Shanghai is already emerging as a service centreUrban areas in the region are rapidly changing and developing, creating vast long-term investment opportunities.
Like economies, cities tend to move from one level of development to another; from basic manufacturing to more high-tech activities, and on to services. Provided the infrastructure is adequate and the geographical location is appropriate, any city has the potential to become a logistics centre for a country or even an entire region, much as Singapore and Hong Kong are today. As one city moves out of more basic activities into 'higher' ones, another city usually takes its place.
What follows are some predictions, country by country, of which cities around Asia are likely to be worth looking at as long-term investment sites - places that could be making an impact by 2010 or 2015. Some of these cities have been highlighted in Asian Business, occasional series, Second Cities. Some are already on their way to making their mark. Others have yet to show signs of joining the race, but are worth looking at because they are long-shots; the risk of going in now is higher, but so is the potential gain.
Cambodia
The best long-shot in this troubled country is Sihanoukville. The country's only ocean port, it recently received US$2 million from the Asian Development Bank to rehabilitate its rail links with Phnom Penh. Its port is also undergoing extensive improvements, which will more then double its container-handling capacity.
Provided more upgrading is done, and a great many political and economic hurdles can be overcome, Sihanoukvile has the potential to become a logistics centre for cargo in and out of Cambodia, Laos and China' Yunnan province.
China
As southern China continues to develop and becomes more sophisticated, Hong Kong's role as the region's service centre is likely to expand. But it will not have the field all to itself. Guangzhou, which will become a high-tech manufacturing centre, is likely to be a strong contender. Hong Kong will also face rivalry from Yantian and Shekou when it comes to logistics, although it is likely to continue to dominate air transport.
Further north, Shanghai is already emerging as a services centre and Tianjin is likely to follow. Heavy manufacturing will probably be centred on Dalian, Harbin, Qingdao and Wuhan. Because it sits on the Yangtze river and astride the main Guangzhou-Beijing rail line, Wuhan also has the potential to develop as a logistics centre. Light manufacturing will most likely be strongest in Suzhou, Pudong, Chengdu and Tianjin.
Indonesia
Indonesia has more emerging cities than most Asian countries, partly due to the government's drive to provide what it calls 'counter-magnets' to the attractions of Jakarta. Surabaya is in the forefront, rapidly becoming a heavy industrial and logistics centre. Now that the government has barred more heavy industry from Jakarta, this is moving to nearby cities such as Cirebon, Jakarta itself is rapidly switching from industry to services.
Light manufacturing is developing in Bandung and Malang. Semarang has potential as a logistics centre due to its proximity to Jogyakarta and Surakarta.
Because the country is spread across so many islands, and shipping links between them are poor, the government has also been encouraging local manufacturing of heavy goods as well as the establishment of 'growth traingles' with neighbouring countries.
Thus Medan, on the north coast of Sumatra, across the Strait of Malacca from Singapore and Malaysia, is a contender for both manufacturing and logistics.
Development of Kalimantan is also being pushed, with Pontianak and Banjarmasin tipped as front-runners.
On Sulawesi, the northern town of Manado is seen as having the potential to attract tourism, especially from Japan, due to its scenery, good diving and good golf courses.
South Korea
South Korea is experiencing a boom port building and shipping activity as ship owners move out of Japanese ports - which have become extremely expensive. Light manufacturing and services can be expected to increase around Pusan, north of the new Kancheonman port, which will open next year.
Going west along the southern end of the Korea peninsula, look for similar development further down the line in the town of Changwon, which is on the mainland close to Kadok Island.
Between now and 2011, US$6.6 billion is to be spent on developing a deep-water port on Kadok, with 33 quays - 24 of them for container ships.
Malaysia
The pollution and congestion that have plague Kuala Lumpur for several years are forcing industry out towards Klang, which has the advantage of fine port facilities.
Light manufacturing is well established in Johor Bahru, which is likely to require more locally provided services if the Singapore dollar keeps strenghthening, making the provision of services by Singapore increasingly expensive.
In the north, manufacturing is likely to expand beyong the Penang area into Kedah state.
Alor Setar, which sits on main roads and rail into Thailand, will be worth watching.
Laos
Like Cambodia, Laos is a country with long-shot prospects at present. The building of the Friendship Bridge across the Mekong from Thailand offers potential for Vientiane as a logistics and, possibly, light manufacturing centre.
So far this potential is unrealised. Plans to build another bridge from Mukdahan in Thailand give Savannakhet distant potential, since this would form part of a road link from the central Vietnamese coastal city of Quang Tri right through Thailand and on to Myanmar. (See Thailand)
Phillippines
Manila will probably continue to be the services centre of the Phlilppines, but as the economy improves, foreign investors are likely to look more to Olongapo and Cebu for light manufacturing.
Olongapo is already growing thanks to its proximity to the old US navy and air base at Subic Bay. Converted to commercial use, Subic is fast making a reputation for itself as the Southeast Asian centre for both sea and air freight - particularly express freight - and so is likely to attract both low-value and high-value time-sensitive manufacturing.
Cebu, too, has potential as a logistics centre, though more for the south and central Philipppiines than for the whole region.
Further south, now that the Muslim insurgency on the island of Mindanao seems to be coming to an end, Davao bears watching. As part of the peace plan, the government has pledged to put US&56 million into projects on mineral-rich Mindanao. More investment can be expected to follow.
Taiwan
Keelung, on the coast northwest of Taipei, has potential as a manufacturing and logistics centre, particularly if links with China's Fujian province continue to grow. In the south, Tainan is emerging as a light manufacturing centre.
Thailand
Successive governments' efforts to attract investment away from the Bangkok area have been highly successful by Rayong, on the coast southeast of the capital.
With its access to oil - which is attracting major petrochemicals investments - the new port of Laem Chabang close by, and its rail and road connections, it is fast emerging as a centre for manufacturing and logistics.
The governement is trying to repeat that success on the other side of the Gulf of Thailand, with the development of a 'Western Seaboard'. This is still on its infancy - so far there is only a hot-roll steel mill there.
The plan envisages a port at Ban Saphan, and a gas pipeline from Myanmar is currently under construction. Towns on the west side of Bangkok and down the coast towards Malaysia, particularly Rat Buri, Kanchanaburi and Prachuap Khiri Khan, can be expected to benefit.
Thai planners are also drawing up long-term plans for road and rail links so that goods can move from Myanmar, via Thailand and Loas, to Vietnam - or the other way, via Phitsunalok and Khon Kaen.
Phitsunalok is also on the main south-north railway and road from Bangkok to Chiang Mai, while Khon Kaen sits astride the main routes from Bangkok to Vientiane (see Laos).
Both towns therefore stand to gain sustantialy from logistics business and possibly as manufacturing centres.
Vietnam
Possibly the best potential lies in Haiphong, the port for Hanoi. It is connected by rail, through the capital, to the southern Chinese province of Guangxi, suggesting a big future in logistcs.
Further south, Danang is emerging as a light manufacturing centre with a good port.
It is also on the main north-south rail line, which has recently been receiving considerable investment for upgrading, effectivly making the whole of Vietnam its markets.
Danang is not too far from Quang Tri, at the end of the existing rail line to Savannakhet in western Laos.
In the south Vung Tau, only a short distance from Ho Chi Minh City, has a port and access to offshore oil.
It is already developing a petrochemicals industry, which can be expected to move downstream rapidly once the government makes the investment climate attractive enough.
Sources: Marlin Land, Federal Express, Cargonews Asia, Bappenas, National Economic and Social Development Board of Thailand, Asian Business Research.