While the world focuses on BRIC – Brazil, Russia, India and China – global investors may be missing agribusiness opportunities in ASEAN. Since its launch in 1967, ASEAN is consolidating as a credible, rules based trading bloc.

ASEAN´s relatively low profile is attributed to “mutual ignorance” in its relations with global markets. With the exception of Singapore, which establishes itself as a financial and trading centre, economic activities are broadly local or regional. Media attention on Myanmar’s poor human rights record and, in a number of its member states, the incidence of corruption and calamities downplay its opportunities. Wedged next to China and India’s markets, where 46% of humanity lives, ASEAN is understandably overshadowed.

The forthcoming publication of the book by Dr Rolando Dy2 – “Food for Thought: How agribusiness is feeding the world” – offers to correct this “mutual ignorance”. First, by informing the world about what ASEAN can offer in agribusiness; and second, what ASEAN needs to know about its own opportunities.Dr Dy argues for agribusiness as a motor for growth and as a pillar for ASEAN´s leadership.

Agribusiness – why is the world “missing” its allure?

The success of ASEAN countries in service industries serves as inspiration for its industrial aspirations: Malaysia’s tourism success paints a positive view of ASEAN. The Philippines´ business process off-shoring remains resilient, globally ranking it second only to India – a country fifteen times its size. Thailand and Vietnam are feeding the world with their agricultural exports, while Indonesia is becoming ASEAN´s lynchpin in global geopolitics through its G20 membership.

The importance of agribusiness to ASEAN belies its 13% to 15% GDP contribution in most ASEAN countries, with the exception of Singapore, Malaysia and Brunei. In spite of its fundamental role in nation-building and self sufficiency in food, agriculture suffers from benign neglect by governments and investors. In polite society, ASEAN agribusiness is “Cinderella” waiting to emerge in the ballroom with her prince.

So, why is the world missing its allure? I suspect the reasons are several, among which are: a) agriculture’s perceived status as a marginal activity; b) educational bias for “white collar” jobs; and c) corrupt and inept delivery of government services. Let us take each of these factors in turn.

The caricature of ASEAN agriculture is deeply ingrained. It is depicted as a farmer toiling their land with their bare hands, assisted by a water buffalo. While a tranquil life amidst the rural landscape is a welcome sight, the picture conveys subsistence farming as an accepted industrial model. Without linkages to logistics, technology and markets, agriculture indeed will remain subsistence, killing any hopes of ASEAN becoming the bread basket of the world.

Education is geared towards professional qualifications, rather than vocational skills. Farming families aim to send their children to universities to escape a life of servitude in agriculture. However, with graduates exceeding local demand, labour migrates to seek opportunities outside their home countries. Hence, it is not uncommon for qualified professionals to take on jobs requiring skills below what they were trained for – medical doctors work as nurses, accountants as care-givers, or teachers as domestic help.

How about governments … what roles are they playing in this dismal saga?

Flawed agricultural policies such as land reform in the Philippines, heavy regulation in Malaysia, and outdated tenancy arrangements condemn agriculture to subsistence living. A product of the 1960s agrarian reform, the Philippines distributes land for the landless. Without access to capital and entrepreneurial temperament, new landowners are largely incapable of matching previous agricultural output and productivity. With former landlords deserting agriculture, it was not long before farming fitted perfectly the caricature of a subsistence farmer.

After 44 years of failures, is it time to dump a policy that only produced misery?

Distribution of land resembles arbitrary sequestration, coupled with mob rule, with “beneficiaries” who never tilled the land queuing for the largesse. Inadvertently, in the midst of such chaos, bureaucrats commonly broker land transfers and payments, arguably for their own financial gain. Again, this is not unique to the Philippines. However, the country is unique in persisting with failures – hoping that the future will resolve itself while the present postpones its day of reckoning.

Recently, there has been a lot of chit-chattering, specifically after the Third Plenum, about the pace, scope and direction of reforms in China. Specifically, everybody seems to be debating the pace of the opening up and innovation in local capital markets. If we focus specifically on the Chinese stock market, both the domestic Yuan A shares segment and the overseas depositary receipts (mainly HKD-denominated H shares in Hong-Kong and NYSE/Nasdaq listings) it is no mystery Chinese equities have been, for the most part, horrendous for most of the last 6 years.

In fact, we had the popping of the bubble on the Mainland in early 2008 from which domestic shares never really recovered. Up to that point, China was engulfed in a mega 90’s-style stock-frenzy that, predictably, ended up in tears and anger. Since then, A-shares had had their ups and downs, but for the most part they lagged behind every other exchange on the planet, except maybe the most derelict Southern European Bourses. The Hang Seng China Enterprises Index (CEI from now on), the benchmark for the H shares which traded at a huge discount during the boom years, have fared a bit better but not by a wide margin.

There have been some temporary and localised bubbles, particularly in consumer goods names between 2009 and 2010, but overall Chinese stocks have been largely catastrophic. We all know how the story goes: around 70% of the CEI is made up of state-owned enterprises operating in energy and heavy industries complexes or banks. Notoriously not exactly the best sectors of the Chinese economy in terms of earnings prospects & visibility and quality of management and corporate governance. Basically, the market there has not reflected the rise, symbolised by the explosive Internet revolution of the last 3-4 years, of the Chinese consumption story.

Plus, there is the issue of the sketchy accounting and IPO practices that have led to a recently lifted ban on mainland IPO’s and a derating of the multiples for companies listed in Hong-Kong and elsewhere. For example rarely do HK listings obtain forward P/E higher than 11-12, while for instance, a Taiwan or Malaysian listing can go up to above the 14 threshold.

Still the Chinese stock market is not dead; in fact, instead of a Nikkei generational slump, we might be close to a turning point. Why would it be so? If you think about it, the decision to allow companies to go public again in Shanghai/ Shenzhen might reek of desperation, as state-owned enterprises (SOES) could be stuck with a refinancing mountain to climb. It is calculated that between paper maturing and interest, the Mainland corporate bond market has a 2.9 trillion dollar liquidity problem to solve. We all know how there isn’t a truly liquid secondary market for this kind of securities in China, where basically corporate bonds are another tool for state-owned banks to circumvent their lending limits to SOES.

Therefore, it isn’t strange that it’s mostly SOES apparently jumping on the bandwagon of the new IPO open tap. In a recent article Bloomberg pointed out how there are 760 companies in China with plans to go public, most of them still being SOES.

Is it all a pump and dump scheme? Apparently, the market has decided so far to trust the promises of reforming the state productive apparatus of the country — it isn’t maybe too coincidental that the biggest (and most successful) H shares IPO last year in Hong-Kong, was for Cinda Asset Management Corp., the bad bank created in 1999 to clean up the balance sheets of the major financial institutions of the country. The management of the company expect to bring in a big deal of fresh, new business, thanks to the inevitable clean up of the bank books after their post-2008 Great Keynesian Lending Extravaganza. Basically, China is bracing herself for printing lots of new Yuan to well, fix a mountain of bad debt. American QE taught us how this will be an opportunity for immense profits.

So the market doesn’t appear to be so closed-minded about SOES stocks anymore, despite a very difficult year for emerging markets. On top of that, China is now increasingly recognised as almost a safe haven among emerging nations, due to her enormous manufacturing, political and financial power (and military too, but that’s another story), to the point that China is scarcely a developing nation anymore, it’s more akin to a developing super-power.

During the toughest days of the pre-September FOMC meeting the fairly illiquid Dim Sum market suffered a bit, but the Renminbi (whose bandwidth has been recently expanded) has remained remarkably stable among a rash of emerging FX volatility. With a deeper debt market and a currency fast-approaching world reserve status (China this year will conduct around 17% of her foreign trade in Yuan), it is not so strange that, going down in the capital structure to equities, we are finally finding some firmer ground.

Even more interesting, the situation appears to be outside of the beleaguered SOES complex: in fact it has witnessed a stellar bull run for the most competitive Chinese firms riding the explosion of consumerism in the country: we don’t need to remind our readers how stocks like Baidu, Great Wall Motor or Tencent have sailed through 2013.

True SOES financial difficulties remain, and it’s possible in 2014 that we will see the first corporate bond default in the history of China, which will test investors’ nerves. At the same time, both domestic and international players are not averse to Chinese companies; they’re just averse to bad Chinese companies. They’re even willing to give many competently run SOES the benefit of the doubt. In fact, when it comes to good private enterprises, they can’t get enough of them, sending their stocks to embarrassingly high multiples.

This is slowly but surely creating an environment of confidence: many IPO’s are carried out nowadays with a cheap price tag. This encourages more sector rotation and successful listings on the stock market, which in turn attract more attention over the whole Dragon equity supply. Needless to say, if and when an Ali Baba listing will happen, it could be a watershed in Chinese financial history.

In fact, there’s a good chance in a distant future that we will look at the previous national stock bubble as a proto-capitalist experiment, where authorities tested the mechanisms of modern securities markets with some state companies and some chump change carved out of the enormous endowment of national savings. After a few years, the real history of the Chinese stock market is about to begin.

Its easy looking back, but there are always classic lessons to be learned, 1929 was not a good year for investors and it took a decade for the primitive wheels of commerce to grind back towards profitability. The capitalist cart had just begun rolling smoothly when Mr. Hitler and his gang of filibusters sprang into view, spilled the beans and spoiled the broth, and dumped the world into a dizzy turmoil. In the back woods, Wall Street was a prime victim.

In 2008 it was the turn of Wall Street (the bastion of ‘financial security’) to lead the charge down the dungeon of capitalist make believe, and to upset the shiny apple cart, and dump the world in a credit crunch par excellence. In 2010 the USA and their European allies still flounder in this dirty bathwater. A dark and murky cloud drifts aimlessly in a financial playground, where smoke screens have become all the rage, in an effort to smooth over the turmoil, and disguise the oozing river for near ‘bankruptcy’ that flows as large as the Yangtze Kiang through the financial streets of the old World order. Back upstream the 3 gorges dam seems to do little to stem the flow of financial tears in the West.

But in the East it is a different story. Asia is plainly and mysteriously on another financial planet. Feng Shui; a definitive mindset; a shiny set of financial wheels; and a more respectful rung on the economic ladder, has actually boosted the Asian economies.

At the heart of the matter is that new chestnut, China, somehow symbolized by the gleam and glitz of Pudong’s Pearl Tower, dominating the skyline like a rocket ship about to launch. The fact of the matter is that it has already taken to the skies, through the buzzing airways of commerce, industry, trade and finance, supported by infrastructure and what the West, in their time of despair, might like to class as economic skullduggery.

The proof is in the pudding, and 2009 eventually saw a gigantic turnaround with some remarkable results in Asia. At the beginning of 2009 most investors were bent over and creaking in shock, sourly beaten by hideous falls in equity markets worldwide. While cash was being stored under larger mattresses at home, well away from the collapsed banking system, Asian equity markets took off a pace and flourished in equity outer space.

Those investment funds lumped aptly under the grand title of “Emerging Markets”, or fine tuned under the title of a “BRIC” fund, have been raking in the profits. The question is – how much money came out early enough from under the mattress and was Asian invested?

The Frenchman Voltaire in the 1700s Blooming in the Face of World Gloom said, “Is there anyone so wise as to learn by the experience of others?” Yet in this day and age, and in the case of the Asian financial market boom in 2009, who was there (alongside you) to reap the rewards?

Everyone knows that when things have taken a big dip, that is the time to buy. After all as Ambrose Redmoon succinctly put it “Courage is not the absence of fear, but rather the judgment that something else is more important that fear.” Naturally we all leapt into the Asian markets and took that plunge and made a killing.

This is all backed up by the words of TS Eliot who said, “Only those who will risk going too far can possibly find out how far one can go.” You and I were ready on the sidelines to cash in on the cash cow, because, as George Bernard Shaw said, “The people who get on this world are the people who get up and look for the circumstances they want, and if they can’t find them make them.” At the end of the day William Shakespeare said it all with the simple words, “The readiness is all.”

The investment house Jardine Fleming, have a Fund in Korea that made 66.7% in 2012. Their Thailand Fund made 84% over the same timeline, while in Taiwan their fund creamed in a growth of 64%. They are a British company who delisted on the Hong Kong Stock Exchange around the time of British ‘handover’ of the territory to China, when China spoke of ‘150 years of shame’ while Britain ruled Hong Kong. Jardine Fleming were picked out by the Chinese as example of this shame, amid a flurry of mainland accusations of being linked up with the Opium Wars, in the days when the British rulers issued Government licenses to trade in Opium in another century.

Meanwhile investing in most of Europe and the USA is a bit like pouring tea from a chocolate teapot. South America adds the B to BRIC funds with Brazil, and with South America comes under the lucid umbrella of “Emerging Markets”, and has also managed impressive results recently.

This is all very well, but what of the future? If you still fall in to line and believe in the old world order, then invest in USA and Western Europe, but beware that this investment flame might be getting as much protection for your capital as using a chocolate fire guard. There again shares in Kraft might get you a boost with Cadbury. The buzzwords still have to be “Emerging Markets”, while the downturn in 2009 with the Hedge Fund industry and in Commodity Funds is being talked back up right now, profitability is forecast for 2014 and beyond.

It’s a complicated brew. But for those who made it in 2009 in Asia it is time to sit back on the brand new yacht, and enjoy the new beach cottage.

Perhaps it is also time to take more cash from the stash beneath the mattress and trickle a dollar or three into those “Emerging Markets”, and place a wholesome wad into agricultural Commodities… after all, half of the world lives on rice. Put your money where your mouth is, and invest in this fuel that drives the workers of the “emerging markets” – after all rice is Asia.

But the future signs are still only for the brave at heart. “Is there anyone so wise as to learn by the experience of others?” The advice is simple, don’t fret, take the plunge, for rather the judgment that something else is more important than fear.”

Indeed, its easy looking back, especially after the success of investing last year when the signs were obvious, and the lessons worked well when put the test. Asia is definitively blooming in the face of the world gloom.