairman Eric Ng, chief executive Justin Low and executive director Eddie Siah.
More interestingly, in its 3PL – or third-party logistics – segment, Chasen is taking advantage of opportunities arising from improving road networks in Asia as well as enhanced security systems and vehicle-tracking mechanisms. These detect within seconds if one of its vehicles has gone off the designated route and thus reduces the threat of truck hijackings – the scourge of long-distance transporters.
So Chasen can now safely truck cargo all the way from Singapore to Shanghai, the vehicles threading a route up the Isthmus of Kra and making a broad turn to the right to cross through Cambodia, Laos and Vietnam to enter China. Secure seals introduced by Customs authorities that only they can open help trucks pass checkpoints with relative ease, without the need to open cargo for inspection frequently.
The result is that goods that once used to move by air and sea are increasingly going from factory to factory by the land route. Logistics firms like Chasen are adjusting in other ways as well; if once they preferred full container loads, today they are happy to accept partial loads or, in industry parlance, loose container loads.
Amid the terrible economic contraction, Chasen trucks are going two-thirds full, but that’s fine, according to its top management. What’s more, the firm is planning on expanding its fleet and enhancing frequency.
Or take Singapore’s Omni United, which focuses on replacement auto parts, chiefly tyres, for the global market.
Founder G.S. Sareen says that in the confusion and panic of April, as the world felt the full impact of the Covid-19 pandemic, he cut staff salaries by more than a third.
Then the counter-intuitive began to manifest. Even as sales of new cars and trucks slumped worldwide, the maintenance needs of existing vehicles increased. In his largest market, the United States, people shunned air travel and chose to use their cars over longer distances, causing a surge in demand.
Indeed, for a time there seemed to be a shortage of tyres – demand that he, the owner of a company sometimes called the “Ikea of tyres”, cheerily stepped in to fill by drawing on capacity across his various Asia factories.
Since April, Mr Sareen tells me, business has grown by as much as 70 per cent and margins by up to 40 per cent.
“July was great, and August will be even better,” he says. “I am confident we can keep growing at this rate till the middle of next year.”
Mr Sareen says he is thankful to a responsive Singapore Government and proactive bankers who stepped in to help his US$400 million (S$548 million) firm tide over its worst months. Omni United staff, he says, are seeing salaries restored and even compensated for the pay cuts endured earlier in the year.
Now, he is eyeing another move to improve the bottom line: Working from home in the past months has made him rethink the need for expensive office space in the downtown area.
Why not use the money in a more productive way?
STORIES OF ADAPTATION
Across Asia and its periphery, the tiniest economic green shoots are coming into view as businesses adapt to the changing environment or innovate and go the extra mile for customers and consumers who themselves are adjusting preferences or finding new interests.
In some instances, this is fuelling demand that did not exist previously.
Take Australians, a people defined by their love of the outdoors. For five decades, they were industry leaders in surfboards and the Australian “thruster” design had become the standard for the sport.
However, thanks in part to a strong Australian dollar and rising labour costs, the surfboard industry had seemed in danger of collapse just eight years ago. Companies such as Base and D’Arcy Surfboards were either closing or downsizing.
Now, Australians, denied team sports such as cricket and football, are back to individual pursuits and surfing is booming. According to ActionWatch, a company that generates retail data from action sports sectors, May sales of surfboards in the seven-to-nine-feet category skyrocketed by 36 times compared with the same period last year, and remain buoyant. One prominent manufacturer and retailer told ABC News that recent trade was like “Christmas in July”.
Or take a look at the sector of indoors entertainment, such as casinos, which have had a terrible six months. At the same time, online betting – immune to safe distancing measures – has soared. Investors have taken notice of firms that cater to this booming sector; DraftKings, an eight-year-old company that focuses on sports betting and daily and weekly fantasy sports-related contests, was valued at about US$6 billion as it began trading on Nasdaq in late April. This week, its market capitalisation exceeded US$13 billion as these words were written.
Perhaps it is something to do with the human spirit that it cannot be held down for very long. Whether it is work, play, feeding or the pleasures we consume, we are back at it one way or the other. And sooner or later, the economy reflects it.
Working from home, for instance, has spawned a raft of innovations. One example by local company MaNa is a portable lightweight sit-stand-desk and laptop case, claimed to be the first of its kind. Branded “Rizr”, it is set to formally launch next month.
Besides, the pandemic’s effects are uneven if you look across sectors. Food, for instance, can never go out of fashion. Commodities major Olam, one of Singapore’s most globalised companies, is fortunate to have 85 per cent of its portfolio in food and feed ingredients, all recession-proof.
While the supply-side shock was significant because of forced lockdowns in many of the 67 countries where Olam operates, the firm could function through the crisis because many countries treat food as an “essential sector”. Group chief executive Sunny Verghese told a CNBC interviewer recently that for centre-of-the-plate food items – such as food staples – demand is actually going up because of restocking at both the household and retail levels.
The crisis has also forced Olam to find innovative ways to reach the small farmer in remote areas, jobs once done by field agents. Called an agronomy nudge brain and using machine learning and remote sensing technology, it advises individual farmers through a voice brain that hands down instructions on the best action he can take on his land that day.
The Asian travel industry took the severest beating from Covid-19. But now, governments and airlines are moving apace to work out safe travel arrangements, regardless of the prospects of a trusted vaccine being discovered to combat the virus. This week, Singapore announced that it will allow passengers from more destinations to transit at Changi Airport, if using Singapore Airlines. The International Civil Aviation Organisation (ICAO) now has in place a “Take-off Guidance for Air Travel through the Covid-19 crisis”, rather like the way the industry reacted to the security challenge posed by the Sept 11 airborne terrorist attacks, once the initial shock had passed.
The International Air Transport Association has come up with its own health safety checklist following the ICAO guidance, encompassing everything from pre-arrival notification to aircraft cleaning, onboard air quality and even crew layover norms for airlines to self-assess.
Carriers eyeing the long game are already jockeying for pole position even if they are unable to fill cabins for now; In West Asia, Qatar Airways, the airline that competes with Dubai-based Emirates for Asia-Europe and Asia-North America traffic, just announced it is resuming daily flights to London Gatwick, adding to its thrice-daily flights to London Heathrow.
Japan, which currently bans the entry of all foreign nationals from 146 designated countries and regions in principle, said late last month it will discuss with 12 Asian economies, including Singapore, on ways to resume travel.
None of this is to make light of the morass Asia has slipped into thanks to Covid-19. To be sure, the economic contractions haven’t yet played out fully. Even as China has staggered back to its feet and may even eke out mild growth this year, major Asian economies such as those of Japan, India, Indonesia and Thailand are still in shock. But at some point – perhaps when adequate treatment facilities are built up – the region will figure out that you just need to learn to live with the virus, and move on.
Through it all you can sense the glimmers, the pent-up demand waiting to unload whether in manufactured goods or services like travel and hospitality.
India tops the Asia count in Covid-19 cases. Yet, New Delhi-based Hero MotoCorp, which lays claim to being the world’s largest manufacturer of motorcycles and scooters, sold 514,509 units last month. That’s 14 per cent over the previous month and more than 95 per cent of wholesale dispatch numbers of the corresponding July last year.
Can’t yet travel to Japan for your favourite sushi? Never mind, many Singaporeans are paying top dollar to enjoy a slice of Japan in their home city. Try getting a table reservation at Sushi Kimura – one of Singapore’s finest, and priciest, Japanese restaurants.
Mr Sareen likens the situation to a pile-up on a Formula One race track where the flag car emerges, the pole position becomes irrelevant and contestants bunch up while the track is cleared for the contest to start all over again. He isn’t too off the mark.
Unlike in the Asian financial flu of 1997, many countries in the region were in better shape when the current crisis struck. There’s no reason to doubt that they will bounce back sooner when the moment arrives. And since an economy is nothing but a collection of a nation’s businesses, it stands to reason that firms that saw opportunity during the crisis and recognised that many of the old ways of doing business are over will likely lead the way.
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