Hard hit by the global recession and regional financial crisis from 2001 to 2003 and the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, Southeast Asia has fully recovered since and has become one of the fastest growing regions in the world.
Hard hit by the global recession and regional financial crisis from 2001 to 2003 and the outbreak of Severe Acute Respiratory Syndrome (SARS) in 2003, Southeast Asia has fully recovered since and has become one of the fastest growing regions in the world.
Acouple of months ago, A&S had the pleasure to meet and speak with a number of major players in Singapore, Malaysia and Thailand to find out what has been moving the electronic security industry in Southeast Asia. This report is a summary of our findings.
Market Overview
Southeast Asia (SEA) refers to the 11 countries situated south of China, east of India and north of Australia, including Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, East Timor and Vietnam. When combined with other countries in the Asia-Pacific region, they generated a sales recordfor surveillance productsof US$1.6 billion in 2006, based on the estimate by Steven Tan, General Manager of Security Electronics Division at Chemcoa fairly active regional distributor of high-end electronic security products. In terms of security market, all of these SEA nations have been growing quite rapidly in recent years, with the exception of East Timor given its socio-political unrest. And this market expansion phenomenon was confirmed by Bosch: "Aside from China and India, ASEAN (the Association of Southeast Asian Nations) as a cluster is one of the most promising areaswith the highest growth ratefor us worldwide," said Doris Grammer, Vice President of Asia Pacific for Bosch Security Systems.
Take Vietnam for example. The count ry, according to the U.S. Commercial Service, had an estimated market sizefor safety and security equipmentof $90 million in 2006, with its annual GDP growth surpassing 8 percent for the past couple of years. "With many Taiwanese and Korean companies setting up their factories inVietnam, the country's security market has experienced 7x growth over the last two years," said Daniel Lim, Business Leader for South East Asia at Honeywell Security. Primary sales of safety and security equipment have occurred in the Vietnamese construction market, where development of transport (roads and bridges), power (thermal and hydro), oil and gas (plants and pipelines), environment (water drainage) and buildings (hotels and commercial sites) has outpaced other types of development projects. Competition in these sectors is intense, though, as major suppliers include those from Japan, England, Korea, Malaysia, Singapore, China and Taiwan.
Others like Indonesia and the Philippinesaccording to another U.S. Commercial Service reportthat were in a more or less financially lackadaisical state have also bounced back, growing at triple digits every two years with respect to use of security and safety paraphernalia.
In Indonesia, several bomb attacks and threats to foreign embassies and tourist sites in various cities have underscored the need for heightened security. To prevent future attacks, the government of Indonesia has had plans to form a special counterterrorist agency, as an expansion of the current counterterrorist unit managed by the Office of the Coordinating Minister for Security and Political Affairs. This agency will have branches in cities throughout the country, requiring all kinds of security equipment.
The total value of imported products- -from Japan, China, Germany, France, South Korea and Taiwanin security and safety equipment rose remarkably in recent years; in 2006, the value climbed to approximately $300 million, an annual increase of more than 100percent based on the estimate by the U.S. Commercial Service. The demand for security and safety equipment in Indonesia will continue to increase as more trade centers, malls and apartments are built in the next few years. At least 16 new trade centers and 44 apartment complexes were completed in 2006. Such facilities need security equipment and systems for access control systems, card systems, intrusion alarms, door entry systems, video surveillance systems, smoke detectors, fire alarms, anti-shoplifting devices and parking lot management systems.
Although the Philippine market has become more price-conscious in recent years, demand for safety and security products is expected to surge due to the growing need to protect commercial and industrial establishments, residential communities, sensitive infrastructure and personal properties. New security-related technologies and solutions continue to be introduced to the local market asthere is growing interest in their varied and specialized applications. Meanwhile, the Philippine government's current campaign against terrorism and criminality has stressed the importance of such security provisions. Industry estimates peg the safety and security market to be between $35 to $50 million, and industry players project a 10- to 15-percent annual increase in sales of safety and security products over the next few years.
Zoom in on Singapore
With merely a population of 4.55 million and a land mass of 682.7 square kilometers, Singapore had experienced, in 2006, an astonishing GDP growth rate of 7.4 percent unproportionate to its rather limited natural resources. With respect to security electronics, most studies and interviewees pointed out that Singapore has reached a certain point of maturity and saturation, so it was difficult to pinpoint an exact market size figure. Recent security projects have all been upgrade and refurbishment ones, with an estimated annual value of $70 to $80 million. There are, however, a few new construction projects on the way, with a total infrastructure cost in billions.
Market Drivers & New Projects
The most exciting security projects are, of course, the two integrated resorts where there willbe - -when completed in 2009 and 2010, respectively- - purpose - builtcasinos , theme parks,apartment complexes and commercial establishments to boost tourism. The first was awarded in May 2006 to Las Vegas' Sands Corporation; the $3.6-billion casino resort is expected to be operating by July 2009. Analysts said the Marina Bay project would be the world's most expensive casino resort, situated on 51 acres of waterfront property opposite downtown Singapore that city planners are turning into a new central business district. Sands will receive a 30-year concession to operate the casino, which translates to approximately $3.4 billion a year in revenue.
The second resort, which is valued at $3.4 billion and scheduled to open in 2010 on a site of 121 acres on Sentosa Island, will be built and operated by Malaysian Genting International (with Universal Studios as a non-equity partner). The government evaluated various proposals based on tourism appeal, architectural design, level of investment and strength of bidding consortia and partners, and chose Genting for its plan to help attract 17 million visitors a year by 2015. This plan is also central to the government's $12-billion redevelopment project of Sentosa, which is connected to Singapore by a 710-meter, to-be-expanded highway.
According to Lim of Honeywell, banking, petrochemical, pharmaceutical, high-tech semiconductor foundries and high-profile military sites are othe r booming market segments. Based on the record of the Association of Banks in Singapore, there are, at present, 111 commercial banks (5 local full banks, 24 foreign full banks, 35 foreign wholesale banks and 47 foreign offshore banks), 49 merchant banks and 45 banks with representative offices on this small island. Maintenance and upgrade (to IP-enabled systems) contracts alone account for a significant portion of this nation's security business.
The expansion plans of ExxonMobil, Shell and other chemical and energy plants on Jurong Island are also vied over by many international system integrators. When asked about Singapore's role as a "Biopolis" in Asia, Co-Chairman of the Economic Development Board Philip Yeo commented: "The breadth and depth of the biomedical sciences manufacturing activities is testimony of Singapore's track record in high value-added manufacturing, technology leadership and intellectual property protection. It also underscores our ability to effectively support the supply of pharmaceutical products to global markets through good infrastructure, excellent manpower capabilities and efficient logistics." With a number of world-class research institutes busy setting up divisions and labs on this island nation, it is anyone's guess as to how much security, especially access control, is worth in this rapidly growing vertical.
Currently in Singapore, public agencies have begun to implement biometric technology into their systems. However, the market is far from saturated. Government institutions across Singapore stress the need for increased security and look to biometric technology to replace or complement their security procedures. Some agencies, such as the Immigration and Checkpoints Authority, have even identified DNA comparison as the future of biometric security in Singapore. The Singapore government is also considering new measures requiring people using government e-services to log in by scanning their fingerprints or swiping a smart card, as government agencies tighten up computer security amid growing concerns over identity theft. With the endorsement of government agencies and local organizations and the increasing integration of biometric applications into devices, Singapore's biometric market looks set to continue its growth.
Major Players
Local manufacturers seem to focus only on access control products, and the notable ones are ADC Technologies, ASIS Technologies and Elid. Video surveillance products are imported from Taiwan, China, Korea, the U.S. and a few European states. Despite its size, Singapore has well over 1,000 active security distributors and system integrators. International big names such as Bosch, Tyco Fire & Security, Chubb (UTC Fire & Security), Stanley Works, Securitas, Johnson Controls, Siemens Building Technologies, etc. are no exception. Guard services provided by G4S and CISCO are well received in Singapore and by its neighbors.
Malaysia, Truly Asia
Though Malaysia has not experienced the terrorist attacks that have plagued neighboring Indonesia, nor the ethnic unrest that is occurring across their border in southern Thailand, the country's location along the Malacca Strait and in the South China Sea exposes it to several potential threats, as evidenced by pirate activity and the 2000 kidnappings off of Eastern Malaysia's coast by Philippine terrorists.Cmbined with Malaysians' increasing desire to install security systems in their homes and offices, the outlook of the safety and security industry in Malaysia remains resilient.
Recuperating from its political disquiet almost two years ago, the Badawi administration is finally injecting funds back into infrastructural projects, of which security is a vital elementconsidering Malaysia's sensitive religious makeup and geographical stronghold. It was estimated, by Chemco's Tan and Prisma Bytes' CEO Shaji N.M., that the 2007 security market for Malaysia is between $200 and $250 million.
Market Drivers & New Projects
Similar to Singapore's, the Malaysian government has also been promoting tourism (hence the section title), and part of this initiative involves city surveillance. "The nationwide project was supposed to be done two years ago, but the money wasn't there," explained Tan. "When all 13 states are fit for city surveillance in the next four to five years, there will be over 2,600 Vicon IP cameras that link directly to Kuala Lumpur's police headquarters." In the capital city alone, more than 1,300 street junctions will be watched by Bosch IP cameras in three years' time.
"Transportation (including airports and seaports), oil and gas, and Islamic banking are also growing very fast," commented Alex Ng, Executive Director of Viewtech & Communication. The market size for airport and seaport security equipment in Malaysia in 2006 was about $25 million. According to industry sources, the demand high-value electronics export industry.
Malaysia's two largest ports, Port Klang and Port Tanjung Pelapas, began participating in the U.S. Container Security Initiative (CSI) in 2004. Under the program, the U.S. government has made some direct donations of equipment, training, and infrastructure needs to the Malaysian government under the CSI Megaports project. Other areas of airport/seaport security equipment include computerized access control systems, high-tech perimeter control systems (including those employing infrared technologies), smart cards, CCTV systems, multi-zone door frame metal detectors, baggage reconciliation systems, advanced explosive and radiation detection scanners, and biometrics-based integrated passenger profiling systems.
The $515-million, dual-use storm water management and road tunnel, or "SMART Tunnel," is a storm drainage and road structure in Kuala Lumpur; the main objective of this tunnel is to solve the problem of flash floods in Kuala Lumpur and also to reduce traffic jams along Jalan Sungai Besi and Lok Yew flyover at Pudu during rush hours. "Videotec casings were specified for this project because cameras need to be completely waterproof, for a prolonged period of time," explained Ng. Other large-scale transportation projects , said Paul Mun , Sales Director of Viewtech & Communication, are taking place on Penang Island where a new, 13.5-kilometer bridge and a mass rapid for airport and seaport security equipment between 2005 and 2009 is estimated at $120 million. U.S. companies presently dominate the market for this sub-sector. Checked baggage and carry-on luggage x-ray equipment and passenger metal detectors will be the largest categories of airport security equipment for airport security upgrade projects in Malaysia over the next few years. Cargo x-ray systems will also be of increasing interest, given the continuing expansion of Malaysia's transit system with 52 stations are being constructed.
Malaysia is also the head of the Organization of the Islamic Conference, which is an inter-governmental body with 57 member states and a permanent delegation to the United Nations. Given this unique status, a lot of Malaysian system integrators were specified in the infrastructural and security projects for the Doha Asian Games last year, said Shaji of Prisma Bytes. Investment influx in the form of "Islamic Banking"a term coined by the Wall Street Journalis now easily palpable in this Islamic nation and is, in turn, triggering growth in the security business. Combined with upgrade projects for commercial and office buildings, the demand for burglar and fire alarm systems, electronic lock systems, card access systems, CCTVs and intercoms will continue to expand for sure.
The residential sector, suggested Mun, is on the rise as well, especially for the south of Malaysia where it borders with Singapore. The outlook of the household sector is very promising, with more people beginning to understand and appreciate the need to install home security systems. Burglar and fire alarms, lock systems, safes and electronic gates are common features in high-end homes. In middle-income households, the demand for burglar alarms and electronic gates is increasing . There have been a number of incidents of mugging and rape in parking lots of large building complexes recently. The Housing and Local Government Minister recently gave a directive that commercial buildings and public places with parking lots install CCTVs. This directive will lead to fruitful opportunities as many building owners still have not installed CCTVs at their premises for security control.
Major Players
There is no local CCTV production, and active access control players are Elid and Castle. "Video surveillance products in Malaysia rely heavily on quality imports from China, Taiwan and Korea," said Danny Lim, Senior Product Manager of Surveillance System Division at FTEC Networks. Both Ng and Lim think Taiwanese products still have the upper hand in terms of price and performance. Major security distributors and system integrators named by industry sources are Sapura, ADT (Tyco), GeeLong, SensorLink, Johnson Controls and Prisma Bytes; strong, pure system integrators include Pernec Group, Honeywell and Armour Built.
New Thai Spice
In response to both global and domestic requirements for greater public security, the Thai government is increasing its investment in safety and security equipment, particularly at airports and seaports. In addition to international requirements for stricter security measures specifically at ports, the ongoing unrest in the three southern provinces of Thailand has prompted the government to increase its investment in stricter safety and security measures and more advanced technological abilities to ensure greater public safety. Meanwhile, the unrest calls for operators of high-threat areas like shopping centers to increase security measures and technology to provide safety for their premises, employees and customers. In addition, the demand for personal and private property security has also risen as a result of the high-end residential property boom and the increasing purchasing power of consumers in this specific segment.
Thailand is a market of growing demand for secur i ty devices and technology. According to David Viccars, Managing Director of Chubb Thailand (a company of UTC Fire & Security), the 2007 electronic security market for Thailand is projected to be $150 million, while guarding services are valued at $40 million.
Market Drivers & New Projects
Both the Thai government and private sector are expected to increase their safety and security spending to ensure greater capability to cope with growing security uncertainties resulting from both domestic and global issues. To comply with international safety requirements and its own domestic needs for greater public safety, the Thai government is expected to invest in additional security devices and better technology at airports and seaports.
According to Johnny Trivitayakhun, Managing Director of Semple Cochrane (As i a ) , t h e n ew S u v a r n a b h umi International Airport has over 1,500 network cameras installed. "There are 22 royal palaces throughout the country, and each of them is adjacent to an airport. These airports have a very high demand for security as well," said Trivitayakhun. The U.S. Commercial Service also suggests that improvement work scheduled for four other international airports, 25 provincial airports and quite a number of military airports presents sizable opportunities for security equipment.
In addition, the Laem Chabang Port in Thailand needs to comply with the U.S. CSI program by implementing tightened security measures for cargo handling. The port authority has already invested $34 million in security measures and services. Other smaller ports such as Map Ta Phut Port, Songkhla Deep Seaport, Nongkhai River Port, and Nakhonsawan River Port are also potential customers.
The endless stream of terrorist activities in southern Thailand has prompted the government to beef up city surveillance. Approximately 9,000 IP cameras will be installed in this region and be connected directly to Bangkok, and more counterterrorist efforts will be made in other major cities and tourist attractions.
The retail sector is another major market for security electronics. The U.K. chain Tesco is by far the largest and most aggressive foreign retailer, said Viccars. "They have expanded hugely in the last few years with some 100 'mega malls' and some 250 smaller convenience stores nationwide." Carrefour (France) is also in Thailand, but on a more gradual growth curve focusing mainly on Bangkok with 22 stores. "Macro (the Netherlands) was the first foreign retail chain in Thailand but only has about 20 stores," Viccars continued. The Thai-owned Central Group, including Tops, has a range of malls and is the largest retailer in Thailand; the group also owns hotels and has a large property portfolio and other interests. The Thai-owned Mall Group operates a mix of high-end mega malls like the Emporium and Paragon and the more traditional Thai malls. "Jusco from Japan is also here, with about 15 stores; 7/11 is here with over 3,000 stores," recounted Viccars. All these mega malls plus super condominiums and mixed developments warrant limitless possibilities for vendors of CCTVs, access control and electronic article tracking systems, said Somphop Poshakrishna, Deputy Managing Director of Chubb Thailand. Commercial property and residential high rises are major users of safety and security equipment. Industry sources estimate that the sector represents approximately 50 percent of the demand for security equipment and services.
Major Players
There is no known local production of security electronics. Major distributors, as suggested by Trivitayakhun of Semple Cochrane and Chubb's Viccars, include Pacific Technology Distribution, Security Communication Center, Seaworld Supply & Trading, Digitalcom, AES Group, AK Engineer and SGD International. Security system integrators include Tyco, Chubb, Semple Cochrane and Secom; service providers for guarding are still very much in demand and include Chubb, Gunnebo, Leeco and Kingdom.