Last week I had the privilege of hosting, together with McKinsey & Company, our Corporate Affairs Roundtable in Singapore. Parag Khanna, Founder & MD at FutureMap, led our discussion on The Future of Asia, which focused on Asia's influence on world economic growth. Although the regions contribution to global trade is obvious, the conversation highlighted Asia's role in innovation and its ability to seamlessly integrate disruption. The following themes were key learnings;
The second biggest producer of world trade
Asia is the second biggest producer of world trade, producing 34% versus Europe’s 38% ($1.4T vs $1.6T). If Asia was able to harmonise their trade and services in the same way that Europe did with the Economic Union (EU), their potential as global economic leader could be realised. As it is, they are nearly equal with EU's trade volume and with Brexit changes on the horizon, there could be the potential to usurp Europe and become the world’s biggest trade producer.
Political influence is changing Asia’s outlook
The world’s political leaders have the ability to influence change, for better or worse. In light of Trump’s candidacy and leadership changes in the UK and Europe, we have seen the influence this has on economic relationships. As one of our attendees said. “Europe is very actively multilateral at the same time as the US is isolationist. The old trope used to be that the US and Europe are bound tight while Asia was the “other end of the world" but now it seems it is the US that is in that position”.
Emergence as a tech leader
Did you know 190 of the world’s 330 tech unicorns are in Asia? That’s over half! And of the rest, the majority were founded in Asia before setting themselves up in other locations. China has the largest number of “Smart Cities” and engineering and innovation hubs such as Shenzen are fast evolving as production hubs for many of the world’s top global brands.
The quiet achievers: South East Asia
We have been talking about China’s influence on the world for some time now. With a population growth of 50% in the last few decades, from a population of 1 billion in the 1990’s to 1.5 billion today, much has been said about their world dominance as a leader in production and growth. However, South East Asia (ASEAN) has been silently overtaking China in economic growth over recent years and they are the emerging leaders in the Asian economic corridor.
Business strategy and market policy objectives
Asian countries have been quietly preparing for their role as global leaders in innovation and trade. Asia needs to be central to business strategy, including alignment of business strategy and in market policy objectives. In April, the President of China, Xi Jinping joined Singapore’s Prime Minister, Lee Hsien Loong and other Asian leaders at the Belt and Road forum, to discuss international cooperation and how the Asian countries can create policies and processes to achieve unilateral growth. Singapore has drawn on their financial services strength and positioned themselves as the financing centre for Asian countries, helping to bridge relationships with international investors.
Growth from private investment
Knowing that government funding alone won’t be sufficient to develop their capital infrastructure fast enough, Asian countries have been actively involved in foreign private investment projects to construct ports, smart cities and other utilities and infrastructure required to position them as world economic leaders. In 2019, ASEAN received 39% of global investment flows, the highest of any region in the world. In addition, Japan, the US and Australia have signed a memorandum of understanding agreeing to work together to fund future Indo-Pacific infrastructure projects. Thailand is set to be one of the first and key beneficiaries of this multilateral effort, with projects including an elevated train line in Bangkok.
Population size creating opportunities
With more than 50% of the world’s population living in Asia, internal commerce opportunities are plentiful. Asia is on track to top 50% of the world’s GDP by 2040 and drive 40% of the world’s consumption. It is important that Australia maintains positive trade relationships with Asia and our executives and leadership become skilled in negotiations, communications and business relations with Asia.
Commerce opportunities driven by a younger population
There are always two sides to every coin - in contrast to the ageing populations of some countries, most of ASEAN has a median population age of under 30. Also, note that China’s ageing population can be viewed in another way: there are still 700 million people aged under 40! As an associate from Kimberley Clark commented "this means commerce opportunities in the baby nappy range and also adult personal hygiene products".We are also seeing this reflected in Australia with the rise in diagou (personal shoppers), with their main trade being baby formula and vitamins.
Sustainability
Asia has shown their resilience and ability to cope with disruption. As a leading producer of motor vehicles, they are early adopters of automation and technology. But what about their position in sustainability? Historically Asia has lagged in this area, with China being the highest producer of CO2 emissions and South Korea and Japan also being in the top 10. Although late to the party, China acknowledges the economic and social impact this has had on trade and has been successful in meeting and exceeding several of their carbon emission goals since 2018.
Australia’s influence
Here on home ground, as corporate affairs professionals we have an opportunity to position ourselves as market leaders in communicating with the Asian business industry. The growing sophistication of local and global brands in emerging markets will drive the need for more mature corporate affairs, public policy and communications functions. Just this month, PwC released a report, Corporate Australia Urgently Needs Asia Knowledge and Skills highlighting a skills shortage in corporate Australia to successfully navigate business relationships with Asia. It is our responsibility to be there, leading this global change and readying Australia for future business success with Asia.
If you’re interested in learning more, there are some excellent resources published by McKinsey.com or Parag Khanna . Or reach out to me or our team.
